New York Manufacturing Gauge Surges to 3-Year High

- Empire Manufacturing for October rose to 28.8 versus estimates of 13.1 and a reading of 14.7 in September.

BOTTOM LINE: Manufacturing in New York unexpectedly shot up in October, reaching the highest level in three years, as orders and sales gained, Bloomberg said. The Future Outlook component rose to 50.6, the highest since August 2005, versus 48.8 in September. The New Orders component rose to 25 from 13.6 in September. The prices paid component rose to 36.1 versus 35.1 the prior month. I continue to expect manufacturing to help boost overall US economic growth as companies gain confidence in the sustainability of the current expansion and rebuild depleted inventories.

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Monday Watch

Weekend Headlines
Bloomberg:
- Citigroup Inc.(C), Bank of America(BAC) and JPMorgan Chase(JPM) will announce as soon as tomorrow that they are establishing a fund of about $80 billion aimed at reviving the asset-backed commercial paper market, said people familiar with the plan.
- Paulson & Co., the hedge fund that profited from bets on rising foreclosures this year, will donate $15 million to consumer groups backing bankruptcy legislation that would further reduce the value of subprime laons.
-Biogen Idec(BIIB) is considering a sale of the company after billionaire investor Carl Icahn and unspecified potential buyers expressed interest.
- China ordered banks to set aside more money as reserves for the eighth time this year to cool speculation in stocks and real estate and curb the fastest inflation in 10 years.
- US stocks rose for a fifth straight week, the longest stretch of gains since May, after minutes from the Federal Reserve and better-than-expected retail sales bolstered expectations that the economy will keep expanding.
- Citigroup cut its forecasts for the yen and Swiss franc because gains in global stocks will encourage investors to borrow money from Japan and Switzerland and invest in higher-yielding assets.
- Treasuries fell after minutes of the Fed’s Sept. 18 meeting suggested policy makers are in no hurry to cut borrowing costs further.
- Advantest Corp., the world’s biggest maker of memory-chip testers, rose the most in almost 21 months in Tokyo trading after Samsung Electronics said it will increase planned investment on chip production.
- Majority Leader Steny Hoyer said he expects the House to pass a non-binding resolution that labels the World War I-era killing of Armenians by Turks as genocide before Nov. 16, when Congress is slated to recess for the year. Hoyer and Speak Nancy Pelosi, appearing today on separate news shows, said the threat of Turkish reprisals would not stop the vote.
- Alibaba.com Ltd., operator of China’s largest trading Web site for businesses, and its parent may raise as much as $1.3 billion in a Hong Kong IPO.
- European Central Bank council member Nout Wellink said the credit market “turbulence” isn’t over and European economic growth will slow next year.

NY Times:
- Iran’s Supreme Leader Ayatollah Ali Khamenei called yesterday for a Muslim nation boycott of a US-led conference planned for last November intended to spur Middle East peace.
- Some States Consider Leasing Their Lotteries.
- A Need for a Will? Often, There’s an Online Way.

CNBC.com:
- Surprise! Americans Set to Open Wallets This Holiday.
- Genzyme(GENZ) Reports Progress on Multiple Sclerosis Drug.

MarketWatch.com:
- Lord Abbett skipper rides a strong tailwind from smaller, fast-moving firms.
- As Nasdaq nears 3,000, a fresh confidence prevails.
- BEA(BEAS) learns lessons from past Oracle(ORCL) battles.

IBD:
- Oracle Bid For Rival May Spark A Battle With SAP, HP, IBM.
- GPS Leader Garmin(GRMN) May Be Headed In Cell Phone Direction.
- Semiconductor Manufacturing: Suddenly, A Chipper Outlook.

NY Post:
- Over the last six months, Jimmy Cayne went from being the only billionaire head of a Wall Street bank to nearly being forced to go globe-trotting, hat in hand, seeking out financial backers for his floundering Bear Stearns(BSC).

TheStreet.com:
- Galloping Google(GOOG) Propels Tech Funds.

CNNMoney.com:
- Big oil getting squeezed on refining margins.
- Hitachi: 4 terabyte hard drives by 2011.

Business Week:
- Marcial: This Market Rally Has Legs. Recession fears are misplaced, and despite some sluggish sectors in the US, worldwide growth should keep pushing the numbers up.

USA Today:
- Google’s(GOOG) GPhone strategy could keep user costs low.
- Once thought a sure bet, Fed rate cut is uncertain.
- Fat is beautiful – and profitable – to biodiesel makers.

AP:
- Arrowcopter Inc., and other small US toymakers are expanding production as retailers look for alternatives to stock Christmas shelves following the recalls of Chinese-made products.

Financial Times:
- Citigroup(C) is planning to restore links between its stock research analyst and its institutional securities business five years after they were separated under pressure from regulators investigating Wall Street conflicts of interest.
- Pfizer will on Monday lead Big Pharma into internet-based social networking, as the world’s biggest drugmaker unveils a collaboration with Sermo, the fast-growing US networking site for doctors.
- Carl Icahn, the US activist investor, has signaled the possible launch of a new campaign against Motorola(MOT) if performance at the telecommunications equipment maker does not improve.
- SAP has sought to allay investor fears about a new bidding rivalry between the German business software maker and US rival Oracle(ORCL) by pledging big acquisitions only to enter new markets rather than to consolidate existing ones.

Daily Telegraph:
- British Airways Plc insisted on a minority stake in its bid with TPG Inc. for Iberia Lineas Aereas de Espana SA because it wants to retain the option of making a major US purchase, citing CEO Willie Walsh.

Interfax:
- Russian President Vladimir Putin may face an assassination attempt by suicide terrorists while on a visit to Iran this week, citing the Russian intelligence services.

Weekend Recommendations
Barron's:
- Made positive comments on (CVS) and (FTEK).

Citigroup:
- Reiterated Buy on (VFC), target $101. .

Night Trading
Asian indices are unch to +.25% on average.
S&P 500 futures -.10%.
NASDAQ 100 futures -.11%

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Earnings of Note
Company/Estimate
- (HUB/B)/.95
- (JNC)/.67
- (MAT)/.70
- (C)/.44
- (ETN)/1.67
- (DNA)/.72
- (SONC)/.33
- (BMET)/.51
- (CNK)/.24
- (GWW)/1.26

Upcoming Splits
- (CTSH) 2-for-1
- (DKS) 2-for-1

Economic Data
8:30 am EST
- The Empire Manufacturing report for October is estimated to fall to 13.1 versus 14.7 in September.

Other Potential Market Movers
- The Fed’s Bernanke speaking and (ISV) analyst meeting could also impact trading today.

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

Weekly Outlook

Click here for a weekly preview by MarketWatch.com.

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

Economic reports for the week include:

Mon. – Empire Manufacturing

Tues. – Net Long-term TIC Flows, Industrial Production, Capacity Utilization, NAHB Housing Market Index, weekly retail sales

Wed. – Weekly EIA energy inventory data, weekly MBA Mortgage Applications report, Consumer Price Index, Housing Starts, Building Permits, Fed’s Beige Book

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

Fri. – None of note

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

Mon. – Nuveen Investments(JNC), Mattel Inc.(MAT), Citigroup(C), Eaton Corp.(ETN), Genentech(DNA), WR Grainger(GWW)

Tues. – Domino’s Pizza(DPZ), Forest Labs(FRX), Polaris Industries(PII), Regions Financial(RF), State Street(STT), US Bancorp(USB), Jeffries Group(JEF), Wells Fargo(WFC), Champion Enterprises(CHB), CSX Corp.(CSX), Intel Corp.(INTC), International Business Machines(IBM), Liner Tech(LLTC), Seagate Technology(STX), Adtran(ADTN), Delta Airlines(DAL), Illumina(ILMN), Johnson & Johnson(JNJ), Keycorp(KEY), Yahoo!(YHOO)

Wed. – Abbott Labs(ABT), BlackRock(BLK), CIT Group(CIT), Comerica(CMA), Coca-Cola(KO), Gannett Co(GCI), United Technologies(UTX), Altria Group(MO), JPMorgan Chase(JPM), Illinois Tool Works(ITW), AMR Corp.(AMR), Stryker Corp.(SYK), Teradyne Inc.(TER), Allstate(ALL), E*Trade(ETFC), Washington Mutual(WM), Cbot Holdings(BOT), eBay Inc.(EBAY), Gerber Scientific(GRB)

Thur. – Eli Lilly(LLY), Southwest Airlines(LUV), United Health(UNH), Bank of NY(BK), St. Jude Medical(STJ), Capital One(COF), Gilead Sciences(GILD), Cerner Corp.(CERN), SanDisk(SNDK), Advanced Micro(AMD), Bank of America(BAC), Baxter Intl.(BAX), Continental Air(CAL), Google Inc.(GOOG), HCA Inc.(HCA), Hershey(HSY), Intuitive Surgical(ISRG), Mohawk Industries(MHK), Mellon Financial(MEL), Nucor Corp.(NUE), PNC Financial(PNC), PPG Industries(PPG), Pfizer Inc.(PFE), Wyeth(WYE), Xilinx(XLNX)

Fri. – Boston Scientific(BSX), Harley-Davidson(HOG), Honeywell Intl.(HON), Schlumberger(SLB), Wachovia Corp.(WB), Caterpillar(CAT), 3M(MMM), McDonald’s(MCD)

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

Mon. – Fed’s Bernanke speaking, (ISV) analyst meeting

Tue. – Wachovia Consumer Growth Conference, (VQ) analyst meeting, (TESO) analyst meeting

Wed. – Fed’s Hoenig speaking, Bear Stearns Retail Outing, Wachovia Consumer Growth Conference

Thur. – Bear Stearns Retail Outing, Wachovia Consumer Growth Conference, (NGG) investor seminar

Fri. – Fed’s Bernanke speaking, Fed’s Poole speaking

BOTTOM LINE: I expect US stocks to finish the week mixed as diminishing economic fears, better-than-expected earnings reports, investment manager performance anxiety, a stronger US dollar and short-covering offsets more hawkish Fed commentary and profit-taking. 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 1,561.80 +.27%*

Click here for the Weekly Wrap by Briefing.com.

Weekly Scoreboard*

Indices
S&P 500 1,561.80 +.27%
DJIA 14,093.08 +.19%
NASDAQ 2,805.68 +.91%
Russell 2000 841.17 -.44%
Wilshire 5000 15,719.67 +.31%
Russell 1000 Growth 635.66 +.82%
Russell 1000 Value 868.64 -.21%
Morgan Stanley Consumer 754.36 -.04%
Morgan Stanley Cyclical 1,088.99 +.34%
Morgan Stanley Technology 688.88 +1.44%
Transports 4,940.76 -1.13%
Utilities 519.39 +.86%
MSCI Emerging Markets 158.25 +1.85%

Sentiment/Internals
NYSE Cumulative A/D Line 73,349 +2.84%
Bloomberg New Highs-Lows Index +132 +76.0%
Bloomberg Crude Oil % Bulls 23.0 +283.3%
CFTC Oil Large Speculative Longs 247,233 +3.34%
Total Put/Call .76 +7.0%
NYSE Arms .99 -10.81%
Volatility(VIX) 17.73 +4.85%
ISE Sentiment 164.0 +5.1%
AAII % Bulls 54.64 +5.46%
AAII % Bears 25.77 +1.86%

Futures Spot Prices
Crude Oil 83.69 +3.08%
Reformulated Gasoline 208.51 +1.76%
Natural Gas 6.97 -1.18%
Heating Oil 224.64 +1.12%
Gold 753.80 +.83%
Base Metals 254.17 +1.0%
Copper 365.25 -1.95%

Economy
10-year US Treasury Yield 4.68% +4 basis points
4-Wk MA of Jobless Claims 310,300 -1.0%
Average 30-year Mortgage Rate 6.40% +3 basis points
Weekly Mortgage Applications 652.0 +2.4%
Weekly Retail Sales +2.0%
Nationwide Gas $2.76/gallon -.01/gallon
US Cooling Demand Next 7 Days 25.0% above normal
ECRI Weekly Leading Economic Index 141.50 +.50%
US Dollar Index 78.22 -.11%
CRB Index 333.50 +1.3%

Best Performing Style
Large-cap Growth +.83%

Worst Performing Style
Small-cap Value -.87%

Leading Sectors
Construction +4.51%
Oil Service +3.81%
Computer Hardware +3.23%
Energy +2.69
Internet +2.58%

Lagging Sectors
Hospitals -1.57%
Banks -2.29%
Retail -2.31%
REITs -2.39%
Oil Tankers -4.43%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change