Today's Headlines

Bloomberg:
- Ciena Corp., (CIEN) the maker of computer-network equipment for telephone companies such as BT Group Plc, climbed the most in three months in Nasdaq Stock Market trading after raising its fourth-quarter profit-margin forecast.
- Crude oil is falling for a third day after the dollar rebounded against the euro, reducing the appeal of commodities as an alternative investment. Gold is also falling $20/oz on US dollar strength.
- JC Flowers & Co. proposed paying $50 a share and warrants valued at as much as $10 a share for SLM Corp.(SLM).
- NY office rents rose last quarter at the slowest pace since the second quarter of 2006, as demand from banks and securities firms began to slacken.
- The euro fell from near a record high against the dollar and halted five days of gains versus the yen as European policy makers expressed mounting apprehension over the pace of the advance.

Wall Street Journal:
- Looking Ahead, Growth Stocks Are the Call. With Inflation Peaking, Fed May Cut Rates Again; ‘Tis the Season for Tech.
- Globalization is giving purchasing managers more clout and demand is growing for people who can run complex networks of relationships, understand foreign cultures and are willing to travel.

Financial Times:
- The European Union is underperforming in the global arena, though it has built up the biggest single market and has the means to tilt the world toward its formula of democracy, human rights and an open society, according to two senior statesmen.

Pending Home Sales Fall

- Pending Home Sales for August fell -6.5% versus estimates of a -2.1% decline and an upwardly revised -10.7% decline in July.

BOTTOM LINE: The number of Americans signing contracts to buy previously owned homes fell in August during the peak of the credit market turmoil, Bloomberg reported. Pending home resales fell 9.5% in the South, 8.3% in the Northeast, 2.9% in the Midwest and 2.7% in the West. Fed fund futures now imply a 76% chance of another 25 basis point rate cut at the upcoming meeting. I expect pending home sales to rebound sharply next month on a meaningful improvement in the credit markets and lower mortgage rates.

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts\
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Tuesday Watch

Late-Night Headlines
Bloomberg:
- Wall Street strategists got it right when they predicted two months ago the US housing slump wouldn’t end the stock market’s five-year rally.
- The yen traded near the weakest in seven weeks against the euro as gains in global stocks suggested investors were more confident to borrow in the currency to fund purchases of assets with higher yields.
- Russian President Vladimir Putin unveiled a plan to adhere to the form of a democratic succession while dispensing with the substance.

MarketWatch.com:
- As the year winds down, market size doesn’t appear to be as big of a factor as style when it comes to successful stock investing strategies. Whether they’re small- or large-cap oriented, money managers say mutual funds emphasizing growth stocks is the way to go in coming quarters.

CNNMoney.com:
- Beware Big Oil Stocks. Some analysts say there’s a good reason shares of oil firms haven’t jumped along with crude prices: The price of oil is just too high.
- The 50 Most Powerful Women of 2007.

CNBC.com:
- Toy Retailers Upbeat About Holidays Despite Recalls.

IBD:
- Big Utilities Interested in Big Solar.

Financial Times:
- The Iraqi government reported on Monday that civilian casualties dropped by more than 50% in September, a month in which US casualties also declined to their lowest level in 14 months.
- Companies are selling US high-grade bonds in record amounts, putting the market on track for its first $1,000bn year and suggesting better-rated issuers are finding ways around the credit squeeze.

Reuters:
- Rupert Murdoch’s Fox Business Network says everyone has the right to strike it rich in American and it aims to show even the smallest investor how to do it.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (BLC), target $25.

Night Trading
Asian Indices are +1.25% to +2.0% on average.
S&P 500 futures unch.
NASDAQ 100 futures -.09%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (PBG)/.90
- (MU)/-.23

Upcoming Splits
- (BCSI) 2-for-1
- (TAP) 2-for-1

Economic Releases
10:00 am EST
- Pending Home Sales for August are estimated to fall 2.1% versus a 12.2% decline in July.

Afternoon:
- Total Vehicle Sales for September are estimated to fall to 15.9M versus 16.3M in August.

Other Potential Market Movers
- The weekly retail sales reports, (IRM) analyst meeting, (FISV) investor meeting, (KSS) investor conference, (OKE) investor conference, (CIEN) analyst day, Jeffries Technology Conference, Citigroup Ethanol Conference and CIBC Industrials Conference could also impact trading today.

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

Dow Rockets Through 14,000 to New Record, Led by Tech, Homebuilders and Financials

Indices
S&P 500 1,547.04 +1.33%
DJIA 14,087.55 +1.38%
NASDAQ 2,740.99 +1.46%
Russell 2000 824.74 +2.39%
Wilshire 5000 15,528.96 +1.38%
Russell 1000 Growth 626.15 +1.23%
Russell 1000 Value 863.03 +1.41%
Morgan Stanley Consumer 750.37 +.45%
Morgan Stanley Cyclical 1,077.44 +1.50%
Morgan Stanley Technology 677.06 +1.36%
Transports 4,909.20 +1.51%
Utilities 508.81 +1.45%
MSCI Emerging Markets 152.73 +2.16%

Sentiment/Internals
Total Put/Call .85 -22.02%
NYSE Arms .74 -40.49%
Volatility(VIX) 17.84 -.89%
ISE Sentiment 135.0 +22.73%

Futures Spot Prices
Crude Oil 80.21 -1.78%
Reformulated Gasoline 197.95 -3.02%
Natural Gas 7.07 +2.98%
Heating Oil 218.10 -2.0%
Gold 753.70 +.49%
Base Metals 248.99 -.70%
Copper 368.50 +1.24%

Economy
10-year US Treasury Yield 4.54% -4 basis points
US Dollar 77.94 +.28%
CRB Index 332.32 -.40%

Leading Sectors
Homebuilders +3.24%
I-Banks +2.67%
Semis +2.61%

Lagging Sectors
HMOs +.53%
Hospitals +.52%
Foods -.51%

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Afternoon Recommendations
Bank of America:
- Upgraded (AMB) and (PLD) to Buy.
- Downgraded (MPG) to Sell.

Afternoon/Evening Headlines
Bloomberg:
- US stocks rallied, sending the Dow Jones Industrial Average to a record, as investors speculated the worst may be over for banks and construction companies hurt by subprime mortgage losses.
- Crude oil fell $1.42/bbl. to $80.24/bbl. as speculators slashed long positions in anticipation of lower demand from refiners as margins drop to an 11-month low.
- UBS AG(UBS) and Citigroup Inc.(C), the biggest banks in Europe and the US, rose in stock market trading on investor optimism that their reports today on fixed-income losses may represent the low point for earnings.
- PDL BioPharma Inc.(PDLI), the developer of technology for cancer drugs, said it’s “actively” seeking offers to buy the company. The stock is rising 7.3% in after-hours trading.

Forbes:
- The former Federal Reserve chairman Alan Greenspan suggested here Monday suggested here Monday that the global credit crisis triggered in August might be coming to an end.

Dow Jones:
- Despite the housing slowdown, US household net worth Up 2.1% to record $57.86 trillion in second quarter, the Federal Reserve said.

BOTTOM LINE: The Portfolio finished higher today on gains in my Biotech longs, Computer longs, Retail longs, Internet longs, Semi longs and Medical longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was very positive today as the advance/decline line finished substantially higher, almost every sector rose and volume was slightly above average. Measures of investor anxiety were around average into the close. Today's overall market action was very bullish. Every sector I follow gained, with the exception of foods. Airlines, gaming, restaurants, homebuilders, construction, investment banks, banks, semiconductors, papers, steel and alternative energy all posted 2%+ gains. Small-caps, both growth and value, were especially strong, with the Russell 2000 rising 2.4%. Over the last few months, I have heard numerous investors and pundits caution that there is still more bad news to come, insinuating or outright saying that you shouldn't be buying stocks even after a 10% correction. The problem with that is that, historically, the best time to buy stocks is always when the headlines are the worst and anxiety is high. Waiting until the headlines aren't scary or until the news actually gets better is a recipe for long-term underperformance, in my opinion. Back in August, investors were once again pricing in the worst case scenario rather than the most realistic outcome. Six weeks later, the imminent recession case is still alive, but, likely, it has a few less believers. With the supply of stock still low, it doesn't take much of an increase in demand for equities to push the averages sharply higher, which is what is going on right now. As I said last month, I still think stocks are in a win-win situation. If the economy doesn't fall into recession and the Fed doesn't cut rates further, earnings should hold up well and stocks should rise. If we begin to see recessionary data, the Fed, which is already ahead of the curve, has massive ammunition to stabilize growth and investors will likely begin to price in accelerating earnings next year. This is the main reason I think any bad news is mostly ignored and positive news is bought. The latest COT report shows large S&P 500 futures speculators are maintaining their net short positions near recent historic levels -- even as stocks soar. Another bullish indication is that commercial hedgers are now at a historically net long position. Finally, the COT all-index stochastic is still at levels normally associated with meaningful market bottoms. The S&P 500 is now up 10.7% year-to-date. I still expect it to rise about 17% total for this year.

DJIA Blasting Through 14,000 to New Record High, Led by Technology, Homebuilders, Financials

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Networking longs, Retail longs, Biotech longs, Computer longs and Internet longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is very positive today as the advance/decline line is substantially higher, almost every sector is rising and volume is slightly above average. The 10-year yield is falling 4 basis points, and the 10-year TIPS spread is down to 2.29%, as investors continue to ratchet down their inflation expectations. The U.S. Dollar Index is rising 0.23%, which appears to be pressuring oil, which is falling $1.42/bbl. The dollar is surging against the yen, which is also a positive. Fed fund futures now imply a 78% chance of a 25-basis-point cut at this month's fed meeting. I think oil has seen its high for the year and has finally started a meaningful decline that will eventually be seen as a huge positive for the broad market. Last year, oil fell $28 per barrel in less than six months, which was one of the main catalysts behind a 16.5% jump in the S&P 500 over that timeframe, in my opinion. The fundamentals for oil are even worse this year as articulated very well by ISI Group's Mike Rothman a couple of weeks ago in Barron's. Moreover, with the consumer under more pressure this year, as a result of housing, it could be argued that a substantial decline in energy prices would even be more positive for the economy and stocks this year. Global chip sales rose 4.5% in August, led by a 48% surge in NAND flash sales, according to the Semiconductor Industry Association (SIA). The SIA said PC sales have been above their forecast this year. They also said cell phone sales have been above their forecast of 10% and now expect sales to come in at 15% for the year. The Philadelphia Stock Exchange Semiconductor Sector Index (SOX) is one of today's best performers, rising 2.9% on the news. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic pessimism, lower energy prices, lower long-term rates and investment manager performance anxiety.