Today's Headlines

Bloomberg:
- Crude oil is rising above $102/bbl. on a weaker dollar, a shipment disruption in Iraq and historic investment fund speculation.
- Prince Harry, third in line to the British throne, is fighting with his regiment in Afghanistan, the UK Ministry of Defense said.
- PIMCO’s Bill Gross told CNBC the firm is buying some commercial mortgage backed securities and is still buying municipal debt.
- Thornburg Mortgage’s(TMA) CEO said the common stock dividend should be safe.

Wall Street Journal:
- London-based hedge fund Richmond Capital LLP has stumbled badly this year, losing about half its money in January alone.
- Bebo.com, MySpace Turn to Videos to Gain Ads, Users.

Forbes:
- “I don’t anticipate stagflation,” Fed Chairman Bernanke said under questioning from the Senate Banking Committee. “I don’t think we’re anywhere near the situation that prevailed in the 1970s. I do expect inflation will come down,” he said.

NY Sun:
- NYC is launching a campaign to motivate public school students by giving them free cell phones and upgrading features if they do things such as show up to class and behave.

Financial Times:
- Emirates Telecommunications, is close to forming a joint venture with a mobile operator in the Kurdish region of Iraq, citing the company’s CEO.
- A hedge fund’s demise: the Peloton pile-up.

Saba:
- Yemen plans to raise its oil production by more than 50% to 500,000 barrels a day by 2010, citing the country’s oil minister. Yemen’s oil production reached 317,000 barrels a day last year.

Bear Radar

Style Underperformer:

Small-cap Value -1.91%

Sector Underperformers:

Airlines (-3.80%), Homebuilders (-3.47%) and Banks (-3.39%)

Stocks Falling on Unusual Volume:

EPL, WNR, CGV, PBKS, PDGI, LHCG, ENOC, COMV, AMAG, REXX, CRDN, COGT, EWBC, RHD, IRM, MYL, PKE, SFI, EPL and LTD

4Q GDP Rises Slightly Less Than Estimates, Initial Jobless Claims Rise More Than Estimates

- Preliminary 4Q GDP rose .6% versus estimates of a .8% gain and prior estimates of a .6% increase.

- Preliminary 4Q Personal Consumption rose 1.9% versus estimates of a 2.0% gain and prior estimates of a 2.0% increase.

- Preliminary 4Q GDP Price Index rose 2.7% versus estimates of a 2.6% gain and prior estimates of a 2.6% increase.

- Preliminary 4Q Core PCE rose 2.7% versus estimates of a 2.7% gain and prior estimates of a 2.7% increase.

- Initial Jobless Claims rose to 373K versus estimates of 350K and 354K the prior week.

- Continuing Claims rose to 2807K versus estimates of 2785K and 2786K prior.

BOTTOM LINE: The US economy grew .6% in the fourth quarter, the same as initial estimates, Bloomberg reported. Consumer spending rose 1.9% in the fourth quarter. Personal Income rose at a 4.1% rate during 4Q. According to Intrade.com the odds the US slips into recession this year have fallen to 61.5% from 77.5% last month. I continue to believe the US will avoid recession as growth comes in around 1% during the first half of the year before accelerating modestly in the second half as the effects of fiscal/monetary stimulus take hold, exports continue to boom to new records, inflation decelerates and companies rebuild depleted inventories.

The number of Americans filing first-time jobless claims for unemployment benefits rose more than forecast last week, Bloomberg reported. The unemployment rate among those eligible to collect benefits, which tracks the US unemployment rate, held steady at a historically low 2.1%. The four-week moving average of claims fell to 360,500 from 361,750 the prior week. Four states and territories reported an increase in new claims, while 49 actually had a decrease. The current trend in jobless claims is still not at levels normally associated with economic contraction. Fed fund futures now imply a 68.0% chance for a 50 basis point cut at the March 18^th meeting. The odds of a 75 basis point cut have risen to 32.0% from 10.0% yesterday. I continue to believe the job market will improve to more healthy levels in the second half of the year and will remain very healthy over the intermediate-term without generating substantial unit labor cost increases, which account for about two-thirds of inflation.

Bull Radar

Style Outperformer:

Large-cap Growth (+.11%)

Sector Outperformers:

Telecom (+1.64%), Oil Service (+1.57%) and Steel (+.48%)

Stocks Rising on Unusual Volume:

EOG, ROSE, PT, WFT, DWSN, BVN, T, NG, MKTX, NDAQ, SEAB, CVA, BRKR, HURC, VISN, MIDD, DBRN, GTLS, CTRP, XNPT, ULBI, SGMO, VTIV, NFLX, VMED, JAKK, MANT, LEAP, ACAP, BLOG, CRZO, LIFC, HSP, FRE and UHT

Links of Interest

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Top 20 Biz Stories
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In Play
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Dow Jones Hedge Fund Indexes

Thursday Watch

Late-Night Headlines
Bloomberg:
- Salesforce.com(CRM), the biggest seller of Internet-based customer-management software, reported profit and sales that topped analysts’ estimates after it added about 2,900 customers. The shares jumped 10% in after-hours trading.
- Flowserve Corp.(FLS) rose 9%, the most in more than five years in extended trading, after forecasting full-year earnings that topped analysts’ estimates.
- Dress Barn(DBRN) jumped 13% in after-hours trading. The NY-based retailer with more than 1,400 women’s clothing stores said that it earned .09/share in the fiscal second quarter versus analysts’ estimates of .06/share.
- Crude oil fell from a record after a government report showed that US inventories increased a seventh week. “Crude-oil inventories are starting to look very healthy and gasoline inventories are tremendous,” said Michael Lynch, president of Strategic Energy & Economic Research. “Demand is awful and there’s a lot of oil that’s on its way here. There is going to be serious downward pressure on this market within a few weeks.” Gasoline stockpiles rose 2.35 million barrels to 232.6 million barrels, the 16^th straight gain. Inventories of the motor fuel are the highest since 1994 and 17% above the five-year average.
- Baidu.com Inc.(BIDU) rose the most in a month on speculation the company may have acquired web browser Maxthon.
- Sanyo Electric rose the most in a week in Tokyo trading after the Nikkei newspaper reported Japan’s largest oil refiner agreed to distribute its solar-power panels to homes nationwide.
- Yahoo! Inc.(YHOO) said Microsoft’s(MSFT) unsolicited takeover bid has been a distraction to management and may require “significant” time and resources to review. The offer has also created uncertainty for employees, which may make it difficult to keep and hire new people, Yahoo said.
- NYC will require its 10,000 private limos to switch to hybrid models over the next five years, city taxi officials said.

Wall Street Journal:
- Bernanke Hints at More Rate Cuts Amid Multiple Economic Risks.

MarketWatch.com:
- Japan’s industrial output fell 2% in January from the previous month, led by a decline in the production of large passenger cars, memory chips and digital cameras.
- AIG seen easily absorbing mark-to-market hit. Insurer’s an ‘unsinkable ship,’ Friedman Billing Ramsey analysts say.
- Cerberus Capital Management may join a group of banks that are planning to help inject new capital into Ambac Financial(ABK) as the bond insurer tries to avoid losing its crucial AAA rating, CNBC reported.

BusinessWeek.com:
- Google(GOOG): Are Ad Concerns Overblown?
- Obesity Drugs: Worth a Weighty Investment.

CNNMoney.com:
- Google shares recover from sell-off. Analysts rise to the Internet search giant’s defense.

SmartMoney.com:
- Since becoming chief investment officer of Texas’ $100 billion-plus Teacher Retirement System in 2006, Britt Harris has been out front, guiding the pension plan into investments like hedge funds, private equity and real estate.

IBD:
- Atheros(ATHR) Maps Out Its GPS Chip Move.
- Netflix(NFLX) Dazzles As Competition Thins.

Reuters:
- Apple Inc.(AAPL) affirmed on Wednesday its iPhone sales goal for this year and said it will give details next week of how outside programmers can create software for its iPhone, a move expected to spur demand for the multifunction device. The shares surged another 3.5% in after-hours trading.
- Short interest on the Nasdaq rose another 4.9% in mid-February. Short interest soared more than 25% in shares of Microsoft(MSFT) and 30% in shares of Yahoo(YHOO). Short interest also jumped 49% in share of (DRIV), 26% in (GRMN), 37% in (CDNS) and 43% in shares of (VRSN).
- Sovereign funds, Cerberus eye bond insurer stakes.

Financial Times:
- This month is set to become the first February since 1992 in which IPOs were less than those of traditionally slow January. The value of cancelled or postponed deals is the highest on record for the first two months of any year, according to Thomson Financial.
- Private equity firms are now approaching sovereign wealth funds for loans for big leveraged acquisitions, filling the gap left by investment banks struggling with the credit squeeze, leading buy-out bosses said.

TimesOnline:
- The number of new European hedge funds introduced last year dropped to the lowest in at least seven years, citing data provider EuroHedge.

Kuwait Times:
- Saudi, France ink pact to combat terrorism and money laundering.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (UTX), target $86.
- Reiterated Buy on (CRM), raised target to $70.

Night Trading
Asian Indices are -1.0% to +.75% on average.
S&P 500 futures -.35%.
NASDAQ 100 futures +.15%.

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Earnings of Note
Company/EPS Estimate
- (DLM)/.25
- (BRL)/.76
- (OMG)/1.33
- (RDC)/1.18
- (FLR)/1.16
- (TK)/.38
- (SHLD)/3.34
- (SFD)/.22
- (CVC)/.11
- (FRE)/-2.06
- (S)/.18
- (FAF)/.13
- (KSS)/1.30
- (NOVL)/.05
- (GPS)/.34
- (SGMS)/.24
- (NX)/.51
- (HANS)/.39
- (AIG)/.69
- (DELL)/.36
- (CPHD)/-.08
- (OVTI)/.47
- (DECK)/2.26
- (WCG)/1.62
- (BE)/-.43
- (VIA/B)/.83

Upcoming Splits
- (NJR) 3-for-2
- (PRXL) 2-for-1

Economic Releases
8:30 am EST
- Preliminary 4Q GDP is estimated to rise .8% versus prior estimates of a .6% increase.
- Preliminary 4Q Personal Consumption is estimated to rise 2.0% versus prior estimates of a 2.0% increase.
- Preliminary 4Q GDP Price Index is estimated to rise 2.6% versus prior estimates of a 2.6% increase.
- Preliminary 4Q Core PCE is estimated to rise 2.7% versus prior estimates of a 2.7% gain.
- Initial Jobless Claims are estimated to rise to 350K versus 349K the prior week.
- Continuing Claims are estimated to rise to 2785K versus 2784K prior.

Other Potential Market Movers
- The Fed’s Bernanke speaking, weekly EIA natural gas inventory data, (EOG) analyst conference, (CAI) analyst meeting, (ETN) analyst meeting, (DTV) investor day, CSFB Specialty Pharma Conference, CSFB Aerospace/Defense Conference, CSFB Transport/Logistics Conference, Robert Baird Business Solutions Conference, Wachovia Homebuilding Conference, Goldman Sachs Tech Symposium, Pacific Crest Data Center Conference and Keefe Bruyette Regional Bank Conference could also impact trading today.

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