Thursday Watch

Earnings of Note
Company/Estimate
FDX/1.27
ADBE/.42
APOL/.57
DRI/.23
CTAS/.44
CCL/.31
GS/2.32
KBH/4.13
NKE/.86
PLMO/.53
ZQK/.40
TTWO/1.55
TEK/.32

Splits
LCAV 3-for-2

Economic Data
Current Account Balance for 3Q estimated at -$170.6B versus -$166.2B in 2Q.
Housing Starts for November estimated at 1980K versus 2027K in October.
Building Permits for November estimated at 2000K versus 2018K in October.
Initial Jobless Claims for last week estimated at 342K versus 357K the prior week.
Continuing Claims estimated at N/A versus 2796K prior.
Philadelphia Fed. for December estimated at 20.5 versus 20.7 in November.
Minutes of Nov. 10 FOMC Meeting.

Recommendations
Goldman Sachs reiterated Outperform on BBBY, AMGN, IP and Underperform on AZR, HMT, VTS. Banc of America upgraded BIIB to Buy.

Late-Night News
Asian indices are quietly higher, led by Korean and Australian shares. Carlyle Group, a U.S. buyout fund, will acquire a 25% stake in China Pacific Life Insurance, the nation's third-biggest life insurer, for up to $400 million, in the biggest overseas private-equity purchase in China, the Financial Times reported. China's Supreme People's Court will issue new rules making piracy and counterfeiting of software and other goods a more severe criminal offense, stepping up the nation's crackdown on bootlegged intellectual property, China Daily reported. Isuzu Motors, Japan's largest truckmaker, is in talks with GM to get more steel as a worldwide shortage of the material crimps automakers, the Sankei newspaper said. Samsung said it expects to increase mobile phone sale by about 16% next year to more than 100 million units, Korea Economic Daily reported. Latin America's economy will grow by 5.5% this year, the fastest in 24 years, the Financial Times reported. Fannie Mae, the biggest source of money for U.S. home mortgages, failed to comply with accounting rules for financial contracts designed to protect against swings in interest rates, the SEC said. Johnson & Johnson agreed to acquire Guidant for $25.4 billion, adding electrical devices for treating heart disease to a lineup of thousands of health products ranging from Band-Aids to cardiac stents, Bloomberg reported.

Late-Night Trading
Asian Indices are +.25%. to +.50% on average.
S&P 500 indicated +.02%.
NASDAQ 100 indicated -.06%

BOTTOM LINE: I expect U.S. equities to open modestly higher on better-than-expected economic/earnings reports, short-covering and merger activity. The Portfolio is 125% net long heading into tomorrow.

Monday Close

S&P 500 1,205.72 +.19%
NASDAQ 2,162.55 +.13%

Leading Sectors
Homebuilders +3.38%
Iron/Steel +2.67%
Disk Drives +1.78%

Lagging Sectors
Wireless -.44%
Airlines -.49%
Telecom -1.16%

Other
Crude Oil 44.53 +.77%
Natural Gas 7.22 -.15%
Gold 443.10 +.16%
Base Metals 117.59 +1.29%
U.S. Dollar 81.65 +.02%
10-Yr. T-note Yield 4.07% +.09%.
VIX 12.35 -2.99%
Put/Call .61 -20.78%
NYSE Arms 1.03 +18.39%

After-hours Movers

Recommendations

After-hours News

BOTTOM LINE: The Portfolio finished higher today on gains in my internet, homebuilding, semi and healthcare longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. Once again, the tone of the market improved throughout the day as volume increased and the major indices closed near their highs. Today's mild gains should be considered a win for the bulls as the US dollar fell and energy rose. As well, it is a positive to see long-term rates decline again even as cyclicals and small-caps outperformed.

Mid-day Report

S&P 500 1,202.09 -.11%
NASDAQ 2,156.79 -.14%

Leading Sectors
Homebuilders +2.52%
Iron/Steel +1.94%
Disk Drives +1.34%

Lagging Sectors
Biotech -.40%
Airlines -.73%
Telecom -.99%

Other
Crude Oil 43.80 +4.38%
Natural Gas 7.32 unch.
Gold 442.50 +1.19%
Base Metals 117.08 +.85%
U.S. Dollar 81.49 -1.01%
10-Yr. T-note Yield 4.08% -.93%
VIX 12.59 -1.10%
Put/Call .62 -19.48%
NYSE Arms 1.04 +19.54%

Market Movers
LVS +55.2% on strong demand for IPO.
RIMM -4.2% on continuing worries over yesterday's patent ruling.
LEN +10.1% after beating 4Q estimates and raising 05 guidance.
MSTR +8.2% on rebound after yesterday's fall related to CFO resignation.
SUN +4.2% on Prudential upgrade to Overweight.
FS +4.7% on positive comments from Goldman Sachs.
BBY +5.6% after beating 3Q estimates and raising 4Q outlook.
BMET -6.9% on disappointing 2Q report.
JRCC -7.0% on continuing worries over recent 3Q report.
JMDT -9.64% on NXTL/FON merger news.
PLMO -3.45% on profit-taking and Lehman downgrade to Equal Weight.
*Homebuilders up across the board on falling long-term rates and LEN report.

Economic Data
Empire Manufacturing for December rose to 29.93 versus estimates of 20.0 and a reading of 18.86 in November.

Recommendations
-Goldman Sachs reiterated Outperform on SYMC, BBY and KRB.
-Citi SmithBarney upgraded DD to Buy, target $57. Citi upgraded LZ to Buy, target $42. Citi reiterated Buy on GE, target $44. Citi reiterated Buy on SCH, target $14.50. Citi reiterated Buy on SLM, target $61. Citi reiterated Sell on FCEL, target $7. Citi reiterated Buy on NT, target $5. Citi reiterated Buy on BNI, target $50.50. Citi reiterated Buy on VRTS, target $33.
-Banc of America rated CENT Buy, target $44.
-UBS rated NAT Buy, target $42. UBS rated ATB Buy, target $24. UBS raised WEN to Buy, target $44.
-Morgan Stanley cut RAD to Underweight.
-Prudential raised SUN to Overweight, target $73. Pru cut VLO to Underweight, target $41. Pru raised MRO to Overweight, target $42. Pru cut PCO to Underweight, target $42.
-Raymond James rated ASPT Buy, target $15. RJF raised MRK to Strong Buy, target $38.50.

Mid-day News
U.S. stocks are modestly lower mid-day as worries over a bounce in oil prices and a decline in the US dollar more than offset declining interest rates and strong economic/earnings reports. U.S. hedge funds' returns are dwindling as more and more funds chase the same investment opportunities, the Wall Street Journal reported. Ali Hassan al-Majid, known as "Chemical Ali" because of his role in gas attacks on the Kurds, will become the first former aide of deposed Iraqi dictator Saddam Hussein to stand trial next week, Agence France-Presse reported. Palestinian public tv has been airing less anti-Israeli rhetoric, the NY Times reported. Charles Schwab CFO Dodds said the company may be able to beat a fourth-quarter earnings forecast by 10-20%, Dow Jones reported. Crude oil prices are expected to trade at $37 to $39/bbl. next year, Kyodo News reported, citing Japan's Institute of Energy Economics. Career Education Corp. may lose the right to operate its schools in California, the Financial Times reported. EchoStar Communications may soon start offering high-definition tv and high-speed Internet services using a new satellite to be launched this week, the Rocky Mountain News of Denver reported. Google can keep selling ads prompted by searches using trademarked company names, the AP reported, citing a federal judge in a case between Geico and Google. OAO Yukos said it sought Chapter 11 bankruptcy protection in the U.S. and requested an emergency court hearing to stop the government's auction of its biggest unit, Bloomberg reported. Russia is committed to a market economy and foreign investment, Finance Minister Kudrin said. Best Buy, the world's largest electronics retailer, said third-quarter earnings rose as it limited holiday discounts and sold more digital televisions, cameras and MP3 players, Bloomberg reported. Manufacturing in New York state expanded more than forecast this month as more factories reported rising orders, sales and increased employment, Bloomberg said. U.S. communications regulators approved a plan to foster high-speed Internet access aboard airplanes, Bloomberg said. The dollar fell the most in two months against the yen on a report showing purchases of assets in the U.S. increased in October at the slowest pace in a year, Bloomberg said. AT&T, MCI and other U.S. telephone companies that lease competitors' networks to sell local service will lose discount rates in early 2006, regulators said. Crude oil had its biggest gain in six months after the government reported a decline in U.S. heating-oil inventories and below-normal temperatures boosted demand, Bloomberg reported. Sprint agreed to buy Nextel for about $35 billion in a transaction that would leave three companies in control of 70% of the US mobile-telephone market, Bloomberg reported.

Bottom Line: The Portfolio is higher mid-day on gains in my semi, internet and homebuilding longs. I have not traded today and the Portfolio is still 125% net long. The underlying tone of the market is mildly positive today, notwithstanding today's small losses in the major indices. The advance/decline line is slightly higher and many leaders are higher. It is also a positive to see interest rates lower again even with a decline in the dollar on worries over foreign demand for US treasuries. As well, the bounce in energy prices isn't resulting in any significant selling of equities. Oil will likely approach $45-$47/bbl. in the near-term before heading to $35/bbl. over the next few months. I expect US stocks to rise modestly into the close on short-covering, strong economic data, falling interest rates, good earnings reports and merger optimism.

Wednesday Watch

Earnings of Note
Company/Estimate
BBBY/.39
BBY/.44
BMET/.38
MLHR/.23
LEH/1.69
LEN/2.21
SCHL/1.76
WGO/.57
VTS/.18

Splits
None of note.

Economic Data
Empire Manufacturing for December estimated at 20.0 versus 19.76 in November.
NAHB Housing Market Index for December estimated at 70 versus 71 in November.

Recommendations
Goldman Sachs reiterated Outperform on EBAY, FS, GE, MDT, COH and Underperform on CR.

Late-Night News
Asian indices are higher as exporters in the region gained on optimism over sales to the US. Abby Joseph Cohen, chief investment strategist for Goldman Sachs, said she expects 2005 economic growth "will be good," averaging about 3.5%, CNBC reported. Wal-Mart declined to comment on a report that it may pull out of the bidding for Japan's Daiei, Bloomberg said. North Korea would consider any decision by Japan to impose economic sanctions against it as a "declaration of war," the communist nation's Foreign Ministry said. Sprint is close to an agreement to buy Nextel for more than $35 billion, doubling its customers, Bloomberg reported.

Late-Night Trading
Asian Indices are +.50%. to +1.25% on average.
S&P 500 indicated -.07%.
NASDAQ 100 indicated unch.

BOTTOM LINE: I expect U.S. equities to open modestly higher on strong earnings reports, economic data, merger speculation and gains in Asia. The Portfolio is 125% net long heading into tomorrow.

Tuesday Close

S&P 500 1,203.38 +.39%
NASDAQ 2,159.84 +.53%

Leading Sectors
Broadcasting +2.69%
Oil Service +1.89%
Semis +1.86%

Lagging Sectors
Software -.39%
Wireless -.47%
Networking -1.18%

Other
Crude Oil 41.91 +.22%
Natural Gas 7.29 -.52%
Gold 436.80 -.11%
Base Metals 116.09 +.37%
U.S. Dollar 82.32 +.27%
10-Yr. T-note Yield 4.12% -.56%.
VIX 12.73 +1.52%
Put/Call .77 +8.45%
NYSE Arms .87 +20.83%

After-hours Movers
BBI +5.33% after billionaire financier Icahn boosted his stake in Hollywood Entertainment to 9.54% and said he supports Blockbuster's bid for it.
ADCT +10.89% after beating 4Q estimates substantially.
MANC +5.0% on continuing optimism over 1Q report.
ABGX -5.7% after announcing it intends to sell approximately $150 million principal amount of its Convertible Senior Notes through a private placement.

Recommendations
Goldman Sachs reiterated Outperform on RIMM. Goldman cut WTW to Underperform .

After-hours News
U.S. stocks finished modestly higher today as merger speculation increased, long-term interest rates fell and the US dollar rallied. After the close, Russian policies are damaging the economy and the achievements of its rapid economic growth, the Financial Times reported. Federal Reserve policy makers raised the benchmark U.S. interest rate a quarter point to 2.25% and restated a plan to carry out further increases at a "measured" pace to keep inflation in check, Bloomberg reported. The US dollar rose against the yen after the Fed indicated it will keep increasing interest rates as the economy extends an expansion that's outpacing growth in Japan, Bloomberg said. The Nasdaq has advanced 23% from its 2004 low on Aug. 12, bringing its gain for the year to 7.8%. The index has jumped 94% since Oct. 9, 2002, Bloomberg reported. MCI Inc., formerly known as WorldCom before filing the biggest US bankruptcy, can pay more than $165 million to some of the consultants, lawyers and other advisers who guided its reorganization, Bloomberg said. Berkshire Hathaway named Microsoft founder Bill Gates to its board of directors, Bloomberg reported. Las Vegas Sands, owner of the Venetian Casino Resort in Las Vegas and China's Sands Macau, raised $690 million in the biggest IPO by a U.S. gaming company, Bloomberg reported. China has set the inflation target for 2005 at 4%, Wen Wei Po reported. China's consumer prices rose 2.8% in November from a year earlier, Bloomberg said.

BOTTOM LINE: The Portfolio finished slightly higher today as gains in my internet, semi and semi-equipment longs more than offset losses in my Chinese ADR and software longs. I exited a software long in the afternoon as it hit my stop-loss and added a new internet long, thus leaving the Portfolio 125% net long. I added MNST and I am using a $29.50 stop-loss on this position. The tone of the market improved throughout the day as volume increased and the advance/decline line finished near its daily high. It was also a positive to see long-term interest rates fall and the US dollar rally in the face of a disappointing trade report.

Mid-day Report

S&P 500 1,200.19 +.13%
NASDAQ 2,155.47 +.32%

Leading Sectors
Broadcasting +2.01%
Semis +1.63%
Oil Service +1.42%

Lagging Sectors
Wireless -.56%
Homebuilders -.56%
Networking -1.41%

Other
Crude Oil 41.40 +.95%
Natural Gas 7.29 +1.73%
Gold 437.40 -.66%
Base Metals 116.09 +.37%
U.S. Dollar 82.64 +.65%
10-Yr. T-note Yield 4.17% +1.31%
VIX 12.39 -1.20%
Put/Call .88 +23.94%
NYSE Arms .80 +11.11%

Market Movers
SYMC -12.1% after reports it is in advanced talks to acquire Veritas Software(VRTS) for at least $13 billion, the NY Times reported. VRTS +9.7%.
ERTS +5.6% after saying it entered into exclusive licensing relationships with the NFL and Players Inc. to develop, publish and distribute interactive football games. Competitor TTWO -5.3%.
RIMM +7.6% after a US appeals court orders new hearings in a patent infringement suit by a Virginia company.
ORNG +14.8% on strong demand for IPO.
MPS +13.2% after saying it had been selected as one of Raymond James' Analysts' Best Picks for 2005.
LNG +12.5% after completing an agreement to the rights to its Louisiana-based plant to ChevronTexaco.
PQE +11.2% after saying it will buy Voyager Expanded Learning for $360 million is cash and stock to expand its educational products.
SLAB +10.1% after Citi SmithBarney initiated it with Buy(Top Pick), target $46.
VRNT +7.4% on CIBC upgrade to Sector Outperform, target $43.
ADTN -14.7% after lowering 4Q estimates and multiple downgrades.
MSTR -10.4% after saying CFO is leaving and multiple downgrades.
AFCO -9.8% on Lehman Brothers downgrade to Equal Weight from Overweight.
JRCC -14.14% on disappointing 3Q results.
COO -7.1% on disappointing 3Q results.

Economic Data
Trade Balance for October was -$55.5B versus estimates of -$53.0B and -$50.9B in September.
Industrial Production for November rose .3% versus estimates of a .2% increase and a .6% gain in October.
Capacity Utilization for November fell to 77.6% versus estimates of 77.8% and 77.5% in October.

Recommendations
-Goldman Sachs reiterated Outperform on NKE, FON and SYMC.
-Citi SmithBarney said to Buy GIS, target $51.50. Citi said to Buy ACE and STA now, targets $49 and $43, respectively. Citi reiterated Sell on OSG, target $49. Citi reiterated Buy on CSC, target $68. Citi reiterated Buy AXP, target $57. Citi reiterated By on MAY, target $35. Citi reiterated Buy on ERTS, target $67.
-Banc of America rated NWS/A to Buy, target $21. BofA rated L Buy, target $13.25. BofA rated TWX Buy, target $23.
-UBS raised KYPH to Buy, target $30.
-CIBC raised VRNT to Sector Outperform, target $43. CIBC raised ISLE to Sector Outperform, target $30. CIBC raised HLT to Sector Outperform, target $25. CIBC raised PENN to Sector Outperform, target $59. CIBC raised HOT to Sector Outperform, target $61. CIBC cut PNK to Sector Underperform, target $16. CIBC cut ASCA to Sector Underperform, target $36. CIBC cut STN to Sector Underperform, target $55. CIBC cut KZL to Sector Underperform, target $56.
-Merrill Lynch said US dollar is undervalued and Euro is overvalued. Merrill also said US bonds will perform poorly in 2005.
-Thomas Weisel raised STE to Outperform, target $29.
-Legg Mason rated CBM Buy, target $31. Legg Mason rated FSH Buy, target $73.

Mid-day News
U.S. stocks are modestly higher mid-day on a rebound in the US dollar, merger speculation and a better-than-expected industrial production report. The US restaurant business is being pushed to reduce trans fats that are often used in processed foods to improve shelf-life, taste and texture, but which have been linked to health troubles, the Wall Street Journal reported. Mergers and acquisitions worth about $1.7 trillion worldwide have been announced so far this year, compared to $1.3 trillion for all of 2003, the Wall Street Journal reported. The Bush administration will urge Congress to overhaul air quality legislation early next year, the Washington Post reported. Bear Stearns is the subject of speculation on Wall Street over whether CEO Cayne will sell the company, the NY Times reported. Lucent and Nortel, the two main wireless network-equipment suppliers to Sprint, may benefit if Sprint merges with Nextel, the NY Times said, citing analyst Susan Kalla of FBR. Iraq next week will begin war crimes trials for leaders of the former regime of ousted dictator Saddam Hussein, the AP reported. Theme parks in North America boosted attendance by 4% this year, the first increase since the 2001 terrorist attacks, the LA Times reported. Companies are spending heavily on employee monitoring software, USA Today reported. Doctors might be able to identify patients with Alzheimer's disease by using a basic scratch-and-sniff test, Reuters reported. Boeing won a $928 million US contract to develop parts and systems for a site in Huntsville, AL, that will be part of a US anti-missile system from the Missile Defense Agency, Reuters reported. Mahmoud Abbas, the interim Palestinian leader and the front-runner to win Jan. 9 leadership elections, called for an end to the Palestinian armed uprising, saying it has been counterproductive, the AP reported. About 30% of companies in Massachusetts plan to hire in the first quarter of 05 compared with 20% a year earlier, according to Manpower. ChevronTexaco increased 2005 spending by 18% from this year to boost production amid record demand for oil and natural gas, Bloomberg said. Blockbuster will stop charging late fees to compete with Netflix, Bloomberg reported. Vodafone said it's not in talks with Verizon about mounting a bid for Sprint, Bloomberg said.

Bottom Line: The Portfolio is unchanged mid-day as strength in my semi and internet longs is offsetting weakness in my software and Chinese ADR longs. I have not traded today and the Portfolio is still 125% net long. The tone of the market is ok as more stocks are advancing than declining and volume is decent. It is a positive to see the US dollar rally on the trade report. The CRB is also falling again today even with the rise in energy prices. I expect US stocks to rise modestly into the close on merger optimism, short-covering and year-end repositioning.

Tuesday Watch

Earnings of Note
Company/Estimate
EASI/.71
FCEL/-.44
NTY/.40
PIR/.22

Splits
BLUD 3-for-2

Economic Data
Trade Balance for October estimated at -$53.0B versus -$51.6B in September.
Industrial Production for November estimated up .2% versus a .7% gain in October.
Capacity Utilization for November estimated at 77.8% versus 77.7% in October.
FOMC expected to raise 25 basis points to 2.25%.

Recommendations
Goldman Sachs reiterated Outperform on AGN, A, CIL, BAX and CAT. Goldman reiterated Underperform on RAI.

Late-Night News
Asian indices are higher on strength in exporters after a better-than-expected retail sales report in the US. Goodyear Tire & Rubber will renew efforts to raise cash by selling operations not related to tire-making, including a unit that makes hoses and conveyor belts, the Daily Deal reported. General Electric and other companies have invested billions of dollars into struggling airlines as a way to avoid potentially massive losses from a bankrupt carrier, the Wall Street Journal reported. Verizon Communications may bid for Sprint, with the backing of Britain's Vodafone Group Plc, its partner in Verizon Wireless, the Wall Street Journal said. Google will announce tomorrow that it will convert more than 15 million books and documents from research institutions such as Stanford University and Oxford University into Internet-searchable files, the NY Times reported. Frontline Ltd., the world's biggest tanker company, said it's considering a bid for General Maritime Corp., a move that would create a company able to ship about five days of OPEC oil production, Bloomberg reported.

Late-Night Trading
Asian Indices are +.50%. to +1.0% on average.
S&P 500 indicated -.04%.
NASDAQ 100 indicated unch.

BOTTOM LINE: I expect U.S. equities to open modestly higher on optimism over merger activity, better-than-expected economic reports and gains in Asia. I also expect the Fed to raise 25 basis points and to reiterate their plans to continue raising at a "measureed pace." The Portfolio is 125% net long heading into tomorrow.

Monday Close

S&P 500 1,198.68 +.90%
NASDAQ 2,148.50 +.96%

Leading Sectors
Software +3.09%
Iron/Steel +2.53%
HMOs +1.85%

Lagging Sectors
Retail -.09%
Networking -.41%
Hospitals -.49%

Other
Crude Oil 41.10 +.22%
Natural Gas 7.27 +1.52%
Gold 440.50 +.05%
Base Metals 115.66 +1.28%
U.S. Dollar 82.14 -.64%
10-Yr. T-note Yield 4.15% -.05%.
VIX 12.54 -1.72%
Put/Call .71 +14.52%
NYSE Arms .72 -47.83%

After-hours Movers
SHOP +4.6% after saying Shopping.com UK entered into a services agreement with Google.
SLAB +4.7% after Citi SmithBarney initiated it with Buy(Top Pick), target $46.
LNG +14.3% after completing an agreement to the rights to its Louisiana-based plant to ChevronTexaco.
ERTS +5.0% after saying it entered into exclusive licensing relationships with the NFL and Players Inc. to develop, publish and distribute interactive football games.
TTWO -6.21% on ERTS news.
TKLC -6.90% after saying its CFO resigned to become CFO for DGIN.

Recommendations
Citi SmithBarney rated SLAB and SWKS Buy, targets $46 and $14.25, respectively.

After-hours News
U.S. stocks finished higher today on optimism over U.S. economic growth and merger activity. After the close, China and Russia will hold joint military exercises next year, a step that the Chinese defense minister said should not be seen as threatening to other nations, Russia's Interfax news agency reported. The National Hockey League, which is in the midst of an 89-day lockout, will reject the latest proposal from the players union and make a counteroffer tomorrow, TSN of Canada reported. Anger, fear and other negative emotions may be triggers for a stroke, a study of 200 stroke victims bound, Bloomberg reported. New York's crime rate has dropped 4.6% this year, making it the safest of the 25 largest U.S. cities, Mayor Bloomberg said. Sprint and Nextel stand to save more than $3 billion in network costs by combining their U.S. mobile-telephone operations, Bloomberg reported. PepsiCo agreed to purchase General Mills' 40% stake in their European snacks joint venture for $750 million, Bloomberg said. Scott Peterson was sentenced to death by a California jury for the murder of his 27-year-old pregnant wife Laci, Bloomberg reported. American Express agreed with Citigroup to issue credit cards in the U.S. that will be accepted on its global merchant network, Bloomberg reported.

BOTTOM LINE: The Portfolio finished higher today on gains in my internet, semi, semi-equipment and Chinese ADR longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. The overall tone of the market improved throughout the day with volume increasing and the advance/decline line finishing near its highs for the day. Interest rates failed to move higher even with the pullback in the dollar. As well, it was a positive for the bulls to see energy prices bounce up and equities advance to 3-year highs. I continue to expect data and events this week to propel U.S. stocks higher.

Mid-day Report

S&P 500 1,196.20 +.69%
NASDAQ 2,140.63 +.58%

Leading Sectors
Software +2.93%
Iron/Steel +2.51%
HMOs +1.91%

Lagging Sectors
Airlines -.63%
Networking -.73%
Hospitals -.75%

Other
Crude Oil 40.85 +.42%
Natural Gas 7.11 +3.90%
Gold 440.30 unch.
Base Metals 115.66 +1.28%
U.S. Dollar 82.19 -.58%
10-Yr. T-note Yield 4.14% -.28%
VIX 12.20 -4.39%
Put/Call .63 +1.61%
NYSE Arms .71 -48.55%

Market Movers

Economic Data
Advance Retail Sales for November rose .1% versus estimates of a .1% decline and an upwardly revised .8% increase in October.
Retail Sales Less Autos for November rose .5% versus estimates of a .3% increase and an upwardly revised 1.1% gain in October.
Business Inventories for October rose .2% versus estimates of a .5% increase and no change in September.

Recommendations
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Mid-day News

Bottom Line: The Portfolio is slightly higher mid-day on gains in my internet, semi and semi-equipment longs. I added a few new technology longs this morning, bringing the Portfolio's market exposure to 125% net long. One of my new longs is ARBA and I am using a $15.50 stop-loss on this new position. It is very positive to see the large revision in retail sales for Oct. and a better-than-expected Nov. Moreover, internet retail is booming this holiday season. OSTK remains my favorite internet retailer in the intermediate-term. It should also be a longer-term winner in this space. The overall tone of the market is pretty good today and improving, notwithstanding the bounce in energy prices and dollar pullback. I expect U.S. stocks to rise modestly into the close on optimism over economic growth, short-covering, merger activity and bargain-hunting.

Monday Watch

Earnings of Note
Company/Estimate
CKR/.16
ORCL/.13

Splits
GDW 2-for-1

Economic Data
Advance Retail Sales for November are estimated to fall .1% versus a .2% rise in October.
Retail Sales Less Autos for November are estimated to rise .3% versus a .9% gain in October.
Business Inventories for October are estimated to rise .5% versus a .1% gain in September.

Weekend Recommendations
Rukeyser's Wall Street had guests that were positive on SZE, TIF, XOM, TMO, PTEK, AEE, D and GIS. Forbes on Fox had guests that were positive on LLL, IDTI, INTC, RPM, ZBRA and ANZ. Cashin' In had guests that were positive on HSY, LUK, HD and mixed on K, PZZA, SAFM, NUE. Bulls and Bears had guests that were positive on GSIC, NCC, EBAY, ERTS, GS, SFA, NVS and mixed on CSCO, CI, TOL. Barron's had positive comments on JPM, AES, RRI, CPN, ADM, EK, HL, WMT and INT. Goldman Sachs reiterated Outperform on ACS, DNA, EBAY, MER, X, NUE and SPP.

Weekend News
China has raised next year's economic growth target to 8%, the first time it has lifted its estimate above 7% since 1999, the Economic Observer reported. Ukrainian opposition leader Yushchenko said his administration would go to court to reverse illegal sales of state assets if he were to become president, the Financial Times reported. Taiwan President Chen Shui-bian's party failed to win more seats in a legislative vote, which could hamper his proposals to further the island's national identity that would have deepened a rift with China, Bloomberg said. The Canadian Internet pharmacy industry, which has more than $800 million in annual sales in transactions with the U.S., is facing increasing regulatory, political and economic pressures, the NY Times reported. U.S. stocks will rise next year as the economy strengthens, boosting the S&P 500 Index as much as 12%, money managers told Barron's. Job growth may accelerate in 2005 and the US trade deficit may narrow to as little as 5% of gross domestic product, helping GDP growth to rise 4%-5%, higher than the 3.5% forecast of economists, Barron's reported. Bristol-Myers Squibb is preparing to sell its consumer medicines unit for as much as $800 million, and GlaxoSmithKiline Plc and Johnson & Johnson may bid for it, London's Sunday Times reported. More than 300,000 U.S. students between eighth and 12th grade used steroids last year, Newsweek magazine said, citing analysis of a report from the Univ. of Mich. Honeywell Intl., the world's No.1 maker of cockpit electronics, plans to buy Novar Plc for $1.52 billion to obtain its building security, fire systems and services business, the Wall Street Journal reported. Permira, a European buy-out group has entered a joint venture with Apollo Management LP to make an offer for Toys R Us, which is worth about $3.5 billion, the Financial Times said. Procter & Gamble's Indian unit had a 25.5% sales growth in October compared with a 1.9% increase at rival Hindustan Lever, Economic Times said. Mahmoud Abbas, the chairman of the Palestinian Liberation Organization, apologized to Kuwait for Palestinian support for Iraq in the 1990-1991 Persian Gulf War, the AP reported. The oil minister for Saudi Arabia, OPEC's biggest oil producer, said the nation will reduce output by 500,000 barrels a day to enforce a recent accord. The supply of oil is still outstripping demand after OPEC, the producer of more than a third of the world's output, begins to reduce production to prop up falling prices, the Qatari oil minister said. General Motors and DaimlerChrysler AG will jointly develop a gasoline-electric power system to catch Toyota Motor and Honda Motor in the technology that saves fuel and cuts tailpipe emissions, Bloomberg reported. A number of economists say a gradually declining US dollar is good for equities, the AP reported.

Late-Night Trading
Asian indices are mostly lower, -.75% to +.25% on average.
S&P 500 indicated +.14%
NASDAQ 100 indicated +.31%.

BOTTOM LINE: I expect US stocks to open modestly lower in the morning on a bounce in oil prices, however shares will likely strengthen later in the day. The Portfolio is 100% net long heading into tomorrow.

Chart of the Week

Morgan Stanley Commodity Related Index(CRX)

Bottom Line: The CRX has risen 28.1% over the last 12 months. However, I expect these stocks to underperform over the intermediate-term. An exodus by momentum investors, lower commodity prices, a stabilizing dollar, greater supply and slackening demand from Asia/Europe should provide the catalysts. I expect the CRX to test its 200-day moving-average over the coming months.

Weekly Outlook

There are a number of economic reports and some significant corporate earnings reports scheduled for release this week. Economic reports include (Mon.)-Advance Retail Sales, Business Inventories (Tues.)-Trade Balance, Industrial Production, Capacity Utilization (Wed.)-Empire Manufacturing, NAHB Housing Market Index (Thur.)-3Q Current Account Balance, Housing Starts, Initial Jobless Claims, Philadelphia Fed. (Fri.)-Consumer Price Index. Retail Sales, Industrial Production, Housing Starts, Philly Fed. and CPI all have market-moving potential.

Mon.-Oracle Corp.(ORCL) Tues.-FuelCell Energy(FCEL) Wed.-Bed, Bath & Beyond(BBBY), Best Buy(BBY), Biomet(BMET), Lehman Brothers(LEH), Lennar Corp. Thur.-Adobe Systems(ADBE), Apollo Group(APOL), Carnival Corp.(CCL), FedEx Corp.(FDX), Goldman Sachs(GS), Nike Inc.(NKE) Fri.-Circuit City(CC) are some of the more important companies that release quarterly earnings this week. There are also some other events that have market-moving potential. The SG Cowen Consumer Conference(Mon.-Tues.), FOMC policy announcement(Tues.), CSFB Small-cap Software Conference(Tues.-Wed.) and SEMI Book-to-Bill report(Thur.) could also impact trading this week.

Bottom Line: I expect U.S. stocks to finish the week higher on seasonal strength, strong earnings/economic reports, more optimism, a stabilizing US dollar, short-covering and bargain-hunting. I also expect long-term interest rates to move modestly higher and energy prices to fall slightly. I continue to believe commodity-related stocks will underperform in the intermediate-term. My short-term trading indicators are still giving Buy signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,188.00 -.27%

Click here for the Weekly Wrap by Briefing.com.

Bottom Line: U.S. stocks finished slightly lower last week, led down by semiconductors after disappointing reports from Xilinx, Altera and Cymer. However, significant gains in the homebuilding sector, spurred by a very positive report from Toll Brothers, helped minimize losses in the major indices. Taking into account the 25% gain in the Morgan Stanley Tech Index since Aug. 12, losses in the sector were relatively muted considering the news. After basing for several weeks, the homebuilders broke to ALL-TIME highs last week on heavy volume. The index has now returned 41.4% since the bears and pundits said the "bubble" burst in May. It is good to see the AAII % Bulls fall, however investor complacency remains elevated as a whole. The plunge in energy prices is very positive for the U.S. economy and remains underreported by the mainstream press. While oil is at technical levels normally associated with a short-term bounce, still lower prices are likely. A few months ago I forecast oil would reach $35-$40/bbl. during the fourth quarter. However, more supply from the Middle-East, less demand from Asia/Europe, a stabilizing US dollar, less speculation and a lower terrorism/war premium may lead oil prices to overshoot on the downside in the intermediate-term. I would not be surprised to see crude approach $30/bbl within the next six months. This would be a very positive development with respect to measures of inflation and consumer spending. Disposable personal income has risen 4.3% from a year earlier versus a 2.5% gain in the Consumer Price Index. A substantial fall in energy prices would further bolster the US consumer. Finally, it was also a big positive to see the US dollar rebound and interest rates fall last week. I expect the dollar to continue its rebound and interest rates to rise slightly from current levels over the coming weeks.

Economic Week in Review

ECRI Weekly Leading Index 133.00 +.45%

Final 3Q Non-farm Productivity rose 1.8% versus estimates of a 2.0% increase and a prior estimate of 1.9%. Final 3Q Unit Labor Costs rose 1.8% versus estimates of a 1.6% gain and a prior estimate of 1.6%. The productivity of U.S. workers grew in the third quarter at the slowest pace in almost two years, suggesting companies may need to boost hiring to meet demand, Bloomberg said. Moreover, hours worked rose at a 2.4% pace, the most since the third quarter of 1999. "Labor costs have moved from a downward influence on inflation to a neutral one," said Stephen Stanley, chief economist at RBS Greenwich Capital. "Fed officials have consistently noted that labor costs are the key to inflation, not material costs."

U.S. Household Net Worth advanced to another all-time high of $46.7 trillion as stock market and real estate values appreciated, the Fed said. Consumer Credit for October fell to $7.7B versus estimates of $6.0B and an upwardly revised $13.6B in September. The percentage of homeowners in foreclosure fell to 1.14%, the lowest level in 4 years. "Consumers are confident enough in the outlook for the economy to assume greater debt burdens," said Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi. Personal bankruptcy filings across the country declined 2.6% for the fiscal year ended Sept. 30, suggesting most consumers are able to handle their rising debt, and that spending will continue, Bloomberg reported. Sales at U.S. retailers rose 3.3% during the first full week of the holiday season.

The Import Price Index for November rose .2% versus estimates of 0.0% and a 1.6% increase in October. The dollar's decline this year against other currencies makes imported goods more expensive, Bloomberg said. The report "echoes what we've seen in the broader price measures – big run-ups in prices of crude and intermediate goods but only a limited pass-through to consumer prices," said Stephen Stanley. "There is still little evidence as of yet that the Fed is risking a substantial acceleration in core consumer price inflation." "Import competition, particularly from China, is keeping downward pressure on manufactured products, such as apparel and fabricated metals," the Dallas Fed said in its regional report.

Initial Jobless Claims for last week were 357K versus estimates of 335K and 349K the prior week. Continuing Claims were 2796K versus estimates of 2746K and 2705K prior. "As oil prices come down, that should make companies a little less reluctant to hire," said John Shin, an economist at Lehman Brothers. Claims have fallen to a weekly average of 344,102 so far this year from 402,000 for all of 2003, Bloomberg said.

Wholesale Inventories rose 1.1% in October versus estimates of a .5% gain and a .6% increase in September. Consumer purchases rose the most in almost three years last quarter and business investment accelerated, recent reports have shown. Gains in spending caused inventories to rise at almost half the previous quarter's pace, leaving businesses room to add to stockpiles, boosting the economy this quarter, Bloomberg reported. "If you have sales booming, you have to have inventories keep pace," said Tom Rogers, chief economist at Briefing.com. Wholesalers had enough supply on hand to last 1.15 months at the current sales pace, the same as the prior month and up from an all-time record low of 1.12 months in April, Bloomberg said.

The Producer Price Index for November rose .5% versus estimates of a .1% increase and a 1.7% gain in October. The PPI Ex Food & Energy for November rose .2% versus estimates of a .2% increase and a .3% gain in October. "So far, businesses have been more successful in passing along cost increases to other business, but with consumers it's been much more difficult," said Nigel Gault, research director at Global Insight. The 26.4% decline in oil, the 31.9% plunge in natural gas and the 23.6% drop in heating oil should help restrain producer prices going forward, Bloomberg reported.

The preliminary Univ. of Mich. Consumer Confidence reading for December rose to 95.7 versus estimates of 93.5 and a reading of 92.8 in November. Job growth is helping bolster consumer spending and confidence and consumers have benefited from the decline in oil and gasoline prices, economists said. The U.S. economy has added 2.2 million jobs since August of last year, Bloomberg said. The current-conditions component of the index, which reflects Americans' perception of their financial situation and whether it's a good time to buy big-ticket items, rose to 106.8 from 104.7 in November. The expectations component of the index, based on optimism about the next one to five years, rose to 88.8 from 85.2, Bloomberg said. "With the recent drop in energy prices consumer spending will give us a good holiday season," said Lynn Reaser, chief economist at Banc of America Capital.

Bottom Line: Overall, last week's economic data were positive. Productivity has fallen to levels normally associated with increased hiring. However, mitigating forces should hold unit labor costs in check in the intermediate-term. A modest increase in the rate of US job creation, a stabilizing US dollar, deflationary forces in Asia, continuing overcapacity in some areas of the US economy and falling commodity prices should lead to decelerating inflation readings in 2005. This will allow the Fed to slow the pace of rate hikes. With Americans' net worth at ALL-TIME high levels, a modest rise in interest rates next year should not significantly damage consumer spending or the US economy. Inventories are rising to keep up with brisk demand and should contribute meaningfully to 4Q GDP. It is very good to see Consumer Confidence rebound from recent disappointments. A very strong housing market, rising stock market, declining energy prices, good labor market, elections in Iraq, less pessimism from politicians, relatively low interest rates and diminished domestic terrorism fears should lead to new highs in consumer sentiment for this cycle in the next few months. The Weekly Leading Index is now at its highest level since late June.

Weekly Scoreboard*

Indices
S&P 500 1,188.00 -.27%
Dow 10,543.22 -.46%
NASDAQ 2,128.07 -.93%
Russell 2000 632.24 -1.55%
S&P Equity Long/Short Index 999.51 -.85%
Put/Call .62 -10.14%
NYSE Arms 1.38 +.73%
Volatility(VIX) 12.76 -1.54%
AAII % Bulls 51.35 -9.53%
US Dollar 82.67 +2.15%
CRB 276.62 -2.74%

Futures Spot Prices
Gold 435.30 -4.83%
Crude Oil 40.71 -4.12%
Unleaded Gasoline 107.99 -4.43%
Natural Gas 6.84 +.34%
Heating Oil 122.57 -.83%
Base Metals 114.20 -2.56%
10-year US Treasury Yield 4.15% -2.38%
Average 30-year Mortgage Rate 5.71% -1.72%

Leading Sectors
Homebuilders +4.53%
HMOs +4.21%
Hospitals +3.27%

Lagging Sectors
Airlines -3.19%
Iron/Steel -4.79%
Semis -5.06%

*% Gain or loss for the week

Mid-day Report

S&P 500 1,190.97 +.15%
NASDAQ 2,133.15 +.23%

Leading Sectors
Homebuilders +3.31%
Airlines +1.43%
I-Banks +1.10%

Lagging Sectors
Broadcasting -.88%
Oil Service -1.07%
Wireless -1.16%

Other
Crude Oil 41.15 -3.24%
Natural Gas 6.86 -.38%
Gold 436.10 -.25%
Base Metals 114.20 +.55%
U.S. Dollar 82.64 +.65%
10-Yr. T-note Yield 4.17% +1.31%
VIX 13.04 -1.14%
Put/Call .71 -20.22%
NYSE Arms .86 -29.51%

Market Movers
CBON +21.5% on strong demand for IPO.
HOV +10.7% on positive comments from multiple analysts.
MATK +8.9% after beating 4Q estimates.
FFIV +5.7% on comments from Citi SmithBarney.
ADIC -11.6% on disappointing 4Q results.
*Homebuilder up across the board on continuing optimism over fundamentals.

Economic Data
Producer Price Index for November rose .5% versus estimates of a .1% increase and a 1.7% gain in October.
PPI Ex Food & Energy for November rose .2% versus estimates of a .2% increase and a gain of .3% in October.
Preliminary Univ. of Mich. Consumer Confidence for December rose to 95.7 versus estimates of 93.5 and a reading of 92.8 in November.

Recommendations
-Goldman Sachs reiterated Outperform on MO. Goldman reiterated Underperform on WIN and CR.
-Citi SmithBarney reiterated Buy on GE, target $44. Citi reiterated Buy on TOL, target $94. Citi reiterated Buy on TYC, target $40. Citi reiterated Buy on MO, target $68. Citi reiterated Buy on BEAS, target $11.50. Citi reiterated Buy on BJ, target $34. Citi reiterated Buy on BBW, target $43. Citi reiterated Buy on NSM, target $21.
JP Morgan raised GYI to Overweight. JP Morgan rated FLSH Overweight.
-Banc of America rated DHI Buy, target $42. BofA rated HOV Buy, target $50.
-UBS downgraded AMD to Reduce, target $20.
-Thomas Weisel raised FHRX to Outperform, target $29. Thomas Weisel raised NVDA to Outperform. Thomas Weisel raised ATYT to Outperform.
-Legg Mason rated NIHD Buy, target $58.
-CSFB cut FLR to Underperform, target $45. CSFB cut EME to Underperform, target $35.
-Morgan Stanley rated MHS Overweight, target $45.

Mid-day News
U.S. stocks are modestly higher mid-day on optimism over better consumer sentiment and lower energy prices. A journalist from the Chattanooga Times Free Press was behind a U.S. National Guard's question to Defense Secretary Donald Rumsfeld on the shortage of vehicle armor available to the army, the Washington Post reported. OPEC agreed to cut output to end a six-week slide in prices, Dow Jones reported. Senator Grassley plans to introduce a new bill next year to require pharmaceutical companies to report drug trials on a public database, the NY Times reported. Gemstar-TV Guide Intl. CEO Shell, who resigned yesterday, may join Comcast to oversee the cable-tv operator's channels, the LA Times reported. The European Central Bank isn't as worried about inflation as it was a month ago, reducing pressure for an increase in interest rates, Swedish news service Direkt reported. The US dollar is heading for its biggest gain against the yen in almost six years amid speculation the Bank of Japan's Tankan survey will show business confidence is waning, Bloomberg reported. U.S. consumer sentiment rose for a second month in December as oil prices plunged and the government reported continued job creation in November, Bloomberg said. Carlyle Group may raise $6.5 billion for what would be the world's biggest buyout fund, Bloomberg reported. General Electric said it will increase its dividend by 10% and authorized the repurchase of $15 billion of its shares over three years, Bloomberg reported. Southwest Airlines is offering more than $100 million in cash and loans for ATA Holdings assets including Chicago airport gates, Bloomberg reported. The Core PPI had its smallest gain in four months, Bloomberg said.

Bottom Line: The Portfolio is higher mid-day on gains in my homebuilding, security, Chinese ADR and semi longs. I added a few longs this morning, bringing the Portfolio's market exposure to 100% net long. One of my new longs is DRIV and I am using a $39.75 stop-loss on this position. The tone of the market is moderately positive today notwithstanding the mixed performance of the major indices. Many market leaders are higher. The Weekly Leading Index rose again this week and is now at its highest level since late June. Moreover, the continuing decline in energy prices, low interest rates and a stabilizing US dollar bode well for stocks. I expect U.S. equities to rise modestly into the close on short-covering and bargain-hunting.

Friday Watch

Earnings of Note
Company/Estimate
COO/.72
NT/.00

Splits
None of note.

Economic Data
Producer Price Index for November estimated to rise .1% versus a 1.7% increase in October.
PPI Ex Food & Energy for November estimated to rise .2% versus a .3% gain in October.
Preliminary Univ. of Mich. Consumer Confidence for December estimated at 93.5 versus a reading of 92.8 in November.
Monthly Budget Statement for November estimated at -$54.1B versus -$43.0B in October.

Recommendations
Goldman Sachs reiterated Outperform on DTV and A. Goldman reiterated Underperform on CIEN and CVC.

Late-Night News
Asian indices are mostly lower, led down by China and North Korea. AO VimpelCom, the second-largest mobile-phone operator in Russia, and Systema, another Russian cellular-phone service provider, are in talks with BPL Mobile Communications to buy a stake in the Indian company, the Economic Times reported. Gucci Group NV's new CEO, Robert Polet, is aiming to double sales of the company's brand-name merchandise within the next seven years, the NY Times said. China reported the slowest inflation in nine months as improved harvests boosted food supply, easing pressure on the central bank to raise interest rates, Bloomberg reported. Saudi Arabia supports an oil output cut of 1M barrels/day, Al-Hayat reported.

Late-Night Trading
Asian Indices are -1.25%. to unch. on average.
S&P 500 indicated -.07%.
NASDAQ 100 indicated -.15%

BOTTOM LINE: I expect U.S. equities to open modestly lower on weakness in Asia and concerns over comments from OPEC. However, I expect stocks to rise from morning lows on a better-than-expected consumer confidence report and lower oil prices. The Portfolio is 75% net long heading into tomorrow.

Thursday Close

S&P 500 1,189.24 +.54%
NASDAQ 2,129.01 +.14%

Leading Sectors
Homebuilders +4.80%
Oil Service +1.88%
HMOs +1.70%

Lagging Sectors
Airlines -.84%
Drive -1.01%
Semis -1.49%

Other
Crude Oil 42.54 +.02%
Natural Gas 6.95 +.94%
Gold 438.90 +.39%
Base Metals 113.57 -.46%
U.S. Dollar 82.05 +.18%
10-Yr. T-note Yield 4.17% +1.31%.
VIX 12.88 -2.35%
Put/Call .77 -13.48%
NYSE Arms .80 -34.43%

After-hours Movers
AMTD -4.8% said it's in talks with U.S. regulators about whether it had sufficient capital.
SHFL -4.3% after beating 4Q estimates and lowering 1Q outlook.

Recommendations
Goldman Sachs reiterated Outperform on BAX, PG, TYC, NSM and FON. Goldman reiterated Underperform CR and SAY. Usana Health Sciences(USNA), the maker of nutritional supplements and weight-care products, will likely see its sales grow as new items are introduced, Business Week reported. Sipex Corp.(SIPX), whose President and CEO Maghribi quit this week, may be poised to be sold or taken over, Business Week reported. Ingersoll-Rand(IR), the world's biggest maker of refrigeration equipment for trucks, will benefits from increased demand for its products as the U.S. economy grows, Business Week reported.

After-hours News
U.S. stocks finished modestly higher today on optimism over the U.S. housing market, merger news and a rebound in technology shares from morning lows. After the close, deep tremors along the San Andreas fault in California might be a sign a large earthquake is coming, according to a study by scientists at the Univ. of California. Shares of Sprint and Nextel rose after reports that the U.S. mobile-phone companies are in merger talks, Bloomberg reported. Acer Inc. may sell its personal computers in the U.S. through Wal-Mart Stores to try and gain market share, the Commercial Times reported. DaimlerChrysler AG's Chrysler Group was asked by the U.S. government to recall about 600,000 vehicles, the Wall Street Journal reported.

BOTTOM LINE: The Portfolio finished slightly higher today and I added a few new longs from various sectors in the afternoon, leaving the Portfolio 75% net long. One of my new longs is PHM and I am using a $56.25 stop-loss on this position. The tone of the market improved throughout the afternoon with the major indices finishing near their highs for the day. As well, the advance/decline line, while negative, improved substantially from morning lows. The homebuilding index broke out of its recent trading range and closed at an ALL-TIME high, confounding the skeptics once again. It was also very positive to see semis rebound from morning lows on bad news and finish with minor losses. Finally, the weekly AAII % Bulls fell 9.5%, which is also a positive.

Mid-day Report

S&P 500 1,183.43 +.06%
NASDAQ 2,123.61 -.12%

Leading Sectors
Homebuilders +3.75%
Broadcasting +1.77%
Oil Service +1.12%

Lagging Sectors
Iron/Steel -.94%
Disk Drives -1.25%
Semis -1.74%

Other
Crude Oil 42.50 +1.34%
Natural Gas 6.84 +2.35%
Gold 437.40 -.32%
Base Metals 113.57 -.46%
U.S. Dollar 82.24 +.40%
10-Yr. T-note Yield 4.17% +1.31%
VIX 13.04 -1.14%
Put/Call .71 -20.22%
NYSE Arms .86 -29.51%

Market Movers
ALTR -11.5% after lowering 3Q outlook.
SMA +20.6% on strong demand for IPO.
ATPG +17.6% after saying a test on its Mississippi Canyon No.4 ST1 well was successful and showed flow rates that exceeded its expectations.
DITC +14.5% on Roth Capital upgrade to Strong Buy, target $24.80.
TOL +9.8% after beating 4Q estimates and raising 05/06 guidance.
FNF +6.0% after announcing a leveraged recapitalization plan and a special $10/share cash dividend.
INTL -11.6% after saying a unit will pay $8.7 million and plead guilty to bid rigging and wire fraud in connection with a federal program that helps link schools and libraries to the Internet.
LNG -8.4% after ChevronTexaco decided not to invest in a Louisiana plant the company plans to build.
TLCV -7.2% after saying it entered into an underwriting agreement to sell 2.3 million shares of common stock in the ipo of Occulogix.
VIP -9.2% after saying it has enough cash to meet obligations if a claim of $157 million in back taxes from 2001 is upheld.
DWA -5.5% on Bear Stearns downgrade to Underperform.

Economic Data
The Import Price Index for November rose .2% versus estimates of unch. and a 1.6% increase in October.
Initial Jobless Claims for last week were 357K versus estimates of 335K and 349K the prior week.
Continuing Claims were 2796K versus estimates of 2746K and 2705K prior.
Wholesale Inventories for October rose 1.1% versus estimates of a .5% gain and a .6% increase in September.

Recommendations
-Goldman Sachs reiterated Outperform on INTC, SANM, SLR, TYC, FON, BAX, GCI, PG, AVP and BBBY. Goldman reiterated Underperform on DJ, DYN, JDSU, CR and TRB.
-UBS downgraded LZB to Reduce, target $10. UBS downgraded JNS to Reduce, target $15.
-Banc of America rated CW Buy, target $68. BofA rated UDI Buy, target $52.
-Thomas Weisel raised GRMN to Outperform.
-JP Morgan raised LAVA to Overweight.
-Citi SmithBarney raised TWX to Buy, target $22.
-Deutsche Bank raised PPC to Buy, target $36.
-CIBC raised FLSH to Sector Outperform, target $25.
-Bear Stearns rated DWA Underperform, target $33. Bear raised MBT to Outperform, target $176.

Mid-day News
U.S. stocks are mixed mid-day as strong gains in the homebuilding sector are being offset by losses in technology shares. La-Z-Boy and other recliner makers are designing smaller, more delicate chairs that appeal to women to combat stagnant sales, the Wall Street Journal reported. Former Vermont governor and presidential candidate Dean urged fellow Democrats to stick to their liberal principles and not move to a more moderate stance to attract voters, the Washington Post reported. Citigroup plans to open 400 branches in the U.S., Canada and Mexico this year and next year to improve its profitable consumer finance business, Reuters reported. MBNA Corp., the world's largest independent credit-card lender, has angered some cardholders by switching their accounts to its new partner, American Express, from Visa or MasterCard without permission, the NY Times reported. The U.S. successfully resisted the adoption of socialism after WWII in its economic ideology, yet government's role in the economy has increased in recent years and that must be checked, Milton Friedman wrote in a Wall Street Journal column. More workers in the U.S. are finding permanent jobs through temporary assignments, USA Today reported. The Teamsters union proposed cutting the AFL-CIO's budget to help stem a decline in organized labor, the NY Times reported. Mexico's federal government has contracts that protect next year's oil revenue against a decline in the price of oil exports below $23-$24/bbl., daily Reforma reported. Hyatt Corp. agreed to buy the AmeriSuites chain of 143 hotels to tap rising demand from corporate travelers for upscale self-service rooms, Bloomberg said. Eli Lilly said net income will rise to $2.80 to $2.90 a share for 2005 as the company wins approval to sell new medicines, Bloomberg said. Toll Brothers, the largest U.S. builder of luxury homes, said fiscal fourth-quarter earnings increased 93% on higher sales, and raised its forecast for profit growth next year, Bloomberg reported. Men and teenage boys who use laptop computers may be damaging their fertility, a U.S. study shows. DaimlerChrysler AG said it doubled its number of fuel-cell models to 19 in the U.S. as part of the automaker's goal to have 100 of the no-emissions cars, trucks and buses worldwide by the end of this year, Bloomberg reported. National Semiconductor said profit rose for a sixth straight quarter, Bloomberg said. The US dollar had its biggest two-day advance since October against the euro and rose versus the yen as German Chancellor Schroeder and Japanese Prime Minister Koizumi denounced gains in their currencies, Bloomberg reported. The number of U.S. workers filing initial jobless claims unexpectedly rose by 8,000 last week to the highest since September, Bloomberg reported. Nextel Communications and Sprint Corp. are in "active and ongoing" talks about a possible merger, CNBC reported.

Bottom Line: The Portfolio is unchanged mid-day as strength in my retail longs is offsetting weakness in my semi/equipment longs. I have not traded today and the Portfolio is still 50% net long. The tone of the market has improved from morning lows, however it remains weak. Measures of investor anxiety are falling again and breadth is poor. The SOX bounced off its 50-day moving-average, which is a positive considering the news. I expect U.S. stocks to trade mixed-to-higher into the close on short-covering and bargain-hunting.

Thursday Watch

Earnings of Note
Company/Estimate
COST/.40
MATK/.30
NSM/.14
SHFL/.26
TOL/.197

Splits
CAKE 3-for-2

Economic Data
The Import Price Index for November is estimated unch. versus a 1.5% increase in October.
Initial Jobless Claims for last week estimated at 335K versus 349K the prior week.
Continuing Claims are estimated at 2746K versus 2723K prior.
Wholesale Inventories for October estimated to increase .5% versus a .5% gain in September.

Recommendations
Goldman Sachs reiterated Outperform on BHI, AVP and MDT.

Late-Night News
Asian indices are mixed as strength in China is being offset by weakness in Japan. China may let the yuan appreciate as much as 9.5% o 7.72 yuan to the U.S. dollar next year, Sing Tao Daily reported, citing Goldman Sachs' China chief economist Hong. South Korean President Roh Moo Hyun made a surprise visit yesterday to the Asian nation's soldiers serving in the northern Iraqi town of Arbil, Bloomberg reported. American Intl. Group is expanding its insurance offerings with a special policy to help companies in China cover the costs of lawsuits and regulatory investigations, the Asian Wall Street Journal reported. U.S. Trade officials plan to urge the Japanese government to lower barriers to entering the mobile phone market when the two nations hold talks next week, Kyodo News reported. About 10% of U.S. personnel wounded in the Iraq and Afghanistan wars have died, less than half the rates of past wars, partly because of better medical care, according to an essay in the Dec. 9 New England Journal of Medicine. The U.S. FCC said it will consider loosening a ban on mobile-phone use in airplanes, Bloomberg reported. Japan's Cabinet has decided to extend the country's troop deployment in Iraq, Bloomberg reported. Newly appointed Afghan President Karzai called provincial officials and tribal leaders to a meeting on combating drug trafficking, two days after he vowed at his inauguration to tackle the problem, Agence France-Presse said. Australia added jobs in November for a third straight month and the unemployment rate fell to a 28-year low, suggesting the fifth-largest economy in the Asia-Pacific region may rebound from its slowest growth in almost four years. Economists raised their U.S. growth forecast for the fourth quarter to 3.8% from 3.5% as a result of the recent fall in energy prices, Bloomberg reported.

Late-Night Trading
Asian Indices are -1.25%. to +.50% on average.
S&P 500 indicated -.21%.
NASDAQ 100 indicated -.53%

BOTTOM LINE: I expect U.S. equities to open lower in the morning on weakness in technology shares and a bounce in oil prices. The Portfolio is 50% net long heading into tomorrow.

Wednesday Close

S&P 500 1,182.81 +.49%
NASDAQ 2,126.11 +.54%

Leading Sectors
HMOs +2.51%
Biotech +1.86%
Disk Drives +1.73%

Lagging Sectors
Defense -.68%
Iron/Steel -1.01%
Semis -1.28%

Other
Crude Oil 42.05 +.26%
Natural Gas 6.72 +.55%
Gold 441.00 +.52%
Base Metals 114.10 -3.29%
U.S. Dollar 81.87 +.78%
10-Yr. T-note Yield 4.12% -2.47%.
VIX 13.19 -3.51%
Put/Call .89 +21.92%
NYSE Arms 1.24 -18.42%

After-hours Movers
FNF +6.4% after announcing leveraged recapitalization plan and a special $10/share cash dividend.
XLNX -5.3% after lowering 3Q outlook.

Recommendations
Goldman Sachs reiterated Outperform on IR, USB and ECA.

After-hours News
U.S. stocks finished modestly higher today on optimism over a rebound in the US Dollar and falling interest rates. After the close, the California Public Employees' Retirement System is asking managers of companies and funds in which it's invested to disclose any investments they hold in Sudan, Bloomberg reported. TIAA-CREF, the largest U.S. retirement fund, said the staff of the SEC is conducting an informal inquiry into its arrangement with Ernst & Young, Bloomberg said. Gold in New York fell the most in seven months, and the prices of other metals declined, as a rebound in the dollar eroded the appeal of the commodities as an alternative to U.S. stocks and bonds, Bloomberg reported. Russia, one of Iraq's leading trading partners in the corrupt UN/Iraq Oil-for-food program, has refused to sign an agreement to cooperate with an investigation of it, Russian Deputy Ambassador Dolgov said.

BOTTOM LINE: The Portfolio finished unchanged today and I did not trade in the afternoon, thus leaving market exposure at 50% net long. The tone of the overall market improved from yesterday as the dollar rallied, interest rates plunged and commodity prices fell. Volume was lighter and the advance/decline line improved. However, most readings of investor complacency remain elevated. I continue to expect modest declines in the major indices in the near-term, setting the stage for a good year-end rally.

Mid-day Report

S&P 500 1,183.54 +.54%
NASDAQ 2,129.62 +.70%

Leading Sectors
Disk Drives +2.17%
Biotech +1.93%
HMOs +1.92%

Lagging Sectors
Defense -.94%
Semis -1.07%
Iron/Steel -1.06%

Other
Crude Oil 41.70 +.58%
Natural Gas 6.61 -.17%
Gold 438.70 -3.33%
Base Metals 114.10 -3.29%
U.S. Dollar 82.06 +1.02%
10-Yr. T-note Yield 4.14% -1.92%
VIX 13.34 -2.49%
Put/Call .91 ++24.66%
NYSE Arms 1.19 -23.03%

Market Movers
SIRI -15.3% on multiple downgrades to Sell.
VIP -26.9% after saying it received a claim of $157 million for back taxes, penalties and fines from 2001.
STX +6.4% after boosting 2Q estimates substantially and multiple upgrades.
GMR +13.6% after Frontline(FRO) indicated it bought at least 5% of the company and expressed interest in a business combination.
HITK +10.7% after beating 2Q estimates.
TTC +6.4% beating 4Q estimates, raising 1Q guidance and raising dividend.
MTL -20.5% after accusing the Russian police of raiding its Moscow offices to keep it from bidding for a stake in Russia's no. 2 steelmaker.
PIXR -6.0% after saying it and Disney are delaying the release of their movie "Cars" by six months and multiple downgrades.
DECK -5.8% on Piper Jaffray downgrade to Market Perform.
AVP -4.9% after lowering 4Q estimates.

Economic Data
None of note.

Recommendations
-Goldman Sachs reiterated Outperform on IBM, CSCO. Goldman reiterated Underperform on UIS. Goldman lowered AAI to Underperform.
-Citigroup SmithBarney rated ERTS Top Pick, target $62. Citi rated ATVI Buy, target $22. Citi reiterated Buy on MSFT, target $32. Citi reiterated Buy on TXN, target $27. Citi reiterated Buy on CSCO, target $30. Citi reiterated Buy on HOV, target $73.
-UBS raised NRP to Buy, target $60. UBS raised PVR to Buy, target $56. UBS raised USS to Buy, target $27.
-Deutsche Bank raised STX to Buy, target $22.
-Lehman Brothers raised GE to Overweight.
-CSFB rated SHOP Outperform, target $33. CSFB rated MRK Underperform, target $23. CSFB rated LLY Outperform, target $70. CSFB raised FDX to Outperform, target $130.
-Morgan Stanley raised AFL to Overweight, target $45.
-Banc of America downgraded Semis to Sell.

Mid-day News
U.S. stocks are modestly higher mid-day on optimism over falling interest rates and a rebound in the US dollar. Gap's Old Navy retail chain may suffer this holiday shopping season because it doesn't have many new apparel offerings, the NY Times reported. United Airlines may charge a $2/bag fee for curbside baggage check-in beginning in January, the NY Times said. Saudi Arabian Oil Minister Al-Naimi said today no action may be needed from OPEC to prevent oil prices from falling further, Platts reported. Construction contractors and equipment distributors are more confident about the industry and the economy than they have been in a decade, the Wall Street Journal reported today, citing a new survey. Nucor, the biggest U.S. maker of steel from recycled metal, yesterday lowered its prices on some products by $30/ton to compete with imports, American Metal Market reported. 99 Cents Only Stores' 65 union truck drivers voted to authorize a strike after contract negotiations fell through, the LA Times reported. Merck, already hurting from the withdrawal of Vioxx, said 2005 earnings will fall lower than expected as sales of its Zocor cholesterol medication decline, Bloomberg reported. Gold fell the most in 10 months as a rebound in the US dollar eroded the appeal of the precious metal as an alternative to stocks and bonds, Bloomberg said. Pfizer CEO McKinnell said sales of Lipitor may rise 15% in each of the next five or six years, Bloomberg reported. Nortel will file restated financial results on Jan. 10, the last day of a self-imposed deadline, Bloomberg said. The ACLU wants a federal judge to overturn a California law that requires anyone convicted of a felony to submit a DNA sample to law enforcement databases, the San Francisco Chronicle reported.

Bottom Line: The Portfolio is unchanged mid-day as gains in my retail longs are offsetting losses in my semi and semi-equipment longs. I have not traded today and the Portfolio is still 50% net long. The tone of the market is mildly positive today with measures of investor anxiety mixed. It is good to see interest rates falling, gold dropping, the dollar rebounding and the CRB declining near critical technical support. I continue to believe the CRB will fall next year which bodes well for future inflation readings. As well, commodity-related stocks will likely underperform in the intermediate-term. I expect U.S. stocks to trade mixed-to-higher into the close.

Wednesday Watch

Earnings of Note
Company/Estimate
AZO/1.44
DWA/.16
KFY/.18

Splits
VCP 5-for-2

Economic Data
None of note.

Recommendations
Goldman Sachs reiterated Outperform on XRX, WFC, AVP and BAC.

Late-Night News
Asian indices are mixed as optimism over a bounce in the US Dollar is being offset by weakness in commodity-related stocks in the region. The euro zone's growth slowdown in the past three months was a "one-off, temporary nature," the Financial Times said, citing an interview with European Central Bank Chief Economist Issing. Israel and the Palestinian leadership denied a report from Egypt that an agreement is close that could serve as the basis for a peace settlement between them, Haaretz reported. New York lawmakers voted today to reduce the state's mandatory prison sentences for drug crimes, the NY Times reported. Lenovo Group Ltd., China's biggest personal computer maker, agreed to pay $1.25 billion for control of IBM's PC business, Bloomberg reported. Ukraine's opposition leader Yushchenko was the target of a plot to poison him during the country's recent election campaign, the London-based Times said. The BBC may start a worldwide children's tv channel, to capitalize on its success with characters such as the "Teletubbies," the Wall Street Journal reported.

Late-Night Trading
Asian Indices are -.50%. to +.50 on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated +.03%

BOTTOM LINE: I expect U.S. equities to open modestly higher on a bounce in the US dollar and bargain-hunting. However, stocks may fall modestly later in the day on continuing worries over slowing global growth. The Portfolio is 50% net long heading into tomorrow.

Tuesday Close

S&P 500 1,177.07 -1.11%
NASDAQ 2,114.66 -1.70%

Leading Sectors
Hospitals +.31%
Drugs -.57%
I-Banks -.58%

Lagging Sectors
Software -2.24%
Iron/Steel -2.84%
Disk Drives -3.14%

Other
Crude Oil 41.53 +.17%
Natural Gas 6.65 +.44%
Gold 452.40 -.29%
Base Metals 117.98 +.62%
U.S. Dollar 81.24 -.05%
10-Yr. T-note Yield 4.22% unch.
VIX 13.67 +3.64%
Put/Call .73 -3.95%
NYSE Arms 1.52 +53.54%

After-hours Movers
STX +10.6% after boosting 2Q estimates substantially.

Recommendations
Goldman Sachs reiterated Outperform on INTC, PFE and HOT.

After-hours News
U.S. stocks finished lower today on profit-taking and worries over global growth. Crude oil fell to the lowest in more than four months on speculation that warm weather and increased refinery production bolstered U.S. heating-oil stockpiles last week, Bloomberg said. The California Public Employees' Retirement System, the largest U.S. pension fund, agreed to disclose the fees it pays to venture capital and hedge fund managers as part of a legal settlement, Bloomberg reported. Texas Instruments narrowed its fourth-quarter sales forecast because industrial customers for its chips continue to reduce inventory, Bloomberg said. Axa SA, Manulife Financial and other global life insurers are preparing for rule changes in China this week that will give them greater access to a $50 billion market that is growth at more than 20% a year, Bloomberg said. General Motors will add rebates on many models starting Dec. 10 to attract buyers after U.S. sales fell 16% in November, Bloomberg reported. Global aluminum prices may rise after China said it will curb output to try to prevent a repeat of power shortages next year, Bloomberg reported. U.S. Representative Allen Boyd became the leading Democrat to endorse President Bush's plan to create private Social Security accounts, Bloomberg reported. The U.S. House of Representatives approved legislation reorganizing the nation's intelligence agencies and creating the job of national intelligence director to oversee efforts to thwart terrorist attacks, Bloomberg said.

BOTTOM LINE: The Portfolio finished lower today and I pared a number of long positions in various sectors, thus lowering market exposure to 50% net long. The tone of the market was poor today as volume increased and the advance/decline line was very weak, finishing at it lows for the day. As well, measures of investor complacency remained elevated. U.S. stocks will likely weaken further in the near-term. However, I do not anticipate a substantial pullback from current levels. As well, I foresee a resumption of the recent rally closer to year-end. Thus, I will look to rebuild long exposure into any near-term weakness.

***Alert***

There will not be a Mid-day Report today as I have a scheduling conflict. The Tuesday Close will be posted at its regular time. Sorry for the inconvenience. I have exited a number of long positions in various sectors as they hit my stops, thus leaving the Portfolio 50% net long. Today's action is negative and I expect further near-term weakness before another rally commences into year-end.

Tuesday Watch

Earnings of Note
Company/Estimate
HOV/2.07
UTIW/.56
SAFM/.22

Splits
None of note.

Economic Data
Final 3Q Non-farm Productivity estimated to increase 2.0% versus a 1.9% prior estimate.
Final 3Q Unit Labor Costs estimated to rise 1.6% versus a 1.6% prior estimate.
Consumer Credit for October estimated at $6.0B versus $9.9B in September.

Recommendations
Goldman Sachs reiterated Outperform on BBY. Goldman reiterated Underperform on PBG, NFB and SLG.

Late-Night News
Asian indices are mostly lower on worries over slowing Chinese growth and a bounce in oil prices. Johnson & Johnson is in advanced talks to buy Guidant Corp. for more than $24 billion, the NY Times reported. China shut 16,400 mining companies after a government investigation uncovered widespread violations of environmental regulations, the China Daily reported. OAO Gazprom, the world's biggest natural gas producer, has received about $4 billion in investment from hedge funds in anticipation that Russian barriers to international investment are about to be eased, the Financial Times said. Lenovo Group Ltd., China's largest computer maker, may say this week it will pay $2.0 billion in cash and stock for IBM's personal-computer business, the Financial Times said. Central bank governor Xiaochuan says China is facing a financial crisis if non-performing loans continue to build up, the China Securities Journal reported. The US is against moves by Taiwan to drop references to China in its official name, saying it would disrupt the status quo in cross-Strait relations, Agence France-Presse reported. Ukraine's President Kuchma said he agreed that a new election law aimed at ending voting fraud must be in effect before the Dec. 26 re-run of the disputed presidential election, Bloomberg reported. Japan will probably extend its troop deployment in Iraq beyond Dec. 14 when authorization for the current mission expires, Chief Cabinet Secretary Hosoda told a news conference in Tokyo.

Late-Night Trading
Asian Indices are -.75%. to unch. on average.
S&P 500 indicated -.04%.
NASDAQ 100 indicated unch.

BOTTOM LINE: I expect U.S. equities to open modestly higher on strength in technology and medical-related shares. The Portfolio is 125% net long heading into tomorrow.

Monday Close

S&P 500 1,190.25 -.08%
NASDAQ 2,151.25 +.15%

Leading Sectors
Disk Drives +2.09%
Boxmakers +1.77%
Utilities +.79%

Lagging Sectors
Iron/Steel -.97%
Foods -1.07%
Airlines -1.64%

Other
Crude Oil 43.08 +.23%
Natural Gas 6.95 +.46%
Gold 454.00 -.42%
Base Metals 117.25 +.04%
U.S. Dollar 81.28 +.37%
10-Yr. T-note Yield 4.22% -.69%
VIX 13.19 +1.77%
Put/Call .76 +10.14%
NYSE Arms .99 -27.74%

After-hours Movers
SNRR +9.6% after reporting strong 3Q results.
CRDN +5.4% after saying it will take the place of INVN in the S&P 600 Index.
IDBE +4.2% after CEO Holler told CNBC the company may be able to capture a fifth of the market for flu vaccines in the U.S. by the end of the decade.
DBRN -8.9% after the company said it plans to issue $100 million in notes convertible to stock.
VSTA -6.7% after meeting 3Q estimates and lowering 05 guidance.

Recommendations
Goldman Sachs reiterated Outperform on MO and UTX. Goldman reiterated Underperform on SAY and NAV. Goldman rated AAPL In-Line seeing FY06 eps of $1.85, above consensus.

After-hours News
U.S. stocks finished quietly mixed today as strength in the technology sector was offset by weakness in consumer-oriented groups. Martha Stewart Living Omnimedia is in final in final discussions with NBC Universal to distribute a new tv show starring the company's imprisoned founder, the Hollywood Reporter said. The prevalence of obesity among 2-to-5 year-olds from low-income families rose between 1989 and 2000, increasing the risk that chronic health problems will afflict them as adolescents and adults, according to a study published in the Archives of Pediatrics & Adolescent Medicine. The dollar rose after Japanese Vice Finance Minister Hosokawa signaled Japan may sell its currency to slow the yen's appreciation, Bloomberg said. Republicans in the U.S. House of Representatives reached agreement on legislation reorganizing U.S. intelligence agencies, clearing the way for a final vote on the bill as early as tomorrow morning, Bloomberg reported. A New York jury agreed with World Trade Center leaseholder Larry Silverstein that the attack on the twin towers by a pair of hijacked plans was two insurable events, requiring nine companies to pay as much as double their policy limits, Bloomberg reported.

BOTTOM LINE: The Portfolio finished unchanged today as gains in my internet and Russian ADR longs offset losses in my retail, restaurant and security longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. Today's action appeared to be a further consolidation of recent gains as volume declined and sector performance was mixed. I continue to expect technology stocks to lead the major US indices higher this week.

Mid-day Report

S&P 500 1,188.73 -.20%
NASDAQ 2,148.71 +.03%

Leading Sectors
Disk Drives +1.24%
Boxmakers +.86%
Software +.41%

Lagging Sectors
Retail -.96%
Foods -1.09%
Airlines -1.31%

Other
Crude Oil 42.95 +1.08%
Natural Gas 6.84 +.72%
Gold 456.10 -.26%
Base Metals 117.25 +.04%
U.S. Dollar 81.11 +.16%
10-Yr. T-note Yield 4.22% -.55%
VIX 13.40 +3.40%
Put/Call .74 +7.25%
NYSE Arms 1.11 -18.98%

Market Movers
CGTK -57.4% after saying a product its developing with BMY to treat vein-graft failure of the heart and leg didn't work in a late-stage trial.
SOL +24.6% after Carl Zeiss AG and EQT Partners AB agreed to buy it for $815 million in cash.
DVA +9.9% after the Wall Street Journal reported it was nearing an agreement to buy the dialysis operations of Gambro AB for about $3 billion.
OSTK +5.0% on short-covering after continuing strong holiday sales.
GYI +3.9% after positive comments about the company on Rukeyser's Wall Street.
IMDC +4.0% after announcing it silicone gel-filled breast implants PMA will be reviewed at an upcoming FDA panel meeting.
SHOP -13.3% after Deutsche Bank rated it Sell, target $20.
LNG -6.3% on profit-taking.

Economic Data
None of note.

Recommendations
-Goldman Sachs reiterated Outperform on COH, ACN, AMLN, BBY, WLP, DDR, NKE, RIO. Goldman upgraded CVRD to Outperform.
-Citi SmithBarney said to Buy CIT, target $50. Citi thinks another bidder for S will emerge. Citi reiterated Buy on VNO, target $79. Citi reiterated Buy on MSFT, target $32. Citi reiterated Buy on UTSI, target $26. Citi reiterated Buy on SANM, target $12. Citi reiterated Buy on HUM, target $32. Citi reiterated Buy on THC, target $17.50. Citi reiterated Buy on HOV, target $73. Citi reiterated Buy on GE, target $38. Citi SmithBarney reiterated Buy on TXN, target 27.
-Merrill Lynch rated D Focus 1 Stock of the Week.
-UBS cut DDS to Reduce, target $23. UBS raised ICOS to Buy, target $36. UBS raised MFE to Buy, target $36.
-Deutsche Bank raised CHKP to Buy, target $28.
-Prudential cut KWD to Underweight, target $30.

Mid-day News
U.S. stocks are quietly mixed mid-day as optimism over improving fundamentals in the tech sector is offsetting worries over consumer spending and a bounce-back in oil prices. The U.S. Chamber of Commerce has started a weekly newspaper in Illinois as part of a campaign against frivolous lawsuits, the Washington Post reported. The UN nuclear watchdog said it is certain that the nuclear fuel it monitored in North Korea has been turned into four to six nuclear bombs, the NY Times reported. NY Attorney General Spitzer, who will run for governor, hasn't pursued corruption in NY government with the same vigor he has shown in going after corporate wrongdoers, the NY Times said. Accessories for Apple's iPod digital music player amount to a more than $200 million a year business, the San Francisco Chronicle reported. U.S. Senate minority leader Reid said Democrats would oppose any plans by President Bush to create private accounts for Social Security or pick Clarence Thomas to replace William Rehnquist as chief justice if he leaves the Supreme Court, the Washington Post reported. Red Herring magazine founder Tony Perkins plans to introduce a printed "blogzine" in February with an annual subscription rate of $49 to highlight commentary and stories from blog sites, the San Jose Mercury News said. Best Buy is offering two new lines of electronics under its own Insignia and Geek Squad brands, Bloomberg reported. Cisco formed an alliance with Fujitsu to increase sales to Japanese telephone carriers, Bloomberg said. Crude oil is rising from a three-month low after an attack on the U.S. Consulate in Jeddah, Saudi Arabia, boosted concern that a revival of terrorist attacks might threaten oil shipments form the world's biggest oil exporter, Bloomberg said.

Bottom Line: The Portfolio is unchanged mid-day as strength in my internet and Russian ADR longs is offsetting weakness in my retail and security longs. I have not traded this morning and the Portfolio is still 125% net long. The tone of the market is weaker today, but improving. I view it as a positive that oil is only slightly higher, notwithstanding its recent fall and the news today. The rally in bonds is also a positive, especially considering all the recent talk that the declining dollar would send interest rates substantially higher. I expect U.S. stocks to rise modestly into the close on short-covering and strength in the technology sector.

Monday Watch

Earnings of Note
Company/Estimate
CC/-.04
JOSB/.24
NAV/1.80

Splits
None of note.

Economic Data
None of note.

Weekend Recommendations
Wall Street Week w/Fortune had guests that were positive on CD, IACI, PCLN and TSG. Forbes on Fox had guests that were positive on BAY, JNJ, CSCO and mixed on AMLN. Cashin' In had guests that were positive on SYK, EBAY, WTR, mixed on MNST and negative on TZOO. Bulls and Bears had guests that were positive on BBY, BCF, ET, HD, MSFT, TASR, UPS, PBY, GTN, VIAB, mixed on DLTR, PIR, CY, KRI, JRC and negative on SIRI. Barron's had positive comments on MON, SYT, ELY. Goldman Sachs reiterated Outperform on EBAY, IR, NSM, AMGN, DNA, RIG, DO, SII, BHI, SLB and Underperform on EW.

Weekend News
North Korea has asked for 10,000 tons of emergency fuel oil as a condition for resuming six-party talks on its nuclear program, the Sankei newspaper reported. Sales of Abbott Labs' Mobic, which is used to treat arthritis, more than doubled in October after Merck's recall of Vioxx, the Chicago Tribune reported. Colombia agreed to extradite to the US Gilberto Rodriguez Orejuela, the former leader of the Cali cocaine cartel, the NY Times reported. The European Union wants to send up to 800 observers to the Ukraine to monitor the Dec. 26 re-run of last month's presidential election, the Frankfurter Allgemeine Sonntagszeitung reported. Officials from the U.S. and Canada agreed to a plan to clean up the Great Lakes and the major waterways that flow into them, the NY Times reported. Sanofi-Aventis SA's experimental anti-craving drug rimonabant, described in news reports and by word of mouth as a "miracle drug" to treat obesity, is viewed with some skepticism in the medical community, the NY Times reported. Food manufacturers are selling fewer low-carb products because of decreasing demand by diet conscious consumers, the NY Times reported. Pfizer filed a suit Friday against a new German drug price law because state-owned health insurers won't have to refund the full price of its cholesterol drug to users, Reuters said. Ford Motor CEO Bill Ford Jr. plans to revive his push to make the automaker more environmentally friendly now that he no longer has to deal with a financial crisis, Newsweek reported. The ratio between how much stock company insiders sell versus what they buy is skewed toward sales because shares purchased when insiders exercise stock options aren't usually counted, the NY Times said. Half of all U.S. parents are expected to purchase video games as gifts during the Christmas season, the Entertainment Software Association said. European online travel companies may become subject to takeovers as U.S. companies seek to boost their revenue, the Financial Times reported. Apple Computer will probably raise purchases of computers and other parts in Taiwan by about 25% to $5 billion next year, the Economic Daily News reported. An announcement about IBM's sale of is pc unit to Lenovo Group may be made as early as tomorrow, the Wall Street Journal reported. Goldcorp, Canada's fourth-largest gold producer, has agreed to buy Wheaton River Minerals for $1.8 billion in stock, CEO McEwen said. OPEC is likely to keep production at a 25-year high to prevent shortages during the U.S. winter and lower prices, OPEC officials said.

Late-Night Trading
Asian indices are mostly mixed, -.75% to +.50% on average.
S&P 500 indicated unch.
NASDAQ 100 indicated +.09%.

BOTTOM LINE: I expect US stocks to open modestly higher on gains in tech stocks, optimism over weekend retail sales, declining energy prices and a stabilizing dollar. The Portfolio is 125% net long heading into tomorrow.

Weekly Outlook

There are a few economic reports and some significant corporate earnings reports scheduled for release this week. Economic reports include Final 3Q Non-farm Productivity(Tues.), Final 3Q Unit Labor Costs(Tues.), Consumer Credit(Tues.), Import Price Index(Thur.), Initial Jobless Claims(Thur.), Wholesale Inventories(Thur.), Univ. of Mich. Consumer Confidence(Fri.) and the Producer Price Index(Fri.). Initial Jobless Claims, Consumer Confidence and the PPI have market-moving potential.

Circuit City(CC)-Mon., Hovnanian Enterprises(HOV)-Tues., Autozone(AZ)-Wed., DreamWorks(DWA)-Wed., Costco Wholesale(COST)-Thur., National Semiconductor(NSM)-Thur., Toll Brothers(TOL)-Thur. and Nortel Networks(NT)-Fri. are some of the more important companies that release quarterly earnings this week. There are also some other events that have market-moving potential. The CSFB Media & Telecom Week(Mon.-Thur.), Cisco Analyst Meeting(Mon.-Wed.), Citi SmithBarney Chemical Conference(Tues.) and the Texas Instruments Mid-quarter Update(Tues.)could also impact trading this week.

Bottom Line: I expect U.S. stocks to finish the week higher on seasonal strength, improving fundamentals in the technology sector, more optimism, a stabilizing US dollar, declining energy prices, short-covering and bargain-hunting. As I stated a couple of months ago, a number of companies lowered estimates in anticipation of a continuation of the "economic soft patch". However, the economy has since reaccelerated. Thus, many companies, specifically tech, should beat lowered estimates over the next couple of months. Intel was an example of this. My short-term trading indicators are still giving Buy signals and the Portfolio is 125% net long heading into the week.