Labor Market Still Healthy, Chicago Manufacturing Strong, Home Sales Slow, Oil Supplies Rise

- Initial Jobless Claims rose to 322K last week versus estimates of 320K and 319K the prior week.
- Continuing Claims rose to 2715K versus estimates of 2625K and 2630K prior.
- Chicago Purchasing Manager for December rose to 61.5 versus estimates of 60.0 and a reading of 61.7 in November.
- Existing Home Sales for November fell to 6.97M versus estimates of 7.0M and 7.09M in October.
- The EIA reported crude inventories rose 118,000 barrels vs. estimates of a 500,000 barrel drawdown. Gasoline supplies fell 1.22 million barrels vs. estimates of a 250,000 decline. Distillate supplies fell 890,000 barrels vs. estimates of a 1.5-million-barrel fall. Refinery utilization rose 0.83% vs. estimates of a 0.63% rise. Natural gas supplies fell 162 bcf vs. estimates of a 160 bcf fall.

BOTTOM LINE: The number of Americans filing first-time claims for unemployment benefits rose last week, remaining below the average for 2005 and suggesting the labor market is still growing, Bloomberg reported. The four-week moving average rose to 325,000 from 324,750. The unemployment rate for those eligible for benefits, which tracks the US unemployment rate remained at 2.1%. I continue to believe the labor market will remain healthy over the intermediate-term as interest rates remain low and businesses increase spending.

An index of Chicago-area business conditions fell less than expected in December as orders increased, suggesting manufacturing in the region remained strong at year-end, Bloomberg said. The prices paid component of the index fell to 83.8 from 94.1 in November. The new orders component of the index rose to 66.7 from 61.6 in November. The employment component of the index rose to 51.7 from 50.3 the prior month. I continue to believe manufacturing will add to US economic growth over the intermediate-term on hurricane and inventory rebuilding.

US previously owned home sales declined in November to an eight-month low, Bloomberg reported. The median home price rose 13.2% from a year-ago to $215,000. The supply of homes for sale rose to 5 months’ worth from 4.9 months’ worth the prior month. Sales fell 3.7% in the West, 2.7% in the Northeast, 1.3% in the Midwest and .7% in the South. I continue to believe the housing market is slowing from its record-setting pace to healthy more sustainable levels.

Overall, the EIA inventory numbers are bearish for the energy complex considering how much talk there has been of substitution away from natural gas.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Thursday Watch

Late-Night Headlines
Bloomberg:
- South Korea’s industrial production rose 5% in November to a record as car companies and chipmakers expanded to meet export orders and rebounding domestic demand.
- Deutsche Bank AG advises betting on the dollar continuing its advance against the yen.
- South Korean laboratories used by scientist Hwang Woo Suk no longer have any stem cells created from patients’ tissues, the result of the researcher’s landmark May 2005 paper.

Financial Times:
- Public US companies may have to provide investors with valuations of senior executives’ pensions and stock options as part of an overhaul of disclosure rules on executive pay by the SEC.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on BSX.

Night Trading
Asian Indices are +.50% to +1.0% on average.
S&P 500 indicated +.10%.
NASDAQ 100 indicated +.12%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
FRE/1.02
NAV/3.06

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to rise to 320K versus 318K the prior week.
- Continuing Claims are estimated to fall to 2625K versus 2638K prior.

10:00 am EST
- Chicago Purchasing Manager for December is estimated to fall to 60.0 versus a reading of 61.7 in November.
- Existing Home Sales for November are estimated to fall to 7.0M versus 7.09M in October.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude drawdown of 500,000 barrels. Gasoline inventories are estimated to fall 125,000 barrels, and distillate supplies are expected to fall 1,500,000 barrels. Finally, refinery utilization is expected to rise 0.63%.

BOTTOM LINE: Asian indices are higher, boosted by exporting shares in the region after US consumer confidence improved. I expect US equities to open mixed and to rally modestly into the afternoon. The Portfolio is 100% net long heading into the day.

Stocks Finish Slightly Higher on Better Consumer Confidence and Rebounding Energy Shares

Indices
S&P 500 1,258.17 +.13%
DJIA 10,796.26 +.17%
NASDAQ 2,228.94 +.09%
Russell 2000 680.08 +.52%
DJ Wilshire 5000 12,591.17 +.20%
S&P Barra Growth 602.07 +.19%
S&P Barra Value 651.75 +.06%
Morgan Stanley Consumer 597.18 +.29%
Morgan Stanley Cyclical 790.24 +.43%
Morgan Stanley Technology 529.18 +.14%
Transports 4,223.93 +.18%
Utilities 407.05 -.48%
Put/Call .84 -4.55%
NYSE Arms 1.12 -32.49%
Volatility(VIX) 11.35 -1.90%
ISE Sentiment 198.00 +.51%
US Dollar 91.20 +.01%
CRB 329.32 +1.46%

Futures Spot Prices
Crude Oil 60.00 +.30%
Unleaded Gasoline 159.20 +.06%
Natural Gas 11.65 +.11%
Heating Oil 168.96 +.42%
Gold 518.50 +.43%
Base Metals 153.77 +.17%
Copper 206.60 -.14%
10-year US Treasury Yield 4.37% +.76%

Leading Sectors
Gold & Silver +2.47%
Oil Service +1.86%
Steel +1.56%

Lagging Sectors
Utilities -.48%
Disk Drives -.83%
Airlines -2.237%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on STZ.

Afternoon/Evening Headlines
Bloomberg:
- Guidant Corp. recommended that shareholders approve a $21.5 billion takeover offer by Johnson & Johnson and scheduled a Jan. 31 vote while it continues to review a higher offer from Boston Scientific.
- The US Defense Department is contemplating cutting about 24,500 Army and National Guard personnel as part of a plan to save $11.1 billion in Army spending over the next five years, according to Pentagon documents.

Financial Times:
- Hilton Group Plc is near to completing its $6.2 billion sale of its hotels business to US-based Hilton Hotels.

BOTTOM LINE: The Portfolio finished unchanged today as gains in my Retail longs and Internet longs offset losses in my Energy-related shorts. I covered my IWM and QQQQ shorts, thus leaving the Portfolio 100% net long. The tone of the market was mildly positive today as the advance/decline line finished modestly higher, sector performance was mixed and volume was very light. Measures of investor anxiety were lower into the close. Overall, today's action was slightly bullish considering the jump in energy prices. However, I expect better action to end the week.

Stocks Higher Mid-day as Energy Shares Rebound

Indices
S&P 500 1,260.36 +.30%
DJIA 10,815.08 +.35%
NASDAQ 2,231.63 +.21%
Russell 2000 679.73 +.47%
DJ Wilshire 5000 12,609.44 +.34%
S&P Barra Growth 603.39 +.41%
S&P Barra Value 652.82 +.23%
Morgan Stanley Consumer 598.27 +.48%
Morgan Stanley Cyclical 791.38 +.57%
Morgan Stanley Technology 530.19 +.33%
Transports 4,229.13 +.31%
Utilities 406.22 -.69%
Put/Call .83 -5.68%
NYSE Arms .90 -45.72%
Volatility(VIX) 11.30 -2.33%
ISE Sentiment 217.00 +10.15%
US Dollar 91.31 +.13%
CRB 329.54 +1.55%

Futures Spot Prices
Crude Oil 60.10 +3.34%
Unleaded Gasoline 159.50 +5.39%
Natural Gas 11.15 +1.16%
Heating Oil 168.40 +2.87%
Gold 517.40 +.21%
Base Metals 153.77 +.17%
Copper 206.55 -.17%
10-year US Treasury Yield 4.37% +.85%

Leading Sectors
Oil Service +2.08%
Energy +1.85%
Gold & Silver +1.69%

Lagging Sectors
Utilities -.70%
Disk Drives -.77%
Airlines -2.51%

BOTTOM LINE: The Portfolio is unchanged mid-day as losses in my Energy-related shorts are offsetting gains in my Retail longs and Internet longs. I added IWM and QQQQ shorts this morning, thus leaving the Portfolio 50% net long. The tone of the market is slightly positive as the advance/decline line is modestly higher, most sectors are higher and volume is light. Measures of investor anxiety are lower. Overall, today’s market action is positive considering the rise in energy prices and bears inability to gain traction. The Johnson Redbook same-store sales index rose 3.7% year-over-year last week vs. a 3.4% rise the prior week. This week's gain is up from a 1.5% increase in late April, and it's the 34th week in a row that the index has risen 3% or more. The Morgan Stanley Retail Index (MVRX) has returned 15.3% since late October vs. a 7.2% gain for the S&P 500. While these stocks are due for a breather, I expect this sector to continue to outperform over the intermediate term. I expect US stocks to trade mixed-to-higher into the close on short-covering, more optimism and seasonal strength.

Today's Headlines

Bloomberg:
- Nissan Motor plans to unveil a concept car equipped with an Xbox 360 system from Microsoft that allows drivers to play video games.
- The move to online advertising is happening faster than analysts anticipated as companies devote more of their budgets to the Internet than traditional media.
- Crude oil, heating oil and gasoline rose after Iran’s deputy oil minister said OPEC should cut output next month to “keep prices stable.”
- Donald Trump’s casino company and partners today said they pan to spend $350 million to develop the TrumpStreet Casino and Entertainment Complex in Philadelphia.
- Celgene’s shares rose as much as 7.8% today after US regulators approved the company’s Revlimid capsule for a rare blood cancer.

Wall Street Journal:
- The US administration has applied sanctions against nine foreign companies for selling missile components and chemical weapons materials to Iran.
- The US government plans to spend $1 billion or more in the next ten years to construct high-security labs to study exotic and potentially lethal illnesses.

NY Times:
- More US food marketers are selling products that promise health benefits such as cholesterol reduction and improved digestion.
- Many US police departments, which are shot on staff, are seeking to boost recruitment by offering signing bonuses and other perks.

NY Post:
- New York Democratic Attorney General Eliot Spitzer should be impeached if it’s found that he personally threatened the former chairman of Goldman Sachs, John Whitehead, a Republican Assemblymen said.

CNBC:
- ShopperTrak CEO Bill Martin said unadjusted average weekly retail sales rose 7.4% in December from a year ago.

Independent:
- A daily dose of Vitamin D may cut cancers of the breast, colon and ovary by as much as half, citing a review of research published in the American Journal of Public Health.