Stocks Finish Near Session Lows on Profit-taking

Indices
S&P 500 1,257.46 -.85%
DJIA 10,890.72 -.37%
NASDAQ 2,239.37 -1.04%
Russell 2000 671.50 -1.77%
DJ Wilshire 5000 12,548.01 -1.0%
S&P Barra Growth 601.59 -.80%
S&P Barra Value 651.52 -.90%
Morgan Stanley Consumer 592.31 -.56%
Morgan Stanley Cyclical 771.74 -.60%
Morgan Stanley Technology 531.88 -.78%
Transports 4,121.80 -1.37%
Utilities 401.97 -.50%
Put/Call 1.01 +13.48%
NYSE Arms 1.34 +50.57%
Volatility(VIX) 11.84 +8.82%
ISE Sentiment 153.00 -52.34%
US Dollar 91.17 -.95%
CRB 312.72 -.62%

Futures Spot Prices
Crude Oil 57.30 -.10%
Unleaded Gasoline 141.85 +.02%
Natural Gas 11.71 +.65%
Heating Oil 163.65 +.06%
Gold 503.30 +.14%
Base Metals 144.20 +.03%
Copper 190.75 -.18%
10-year US Treasury Yield 4.40% -.57%

Leading Sectors
Disk Drives +1.36%
Telecom +.47%
Restaurants +.09%

Lagging Sectors
Coal -3.03%
Energy -3.44%
Oil Service -3.90%

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Afternoon Recommendations
Goldman Sachs:
- Reiterated Underperform on GM.

Afternoon/Evening Headlines
Bloomberg:
- Analysts have improved over the past six quarters as the US stocks most favored by Wall Street have outperformed those that are least favored, according to Citigroup Investment Research’s Tobias Levkovich.
- The US dollar fell the most in more than seven weeks against the euro and dropped versus the yen after an industry report showed US home sales in October declined more than analysts forecast.
- Crude oil fell and heating oil plunged to a four-month low as warm weather in the eastern US and rising inventories spurred selling in the commodities.

Barron’s:
- Palatin Technologies’ treatment for sexual dysfunction in both men and women will soon enter Phase III trials.

Australian:
- BlueScope Steel, Australia’s biggest steelmaker, may cut its domestic prices to stay competitive with cheaper Asian product.

BOTTOM LINE: The Portfolio finished lower today on losses in my Internet longs, Retail longs, Medical longs and Semi longs. I did not trade in the afternoon, thus leaving the Portfolio 50% net long. The tone of the market was negative today as the advance/decline line finished substantially lower, almost every sector fell and volume was below average. Measures of investor anxiety were higher into the close. Overall, today's market action was slightly negative. I view today’s pullback as orderly and healthy, given recent gains. Most losses were confined to the energy sector and stocks that were short-term overextended.

Indices
S&P 500 1,260.11 -.64%
DJIA 10,902.23 -.27%
NASDAQ 2,244.07 -.83%
Russell 2000 672.88 -1.56%
DJ Wilshire 5000 12,576.95 -.78%
S&P Barra Growth 602.62 -.63%
S&P Barra Value 653.18 -.65%
Morgan Stanley Consumer 592.98 -.45%
Morgan Stanley Cyclical 773.22 -.41%
Morgan Stanley Technology 533.37 -.50%
Transports 4,130.18 -1.17%
Utilities 403.12 -.22%
Put/Call 1.02 +14.61%
NYSE Arms 1.20 +34.25%
Volatility(VIX) 11.87 +9.10%
ISE Sentiment 169.00 -47.35%
US Dollar 90.96 -1.17%
CRB 312.74 -.61%

Futures Spot Prices
Crude Oil 57.35 -2.32%
Unleaded Gasoline 141.90 -2.65%
Natural Gas 11.40 -1.89%
Heating Oil 163.50 -3.21%
Gold 498.50 +1.14%
Base Metals 144.20 +.03%
Copper 190.30 +2.67%
10-year US Treasury Yield 4.40% -.57%

Leading Sectors
Disk Drives +1.53%
Telecom +.80%
Gold & Silver +.57%

Lagging Sectors
Coal -2.71%
Energy -2.95%
Oil Service -3.25%

BOTTOM LINE: The Portfolio is lower mid-day on losses in my Internet longs, Medical longs, Semi longs and Retail longs. I added IWM and QQQQ shorts and took profits in a few longs this morning, thus leaving the Portfolio 50% net long. The tone of the market is negative as the advance/decline line is substantially lower, most sectors are falling and volume is about average. Measures of investor anxiety are higher. Overall, today’s market action is slightly negative considering recent gains and the fall in oil and long-term rates. Over the weekend, Newmont Mining's (NEM) president said he sees gold rising to more than $1,000 an ounce in 5-7 years. This reminds me of Valero's (VLO) prediction a few months ago that a "new era for energy pricing" was at hand. Of course, most still believe this prediction. I suspect a sustained move in oil below $50 will break this mentality. Gold will follow oil lower over the intermediate term, in my opinion. I expect US stocks to trade mixed from current levels into the close as short-covering, lower energy prices and declining long-term rates offset profit-taking and housing worries.

Today's Headlines

Bloomberg:
- French Interior Minister Nicolas Sarkozy said 10,000 cars, more than 200 administration buildings and thousands of square meters of commercial property were torched in violence that rocked the country earlier this month.
- Mexico probably will surpass the US in obesity rates for the first time next year.
- US retailers recorded sales of $27.8 billion over the holiday weekend, putting the industry on track for its second-biggest selling season since 1999, said the National Retail Federation.
- Saddam Hussein argued with the judge in his murder and torture case minutes after proceedings resumed in Baghdad today.
- Merck & Co. will eliminate 7,000 jobs and close five plants and said it still has “work to do.”
- Online sales for US retailers rose 24% to $6.96 billion this month as shoppers got an early start on their holiday purchases.
- Crude oil is falling and heating oil touched a four-month low as warm weather in the eastern US reduces fuel consumption, pushing inventories even higher.

Wall Street Journal:
- Tivo Inc. is joining with media-buying groups, including Interpublic Group’s Interpublic Media, to offer customers a way to search for commercials on topics in which they are interested.
- Alvaro de Molina took over as chief financial officer at Bank of America on Sept. 8, and the bank’s shares have risen 9.2% since then, as some investors and analysts bet on de Molina as the “Mr. Fix-It” who’s been needed.
- American Pharmaceutical Partners, a Schaumberg, Illinois-based maker of generic hospital drugs, may acquire its largest shareholder, closely held American BioScience of Santa Monica, California.
- Dallas has distributed about $160 million in grants and tax abatements to convert most of the city’s downtown business district into an upscale neighborhood with 10,000 residences.

NY Post:
- J. Crew Group Inc. will sell men’s accessories out of a custom-outfitted sport-utility vehicle that will make stops throughout Manhattan this week.

Washington Post:
- Democrats are split over legislation aimed at controlling Medicaid growth, with federal lawmakers opposed to the provisions and Democratic governors supporting them.

NY Times:
- Classified advertising on Internet sites rose more than 80% this year, with traffic at Craigslist.org climbing 165% from a year ago.

AP:
- President Bush will travel to Arizona today to speak about border enforcement and call for immigration reform.

Sudan Tribune:
- Sudan will boost oil production to 600,000 barrels a day by the middle of 2006 and may reach 1 million barrels a day by the end of the year, President Umar al-Bashir said.

Existing Home Sales Fall Modestly

- Existing Home Sales for October fell to 7.09 million versus estimates of 7.20 million and 7.29 million in September.

BOTTOM LINE: US previously owned home sales fell a larger-than-expected 2.7% last month, Bloomberg reported. Sales would have declined 3.2% in October excluding hurricane-related buying activity. The median price of an existing home rose 16.6% to $218,000 in October, the largest increase since July 1979. Sales fell 7.4% in the Northeast, 1.9% in the Midwest, 1.8% in the South and 1.2% in the West. Existing home inventories rose to 4.9 months’ worth at the current sales pace, an increase from 4.6 months’ worth the prior month. I continue to believe the housing market is slowing, not plunging, to more healthy sustainable levels.

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Monday Watch

Weekend Headlines
Bloomberg:
- U.S. retail sales jumped 22 percent to $27.8 billion during the post-Thanksgiving weekend, as shoppers flocked to stores to buy electronics, clothing and books, the National Retail Federation said.
- Retail spending on Visa credit and debit cards rose 12% on Black Friday, the first day of the holiday shopping season, led by purchases of electronic and computers. Purchases of personal entertainment devices, including Microsoft’s Xbox and Apple’s iPod, as well as computers, accounted for 19% of all retail sales volume.
- Iraqis living abroad will be permitted to take part in the country’s December elections for a new National Assembly, with voting set up in 15 other countries.
- Wal-Mart Stores said November sales at its US stores rose about 4.3%.
- Crude oil is falling in NY after forecasters predicted above-average temperatures in the US Northeast this week, leading to lower demand for fuel.

Barron’s:
- The number of US family foundations has climbed more than 60% during the past six years to about 33,000.

NY Times:
- Roche Holding AG expects to make an announcement on licenses for Tamiflu in coming weeks.
- Web logs are becoming more mainstream and less rebellious as blog advertising rises.
- The switch by large retailers to wireless cash registers from dial-up connections is inevitable.
- The US military is working to help soldiers in Iraq and Afghanistan cope with stress and grief in an effort to ward off post-traumatic stress.
- New York has approved emissions standards for cars and light trucks, based on California regulations, that the state says will add more than $1,000 in costs to each vehicle when adopted.
- Public and corporate pension plans have been investing billions of dollars in hedge funds in an effort to generate higher returns to meet demand from an increasing number of retirees.
- Canadian Prime Minister Martin’s Liberal Party government may fall in a no-confidence vote tomorrow, undercutting an international conference on greenhouse gases in Montreal.
- Verizon Communications and AT&T face large capital expenditures and higher charges for content than cable providers in the telephone companies’ bid to enter the television business.

Washington Post:
- Candidates who aspire to succeed United Nations Secretary General Kofi Annan when his term ends next year have begun seeking backing from the US and other Security Council members.

San Francisco Chronicle:
- Advanced Micro Devices has gained 5 percentage points of share to account for 10% of the market for server microprocessors in the third quarter, citing Gartner Inc.

Crain’s Chicago Business:
- Crane leases in Chicago have soared as much as 25% in the past year as construction of high-rise hotels and office towers boosted demand.

Financial Times:
- Revenue at the biggest investment banks surged after being boosted by their brokerage of hedge funds, citing research by Morgan Stanley.

Sunday Times:
- Rolls Royce Group Plc may open a factory in the US to produce its Trent 1000 aero engines.

AME Info.:
- Saudi Arabia’s Oil Minister, Ali al-Naimi, ruled out a cut in OPEC’s oil production quota when it meets in Kuwait next month.

Le Parisien:
- French President Chirac has little influence on what’s happening in France, Europe and the rest of the world, according to a majority of French people polled by research company CSA.

Weekend Recommendations
Barron's:
- Had positive comments on MEL, PCZ and KEYN.
- Had negative comments on BOT.

Goldman Sachs:
- None of note

Night Trading
Asian indices are +.25% to +1.0% on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated -.03%.

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- None of note

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Economic Releases
10:00 am EST
- Existing Home Sales for October are estimated to fall to 7.2 million versus 7.28 million in September.

BOTTOM LINE: Asian Indices are higher on falling energy prices and optimism for exporters in the region. I expect US stocks to open modestly higher. The Portfolio is 100% net long heading into the week.