Today's Headlines

Bloomberg:
- Goldman Sachs Group’s(GS) Global Alpha hedge fund, once the firm’s biggest, fell about 40% last year because of wrong-way bets on currencies, equities and bonds worldwide, according to a report sent to investors.
- The European benchmark speculative grade credit default swap index is falling 17 basis points today to 438, down from 530 a week ago.
- Travelers Cos.(TRV), the second-largest US commercial insurer, increased its holdings of securities backed by subprime mortgages in the fourth quarter. The company “took advantage of favorable pricing” to purchase the securities, an executive said.
- Ethanol tariffs will be addressed in the 2009 budget, Energy Secretary Samuel Bodman said. The ethanol industry is “close,” to being able to stand on its own, he said.
- Turkey plans to develop a wind-turbine industry worth as much as $15 billion alongside a new wind energy market, Energy Minister Hilmi Guler said. Record demand for wind turbines has companies like General Electric(GE), the world’s second-biggest turbine marker, sold out through 2009 and has driven the cost of the equipment higher.
- Clearwire Corp.(CLWR), the wireless Internet company founded by mobile-phone pioneer Craig McCaw, rose as much as 23% in Nasdaq trading after the Wall Street Journal said talks about a venture with Sprint Nextel(S) have restarted.
- NYC traffic and pedestrian fatalities dropped to a record low in 2007, Mayor Bloomberg said.
- Unisys Corp.(UIS) climbed the most in five years in NY trading after fourth-quarter revenue and profit topped some analysts’ estimates.
- Lexmark Intl.(LXK), the second-biggest US printer maker, posted fourth-quarter earnings that beat analysts’ estimates on record sales to business clients and new, more profitable products.
- Bank of America(BAC) said its purchase of Countrywide Financial(CFC) is proceeding and the bank doesn’t need more capital.
- The IMF cut its forecast for global growth this year to a still healthy 4.1%, down from 4.9% in 2007.

Wall Street Journal:
- Despite calls by the Bush administration and European governments for OPEC to pump more oil, the cartel may actually look to cut output this spring if signs continue to point to increasing oil supplies and diminishing demand.
- Studies Cite Head Injuries As Factor in Some Social Ills.

Forbes.com:
- Abengoa SA unit Abengoa-Solar expects solar panels to be available for every Spanish home within 5-10 years.

USA Today:
- Governor Kathleen Sebelius on Tuesday endorsed Barack Obama for president, a Super Tuesday boost in a GOP-leading state that Democrats hope to reclaim in the White House campaign.

The Hindu:
- The US offered to provide technical support and equipment to fight an outbreak of avian influenza in India. Drugs such as Tamiflu will be made available and the US will assist West Bengal state with diagnosing potential cases of human infection.

Nikkei English News:
- Sanyo Electric Co. will increase production of digital cameras 60% to 15 million units this business year.

Bear Radar

Style Underperformer:

Large-cap Growth (+.72%)

Sector Underperformers:

Coal (-3.13%), Oil Service (-1.26%) and Internet (-1.24%)

Stocks Falling on Unusual Volume:

ALB, SII, CCU, EMC, ICUI, NHWK, ZRAN, JDAS, EWBC, AMLN, OXPS, CBST and PBG

Durable Goods Orders Very Strong, Overall Consumer Sentiment Slightly Better-Than-Expected, Present Situation Component Rises

- Durable Goods Orders for December rose 5.2% versus estimates of a 1.6% increase and an upwardly revised .5% gain in November.

- Durables Ex Transports for December rose 2.6% versus estimates of a .1% increase and an upwardly revised .4% decline in November.

- Consumer Confidence for January fell to 87.9 versus estimates of 87.0 and an upwardly revised 90.6 in December.

BOTTOM LINE: Orders for US durable goods rose substantially more than forecast in December, indicating business investment remains healthy. Bloomberg reported. The 5.2% surge in demand for computers, aircraft and other items made to last several years was the largest since July 2007. Bookings for non-defense capital goods excluding aircraft, a gauge of future business investment, jumped 4.4%, the most since March of last year. Shipments of those items, used in determining GDP, rose 2%, the most since March of 2006. The rise in total orders was led by the largest gain in machinery bookings since December 2006, a jump in commercial aircraft and a 12% surge in communications gear. Shipments to international buyers set a ninth consecutive monthly record. To put today’s 5.2% jump in Durable Goods Orders in perspective, March 1993-February 1996, Sept. 1998-November 1999 and August 2002-February 2004 were periods in which Durable Goods Orders never rose above 5%. We were told by the many bears that the US economy was plunging into recession in 3Q when the credit turmoil began to intensify, but in actuality US GDP was rising at a very powerful 4.9% rate. The bears were even more certain that 4Q growth would be negative, however that now appears unlikely. Growth should come in around 1.5%. Now there doesn’t even seem to be a debate in many quarters, it is just assumed that we are now in a recession, which is defined as two consecutive quarters of GDP contraction. I continue to see little data to indicate we are now in a recession even as this is priced into stocks at current levels. I still expect US growth to average around 2% for the year.

Consumer confidence fell in January less than economists expected, Bloomberg reported. The Present Situation component rose to 115.3 from 112.9 the prior month. The Expectations component fell to 69.6 from 75.8 in December. The share of consumers who said jobs are plentiful rose to 23.9% versus 23.6% the prior month. The percentage of people that said jobs are hard to get fell to 20.1% from 22.7% in December. The percentage of consumers planning to buy an automobile rose to 6.7% from 6.3% the prior month. Those planning to buy an appliance rose to 30.5% from 28.1% prior. There remains a historically wide gap between consumers’ perceptions of their current financial situation and their views of the future. This is a direct result of the current “US negativity bubble,” in my opinion. Consumers have been told by so many high profile market participants, with negative political and/or financial agendas, for so many years that an imminent economic collapse is just around the corner that when we get a slowdown it is just assumed by most that the collapse in finally occurring, even though they don’t see it in their own finances. I suspect we have now seen the lows for the year in consumer sentiment gauges as economic pessimism begins to wane, home sales bounce unexpectedly, interest rates remain low, inflation decelerates, stocks rise and the job market remains healthy.

Bull Radar

Style Outperformer:

Large-cap Value (+1.11%)

Sector Outperformers:

Telecom (+1.96%), Airlines (+1.75%) and Computer Hardware (+1.32%)

Stocks Rising on Unusual Volume:

CXG, TAR, ZMH, KFN, AXE, FTO, SMG, CR, CNW, LXK, CHTT, QMAR, NNDS, ENDP, SMTS, GASS, MATR, SONC, ALGN, CENX, RATE, TECH, NICE, IBKR, ALDN, DBTK, ABK, THG, TNE, GEOY, EE, KFN and JOE

Links of Interest

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Tuesday Watch

Late-Night Headlines
Bloomberg:
- VMware Inc.(VMW) said fourth-quarter profit more than doubled. Sales missed analysts’ estimates, sending the shares down 24% in late trading.
- California Governor Arnold Schwarzenegger’s $15 billion plan to provide health insurance for everyone in the most populous US state was rejected by a Senate committee on concerns it would cost too much.

Wall Street Journal:
- Bush’s Aim Is to Reassure a Worried Country.
- Liberty Media Corp., the media company controlled by billionaire John Malone, is trying to force Barry Diller out of IAC/InteractiveCorp.

NY Times:
- The credibility of Societe Generale’s management came under fresh scrutiny Monday after Jerome Kerviel told French prosecutors that his fictitious trading started as far back as 2005 – a year earlier than the bank had acknowledged.
- Edward S. Lampert has a new strategy for Sears(SHLD): less Edward S. Lampert.
- Good News in the 1 Million Missing iPhones.

BusinessWeek.com:
- Cisco Systems(CSCO) revealed a major offensive today in its ongoing assault on the data center market.
- Top Tech Trends in ’08.
- Broadband’s Growing ‘Need for Speed’

CNNMoney.com:
- Bush hammers home on economy. Bush lobbies for enactment of $150 billion stimulus plan ‘as soon as possible’ and calls for permanent extension of tax cuts.

Forbes.com:
- America’s Richest Counties.
- iPhone Apps In The Works.

Reuters:
- US Treasury Assistant Secretary Anthony Ryan said on Monday there were signs that market liquidity was starting to return but it won’t happen overnight and requires greater investor caution in future.
- JPMorgan(JPM) disclosed on Monday that it has raised its stake in bond insurer AMBAC Financial Group(ABK) to 7.7% from 5.4%.

Financial Times:
- Efforts to shore up US bond insurers gathered pace yesterday as NY state regulators appointed investment bankers to advise on a rescue plan that could include back-up credit lines for the troubled guarantors.

TimesOnline:
- Hedge funds worldwide are heading for their worst monthly performance in almost ten years amid signs that the credit crunch is claiming fresh victims across the investment markets.
- India’s love affair with gold is waning as high prices deter casual buyers in the world’s largest gold importer and savvy housewives try to sell their spare jewelry to capitalize on rocketing prices.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (CBG), target lowered to $31.
- Downgraded (DIS) to Sell, target $26.
- Reiterated Buy on (ACV), target raised to $30.
- Reiterated Buy on (MCD), target lowered to $64.
- Raised (GASS) to Buy, target $20.
- Reiterated Buy on (VZ), target $45.

Night Trading
Asian Indices are +.25% to +2.0% on average.
S&P 500 futures -.04%.
NASDAQ 100 futures -.44%.

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Earnings of Note
Company/EPS Estimate
- (NNDS)/.61
- (X)/2.22
- (CAH)/.88
- (LLY)/.89
- (COCO)/.10
- (DOW)/.80
- (ENR)/2.21
- (OXY)/1.69
- (TRV)/1.61
- (UIS)/.14
- (CNX)/.34
- (LXK)/.56
- (VLO)/.59
- (SII)/.88
- (MMM)/1.17
- (PII)/1.04
- (CFC)/-.28
- (BNI)/1.39
- (SHW)/.85
- (ALL)/1.34
- (YHOO)/.11
- (CB)/1.47
- (ZMH)/1.04
- (CTX)/-1.06
- (JBHT)/.40
- (EMC)/.22
- (FLEX)/.26
- (PPC)/.38
- (RHI)/.47
- (HTCH)/.35

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

Economic Releases
8:30 am EST
- Durable Goods Orders for December are estimated to rise 1.6% versus a -.1% decline in November.
- Durables Ex Transports for December are estimated to rise .1% versus a -.8% decline in November.

8:30 am EST
- Consumer Confidence for January is estimated to fall to 87.0 versus a reading of 88.6 in December.

Other Potential Market Movers
- The S&P/CS Home Price Index, weekly retail sales reports, Wachovia Healthcare Conference, Banc of America Gaming Conference and Citigroup Financial Services Conference could also impacting trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and automaker stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.