Weekly Outlook

Click here for The Week Ahead by Reuters

Click here for Stocks in Focus for Monday by MarketWatch

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

Economic reports for the week include:

Mon. – None of note

Tues. – Consumer Price Index, Empire Manufacturing, Net Long-term TIC Flows, NAHB Housing Market Index, weekly retail sales

Wed. – Weekly MBA Mortgage Applications, Housing Starts, Building Permits, Industrial Production, Capacity Utilization

Thur. – Initial Jobless Claims, Leading Indicators, Philly Fed

Fri. – Univ. of Mich. Consumer Confidence

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

Mon. – Agilent(A), Grubb & Ellis(GBE), PetMed Express(PETS), Sina Corp.(SINA), Syneron Medical(ELOS)

Tues. – Applied Materials(AMAT), Compuware(CPWR), Fossil Inc.(FOSL), Freddie Mac(FRE), Home Depot(HD), Shaw Group(SGR), Telephone & Data(TDS), TJX Cos(TJX), Transaction Systems(TSAI), Wal-Mart Stores(WMT)

Wed. – Cato Corp.(CTR), Ctrip.com(CTRP), Deere & Co.(DE), Dick’s Sporting Goods(DKS), Federated Department Stores(FDO), Hewlett-Packard(HPQ), Jack in the Box(JBX), Mentor Corp.(MNT), O’Charleys(CHUX), PetSmart(PETM), Salesforce.com(CRM), Swift Transportation(SWFT)

Thur. – Advance Auto Parts(AAP), Focus Media Holding(FMCN), Gymboree Corp.(GYMB), Intuit Inc.(INTU), JC Penney(JCP), Kohl’s Corp.(KSS), Longs Drug Stores(LDG), Netease.com(NTES), Nordstrom(JWN), Pacific Sunwear(PSUN), Sonic Solutions(SNIC)

Fri. – Activision(ATVI), Alkermes(ALKS), American Eagle Outfitters(AEO), Cleveland-Cliffs(CLF), International Rectifier(IRF), Steinmart(SMRT)

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

Mon. - UBS Global Financial Services Conference, UBS Alternative Energy Conference, the Fed’s Fisher speaking, the Fed’s Lockhart speaking

Tue. – UBS Alternative Energy Conference, CSFB Semi&Supply-Chain Summit, Merrill Lynch Global E&C/Infrastructure Conference, Oppenheimer Moving Beyond Voice Conference, UBS Global Financial Services Conference, Deutsche Bank Tech Conference, Morgan Stanley Communications Conference, the Fed’s Lockhart speaking, the Fed’s Bernanke speaking, the Fed’s Minehan speaking, the Fed’s Mishkin speaking, the Fed’s Geithner speaking, the Fed’s Hoenig speaking

Wed. - UBS Global Financial Services Conference, Oppenheimer Semiconductor Tech Conference, Deutsche Bank Tech Conference, Bank of America Smid Cap Conference, Morgan Stanley Communications Conference, Goldman Sachs Basic Materials Conference, CSFB Semi&Supply-Chain Summit, the Fed’s Plosser speaking, the Fed’s Kohn speaking, the Fed’s Fisher speaking

Thur. - CSFB Insurance Forum, Bank of America Smid Cap Conference, Goldman Sachs Basic Materials Conference, Deutsche Bank Tech Conference, former Fed Chairman Greenspan speaking, the Fed’s Moskow speaking, the Fed’s Bernanke speaking

Fri. – None of note

BOTTOM LINE: I expect US stocks to finish the week modestly higher on buyout speculation, constructive Fed comments, better-than-expected earnings reports, lower energy prices, investment manager performance anxiety and short-covering. My trading indicators are still giving bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,505.85 +.01%

Click here for What a Week by TheStreet.com.

Weekly Scoreboard*

Indices
S&P 500 1,505.85 +.01%
DJIA 13,326.22 +.46%
NASDAQ 2,562.22 -.39%
Russell 2000 829.54 -.40%
Wilshire 5000 15,164.43 +.03%
Russell 1000 Growth 593.50 -.16%
Russell 1000 Value 867.33 +.22%
Morgan Stanley Consumer 738.92 -.43%
Morgan Stanley Cyclical 1,052.38 +1.13%
Morgan Stanley Technology 609.70 +.25%
Transports 5,165.92 -.10%
Utilities 526.54 +.06%
MSCI Emerging Markets 124.85 +.02%

Sentiment/Internals
NYSE Cumulative A/D Line 75,890 -.92%
Bloomberg New Highs-Lows Index +175 -67.3%
Bloomberg Crude Oil % Bulls 38.0 +7.7%
CFTC Oil Large Speculative Longs 188,498 -3.4%
Total Put/Call .94 +16.05%
NYSE Arms .62 -36.08%
Volatility(VIX) 12.95 +.31%
ISE Sentiment 122.0 -13.5%
AAII % Bulls 42.86 +50.0%
AAII % Bears 42.86 -21.0%

Futures Spot Prices
Crude Oil 62.46 +1.2%
Reformulated Gasoline 235.50 +6.43%
Natural Gas 7.91 +.11%
Heating Oil 188.50 +3.0%
Gold 672.10 -2.54%
Base Metals 277.35 -1.5%
Copper 360.70 -4.15%

Economy
10-year US Treasury Yield 4.67% +3 basis points
4-Wk MA of Jobless Claims 317,300 -3.5%
Average 30-year Mortgage Rate 6.15% -1 basis point
Weekly Mortgage Applications 680.70 +3.6%
Weekly Retail Sales +.10%
Nationwide Gas $3.04/gallon +.03/gallon
US Heating Demand Next 7 Days 13.0% below normal
ECRI Weekly Leading Economic Index 142.70 +.21%
US Dollar Index 82.11 +.46%
CRB Index 311.13 -.03%

Leading Sectors
Steel +4.0%
Defense +1.84%
Disk Drives +1.55%
Computer Hardware +1.46%
Wireless +1.31%

Lagging Sectors
I-Banks -1.20%
Internet -1.40%
Gold -1.59%
Alternative Energy -1.63%
Drugs -1.86%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Rebounding into Final Hour on Economic Data, Buyout Speculation and Short-Covering

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Semi longs, I-Banking longs and Biotech longs. I covered some of my (QQQQ)/(IWM) hedges this morning, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is gaining and volume is below average. The major averages and breadth are pushing back to session highs after the news of a possible terror attack in Germany failed to make a dent in today's rally. I suspect many that were caught off guard by today's sharp morning snapback, including myself, were waiting for midday weakness to surface. That didn’t happen, thus we are seeing more short-covering into the close. The CBOE total put/call is an above average 0.94, and the ISE Sentiment Index is falling to a below average 128.0, despite today's gains. The 10-year yield is at session highs, rising 3 basis points, as I suspect many traders are anticipating better economic data going forward. Retail is the only sector not participating today. I still believe the Fed will remain on hold this year as economic growth accelerates back near average levels in the second half of the year. However, a rate cut is still much more likely than a rate hike. While most emerging markets were just modestly lower last night, Russian shares fell 2.5% and appear to be rolling over as the index breaks back below its 50-day moving-average. I expect US stocks to trade modestly higher into the close from current levels on buyout speculation and short-covering.

Today's Headlines

Bloomberg:
- The Chicago Merc(CME) raised its bid for the Chicago Board of Trade by 16% to $9.2 billion to ward off a higher offer from Intercontinental Exchange(ICE).
- Nvidia Corp.(NVDA) shares rose as much as 8.1% after the world’s second-largest producer of computer-graphics chips reported first-quarter results that topped analysts’ estimates.
- The IPO of Everquest Financial Ltd. would allow funds run by Bear Stearns(BSC) and Stone Tower Capital LLC to transfer risk from subprime mortgage bonds and buyout loans to other investors.
- A decision to sell the Beatles’ recordings online is “virtually settled,” Billboard magazine reported, quoting Paul McCartney.
- Oil futures in NY are rising $.56/bbl. after a report predicted global demand for oil will rise 1.8% this year.

Wall Street Journal:
- The fate of CBOT Holdings(BOT), which is weighing two takeover offers, will point to further deals in the exchange industry.
- Highfields Capital Management LP, the largest institutional shareholder in Wendy’s Intl.(WEN), called on Wendy’s Chairman James Pickett and other directors to find buyers for the company.
- Smartphone users are trying to muffle an annoying mosquito-like buzz that comes out of Research In Motion’s(RIMM) BlackBerry e-mail devices when used near public-address systems and electric appliances.
- A group of United Auto Workers labor union members at a Jeep plant in Toledo, Ohio, hired a financial adviser to help it in its proposal to buy the Chrysler Group from Germany’s DaimlerChrysler AG(DCX).

ABC News:
- A terrorist attack is being planned on US interests in Germany, officials from both countries said, and security is being tightened at potential targets, including adding air marshals to flights.

Washington Post:
- Democratic presidential candidate John Edwards, who has criticized predatory lending practices of sub-prime mortgage lenders, said he didn’t know hedge fund Fortress Investment Group expanded its holdings in sub-prime mortgage portfolios to at least $6.7 billion while Edwards worked at the fund.

AP:
- The US divorce rate has declined to its lowest level since 1970. The national rate per capita is 3.6 divorces per 1,000 people, down from the peak of 5.3 in 1981.

Financial Times:
- Goldman Sachs Group(GS) this week traded the first long-dated derivatives based on US home prices. Goldman speculated that expectations for home prices won’t be lower than they are now in five years by trading a contract based on the S&P/Case-Shiller home price index.

Core Producer Prices Unchanged, Advance Retail Sales Decline, Business Inventories Decline on Rising Sales

- The Producer Price Index for April rose .7% versus estimates of a .6% gain and a 1.0% increase in March.
- The PPI Ex Food & Energy for April was unch. versus estimates of a .2% increase and unch. in March.
- Advance Retail Sales for April fell -.2% versus estimates of a .4% gain and an upwardly revised 1.0% increase in March.
- Retail Sales Less Autos for April were unch. versus estimates of a .5% increase and a 1.1% gain in March.
- Business Inventories for March fell -.1% versus estimates of a .3% gain and a downwardly revised .2% increase in February.

BOTTOM LINE: Core US wholesale prices were unexpectedly unchanged for the second month in a row, a sign that inflation pressures may diminish, Bloomberg reported. The last time core prices went two consecutive months without a rise was in the fourth quarter of 2005. Core prices rose 1.5% year-over-year versus a 1.7% rise in March. I continue to believe inflation concerns have peaked for this cycle and that inflation will continue to decelerate in the second half of the year.

Retail sale in the US unexpectedly fell last month, a sign that higher gas prices and falling home values are taking a toll on consumers, Bloomberg said. The recent increase in gas prices diverted spending from other goods and services in April. As well the coldest April in a decade, the 14^th snowiest and the East calendar shift impacted sales greatly. Stores selling building materials and garden supplies showed a 2.3% decrease in sales, the largest drop since February 2003. I expect retail sales to bounce back into the summer on more seasonal weather and lower gas prices.

Sales at US businesses jumped and inventories unexpectedly dropped in March, showing companies may no longer have to pare stockpiles in coming months, Bloomberg said. Business sales surged 1.4%, the most since May 2006. At the current sales pace, the amount of goods on hand declined to 1.27 months, the lowest since August of last year. I continue to believe inventory rebuilding will begin adding to US growth this quarter as company gain confidence in the sustainability in the current expansion.