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Monday Watch

Weekend Headlines
Bloomberg:
- President Bush said the bipartisan economic stimulus package worked out by lawmakers and his administration will provide direct tax relief to working Americans and urged Congress to pass it as quickly as possible.
- Deutsche Ttelekom AG’s T-Mobile unit has sold more than 70,000 iPhones in Germany since introducing the combination handset and digital music player in November, CEO Obermann said. Subscribers spent three times as much as other T-Mobile clients on average every month, and more than half of the customers are new uses.
- After the best annual start for Treasuries since 1998, investors are betting the highest-rated mortgage and corporate bonds will outperform as the Federal Reserve cuts interest rates.
- Democratic Senator Ed Kennedy will announce his endorsement of Illinois Senator Barack Obama’s presidential campaign tomorrow.

Wall Street Journal:
- State Street(STT), Franklin Resources(BEN) and Janus Capital(JNS) are among the money managers vying for potentially billions of dollars in fees to manage sovereign wealth investments.
- Obama Scores South Carolina Win, Defeating Clinton by Wide Margin.
- Tony Blair cautioned US presidential candidates not to lock themselves into damaging protectionist or isolationist policies they could have a tough time walking away from once in office.

Forbes.com:
- America’s 25 Fastest-Growing Tech Companies.

NY Times:
- Investor sentiment suggests that the bulk of the stock market’s decline is now behind us.
- French Bank Offers Details of Big Loss.
- The Coming Wave of Gadgets That Listen and Obey.
- Amazon’s(AMZN) new device could turn out to be the iPod of the written word.

CNBC.com:
- Paulson Pushes Senate for Stimulus Deal. President Bush’s chief negotiator on an economic aid deal said Sunday the Senate should quickly get behind a plan or risk drawing the resentment of a frustrated public.
- Warren Buffett Continues to Snap Up Burlington Northern(BNI) Shares.
- Nikkei Battered Since 2007 Peak, Dow More Resilient.
- S&P 500 Earnings Scorecard: 73% Have Met Or Exceeded Expectations To Date.

TheStreet.com:
- Top NYSE Short-Squeeze Plays.
- Juniper(JNPR) Sends Strong Signals for Cisco(CSCO).

Google Trends:
- There has been a parabolic spike in Google searches that include the word ‘recession.’ The largest volume of Google searches that include the word are coming from Washington, DC and New York, New York. (graph)

MSNBC.com:
- Price of gas falls 9 cents in last two weeks. National average for gallon of regular was $2.98 Friday.

Business Week:
- Super Sunday generates major bucks for all involved, from its host network to snackmakers, HDTV sellers, and especially the game’s host city.
- Second-year MBA students looking for full-time jobs appear to be doing as well as, if not better than, their counterparts last year, with many schools reporting increased recruiting, more job offers, and higher salaries for this year’s grads.

USA Today:
- Ford Escape plug-in prototype shows potential.
- Midsize commercial shipyards across the country can’t find enough skilled, experienced workers.

CNNMoney.com:
- 25 top-paying companies.
- 100 Best Companies to Work For By State.
- From Microsoft’s(MSFT) lofty perch, no sign of a slowdown.

Financial Times:
- Lawyers for Jerome Kerviel, the French trader accused by Societe Generale of massive fraud, hit back at the bank on Sunday, accusing it of creating a “smokescreen” to divert attention from other losses.

TimesOnline:
- As many as 10 European-based hedge funds halted redemptions after losses prompted investors to seek to withdraw their cash, citing a London prime broker.
- The BMW Hydrogen 7.

Oberver:
- Vale Is ‘Days Away’ From Agreed $80 Billion Bid for Xstrata Bid.

Sunday Telegraph:
- Companies affiliated with the Qatar Investment Authority are considering the purchase of a $3 billion stake in Credit Suisse Group.
- Hedge funds: The new global super powers.

Sunday Times:
- Alan Greenspan said there’s no evidence the US is in a recession.

Guardian:
- JPMorgan(JPM) CEO sees end in sight to housing downturn.

Le Figaro:
- European Aeronautic, Defense & Space Co., the parent of planemaker Airbus SAS, must make one acquisition in the US in 2008.
- Groupe Bollore, the investment company controlled by French billionaire Vincent Bollore, will invest $293 million to build a plan that will produce batteries for an electric car designed by Pininfarina SpA.

AFP:
- Iraqi security forces are recruiting about 9,000 militiamen to serve with the police and army after they joined the US military in fighting al-Qaeda.

La Nacion:
- Pan American Energy LLC, an Argentine oil and gas company partly owned by BP Plc, has made a new oil discovery in the south of the country. The new reserve is the largest discovered in Argentina in recent years and contains sufficient oil to double the output of Chubut province, which in 2007 totaled 60 million barrels.

Al-Alam al-Yom:
- Egypt’s daily oil production may soon reach 700,000 barrels. Egypt currently produces 670,000 barrels per day.

Iranian News Agency:
- Russia made a seventh delivery of nuclear fuel for Iran’s first reactor today, citing the Iran Atomic Energy Production and Development Company.

Weekend Recommendations
Barron's:
- Made positive comments on (HP).
- Made negative comments on (SYX).

Citigroup:
- Maintained Buy on (CAT), target $86.

Night Trading
Asian indices are -3.25% to -1.0% on avg.
S&P 500 futures -.68%.
NASDAQ 100 futures -.81%.

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Earnings of Note
Company/Estimate
- (SWK)/1.10
- (ENR)/2.22
- (HAL)/.69
- (BDK)/1.03
- (FPL)/.67
- (GLW)/.39
- (SYY)/.42
- (MCD)/.70
- (VZ)/.62
- (TSN)/.04
- (ATHR)/.30
- (AXP)/.71
- (SNDK)/.65
- (VMW)/.24
- (PAY)/.37
- (XMSR)/-.63
- (OSG)/.63

Upcoming Splits
- (BTJ) 3-for-2
- (KWK) 2-for-1

Economic Data
10:00 am EST
- New Home Sales for December are estimated to fall to 645K versus 647K in November.

Other Potential Market Movers
- The (YRCW) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by financial and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.

Weekly Outlook

Click here for Wall St Week Ahead by Reuters.

Click here for Stocks in focus Monday by MarketWatch.

There are a number of economic reports of note and many significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – New Home Sales

Tues. – Durable Goods Orders, S&P CaseShiller Home Price Index, Consumer Confidence, FOMC Meeting, weekly retail sales reports

Wed. – Weekly MBA Mortgage Applications report, weekly EIA energy inventory report, ADP Employment Change, Advance 4Q GDP, Advance 4Q Personal Consumption, Advance GDP Price Index, Advance 4Q Core PCE, FOMC Rate Decision

Thur. – Personal Income, Personal Spending, PCE Core, Initial Jobless Claims, 4Q Employment Cost Index, Chicago Purchasing Manager

Fri. – Change in Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings, Univ. of Mich. Consumer Confidence, ISM Manufacturing, Construction Spending, Total Vehicle Sales

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – Energizer(ENR), McDonald’s(MCD), Stanley Works(SWK), Halliburton(HAL), SYSCO Corp.(SYY), Black & Decker(BDK), Corning(GLW), Verizon(VZ), Tyson Foods(TSN), Atheros(ATHR), SanDisk(SNDK), VMware(VMW), American Express(AXP), XM Satellite(XMSR)

Tues. – Valero(VLO), Corinthian Colleges(COCO), Eli Lilly(LLY), 3M Co(MMM), Cardinal Health(CAH), Unisys Corp.(UIS), Lexmark Intl(LXK), Polaris(PII), Dow Chemical(DOW), Burlington Northern(BNI), Countrywide(CFC), Sherwin Williams(SHW), Allstate Corp.(ALL), Yahoo!(YHOO), Chubb Corp.(CB), Centex Corp.(CTX), Flextronics(FLEX), Robert Half(RHI), Travelers(TRV), US Steel(X), Zimmer Holdings(ZMH), EMC Corp(EMC), Occidental Petroleuam(OXY)

Wed. – Kellogg(K), Baker Hughes(BHI), Legg Mason(LM), Kraft Foods(KFT), Eastman Kodak(EK), Boeing Co(BA), Hess Corp.(HES), United Parcel Service(UPS), Illinois Tool Works(ITW), Starbucks(SBUX), Pulte Homes(PHM), MBIA Inc.(MBI), Altria Group(MO), Estee Lauder(EL), Royal Caribbean(RCL), Novellus Systems(NVLS), Aflac(AFL), Amazon.com(AMZN), Merck(MRK)

Thur. – Starwood Hotels(HOT), Bristol-Myers(BMY), Burger King(BKC), Mastercard(MA), Goodrich(GR), L-3 Communications(LLL), American Superconductor(AMSC), Mattel(MAT), CVS Caremark(CVS), Lear Corp.(LEA), Under Armour(UA), Raytheon(RTN), Hologic(HOLX), McKesson(MCK), Verisign(VRSN), CA Inc.(CA), Omnicell Inc.(OMCL), Stanley Inc.(SXE), Dolby Labs(DLB), Electronic Arts(ERTS), Monster Worldwide(MNST), Digital River(DRIV), YRC Worldwide(YRCW), Massey Energy(MEE), Google Inc.(GOOG), Trident Microsystems(TRID), Cerner Corp.(CERN), Altera(ALTR), Bebe Stores(BEBE), Safeco(SAF), JDS Uniphase(JDSU), ImClone Systems(IMCL), Apache Corp.(APA), Colgate-Palmolive(CL), Anheuser-Busch(BUD), Intuitive Surgical(ISRG), Procter & Gamble(PG), IntercontinentalExchange(ICE), Wyeth(WYE), Avid Technology(AVID), Celgene(CELG)

Fri. – Chevron(CVX), Arch Coal(ACI), Automatic Data(ADP), Tidewater(TDW), Ryder System(R), Nymex Holdings(NMX), Manpower(MAN), Cummins(CMI), Exxon Mobil(XOM), Gannett(GCI)

Other events that have market-moving potential this week include:

Mon. – (YRCW) analyst meeting

Tue. – Wachovia Healthcare Conference, Banc of America Gaming Conference, Citigroup Financial Services Conference, (NNDS) investor day, (BLC) analyst meeting, (VDSI) investor conference, (CLWR) investor day

Wed. – Wachovia Healthcare Conference, Banc of America Gaming Conference, Citigroup Financial Services Conference, (TEC) analyst meeting

Thur. – Raymond James Growth Airline Conference, Wachovia Healthcare Conference, Banc of America Gaming Conference

Fri. – None of note

BOTTOM LINE: I expect US stocks to finish the week modestly higher on a firmer US dollar, mostly positive earnings reports, less economic pessimism, more constructive Fed commentary, bargain hunting and short-covering. My trading indicators are giving mixed signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

S&P 500 1,330.61 -.19%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,330.61 -.19%
DJIA 12,207.17 +.39%
NASDAQ 2,326.20 -.88%
Russell 2000 688.60 +1.18%
Wilshire 5000 13,361.93 +.16%
Russell 1000 Growth 549.17 -.52%
Russell 1000 Value 727.80 +.72%
Morgan Stanley Consumer 671.84 -1.9%
Morgan Stanley Cyclical 918.46 +4.94%
Morgan Stanley Technology 535.22 -1.94%
Transports 4,474.82 +8.1%
Utilities 484.14 -5.33%
MSCI Emerging Markets 134.79 -.90%

Sentiment/Internals
NYSE Cumulative A/D Line 56,575 -2.2%
Bloomberg New Highs-Lows Index -347
Bloomberg Crude Oil % Bulls 18.0 +83.7%
CFTC Oil Large Speculative Longs 200,595 -11.98%
Total Put/Call 1.05 -28.1%
NYSE Arms 2.09 +22.08%
Volatility(VIX) 29.08 +2.2%
ISE Sentiment 101.0 +66.67%
AAII % Bulls 25.1 +3.6%
AAII % Bears 59.0 +8.4%

Futures Spot Prices
Crude Oil 90.60 +1.47%
Reformulated Gasoline 231.82 +2.29%
Natural Gas 7.97 -1.66%
Heating Oil 251.91 +.85%
Gold 913.90 +4.03%
Base Metals 222.98 +1.21%
Copper 317.85 +.77%

Economy
10-year US Treasury Yield 3.56% -7 basis points
4-Wk MA of Jobless Claims 314,800 -4.3%
Average 30-year Mortgage Rate 5.48% -21 basis points
Weekly Mortgage Applications 981,500 +8.3%
Weekly Retail Sales +.8%
Nationwide Gas $2.99/gallon -.04/gallon
US Heating Demand Next 7 Days 5% below normal
ECRI Weekly Leading Economic Index 135.8 -1.2%
US Dollar Index 75.96 -.26%
CRB Index 361.64 +.06%

Best Performing Style
Small-cap Value +2.2%

Worst Performing Style
Large-cap Growth -.52%

Leading Sectors
Homebuilders +16.3%
Road & Rail +10.2%
Banks +9.8%
Retail +9.1%
REITs +7.4%

Lagging Sectors
Hospitals -3.65%
Utilities -5.3%
Drugs -7.1%
HMOs -7.8%
Biotech -8.7%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Lower into Final Hour on Profit-taking, Shorting, Higher Energy Prices

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Biotech longs, Computer longs and Medical longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short this morning, thus leaving the Portfolio 75% net long. The overall tone of the market is mildly negative as the advance/decline line is slightly lower, most sectors are declining and volume is above average. Investor anxiety is high again. Today’s overall market action is just mildly bearish. The VIX is rising 7% today to a very high 29.65. The total put/call is an above average 1.05 and the ISE Sentiment Index hit a very low 87.0 today. As well, the NYSE Arms has been high all day. This morning’s gains left the major averages very extended short-term. Microsoft’s(MSFT) immediate weakness this morning following such a stellar quarter was a tell. Moreover, there are many hedge fund blow-up rumors swirling today. Many stocks are higher on the day, despite the losses in the major averages. Weakness is the most pronounced in the retailers and financials, which have had humongous gains in a very short period. Economically sensitive small-caps and cyclicals are outperforming substantially today. I still seriously doubt a full retest of recent lows will occur, as so many expect. Given how extended Asian indices are, I would expect to see weakness there Sunday night, which could further pressure US shares Monday morning. Nikkei futures indicate a -200 point decline on the open in Japan Sunday night. Fed fund futures now imply a 72.0% chance for a 50 basis point cut and a 28.0% chance for a 25 basis point cut at the Jan. 30^th meeting. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, higher energy prices and more shorting.