Weekly Outlook

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Click here for stocks in focus for Monday by MarketWatch.

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

Economic reports for the week include:

Mon. – None of note

Tues. – IDB/TIPP Economic Optimism, weekly retail sales reports

Wed. – Weekly EIA energy inventory report, weekly MBA mortgage applications report

Thur. – Trade Deficit, Initial Jobless Claims, Monthly Budget Deficit

Fri. – Import Price Index, Advance Retail Sales, Univ. of Mich. Consumer Confidence, Business Inventories

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

Mon. – Energy Conversion Devices(ENER), American International Group(AIG), Starbucks(SBUX), Tyson Foods(TSN), DISH Network(DISH), Pilgrim’s Pride(PPC), Sirius XM Radio(SIRI)

Tues. – Fossil Inc.(FOSL), Liz Claiborne(LIZ), TJX Cos.(TJX), Intrepid Potash(IPI)

Wed. – NetApp Inc.(NTAP), Macy’s Inc.(M), Applied Materials(AMAT), Las Vegas Sands(LVS)

Thur. – Urban Outfitters(URBN), Kohl’s Corp.(KSS), Nordstrom(JWN), JC Penney(JCP), Wal-Mart Stores(WMT)

Fri. – Abercrombie & Fitch(ANF), Agilent Technologies(A), Nuance Communications(NUAN)

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

Mon. – (HLS) Investor Day, (MVSN) Investor Day, Rodman & Renshaw Investment Conference

Tue. – (PCL) Analyst Day, (BBX) Reception, (STR) Analyst Meeting, (SPWRA) Analyst Day, (FISV) Investor Conference, (UNM) Analyst Meeting, (VMED) Analyst Meeting, (SNS) Analyst Meeting, Rodman & Renshaw Investment Conference, Robert W. Baird Industrial Conference, DB-Biotech Boston Confab, Merrill Banking/Financial Services Conference, UBS Building Conference, Piper Internet Summit

Wed. – (AVCT) Analyst Day, (ACN) Analyst Conference, (STR) Analyst Meeting, (RFMD) Analyst Meeting, (CMI) Analyst Day, (HAS) Analyst Meeting, (BBX) Investor Luncheon, (NKTR) Analyst Meeting, Merrill Banking/Financial Services Conference, UBS Building Conference, Rodman & Renshaw Investment Conference, Robert W. Baird Industrial Conference, CSFB Healthcare Conference, Merrill Defense Forum

Thur. – (QCOM) Analyst Meeting, (BRY) Investor Day, (IWOV) Analyst Day, (SYMM) Analyst Meeting, (TLAB) Investor Conference, (GPRO) Analyst Day, (ULBI) Analyst Meeting, (AMD) Analyst Day, Bank of America Energy Conference, BMO Capital Interactive Entertainment Conference, Merrill Banking/Financial Services Conference, CSFB Healthcare Conference, Needham Telecom Conference

Fri. – CSFB Healthcare Conference

BOTTOM LINE: I expect US stocks to finish the week modestly higher on an end to political uncertainty, seasonal strength, bargain-hunting, technical buying, less credit market angst, diminishing financial sector pessimism, less forced selling and short-covering. My trading indicators are giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 930.99 -3.90%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 930.99 -3.90%
DJIA 8,943.81 -4.1%
NASDAQ 1,647.40 -4.27%
Russell 2000 505.79 -5.90%
Wilshire 5000 9,328.29 -4.15%
Russell 1000 Growth 381.70 -4.06%
Russell 1000 Value 500.34 -4.03%
Morgan Stanley Consumer 553.48 -2.16%
Morgan Stanley Cyclical 506.05 -5.40%
Morgan Stanley Technology 355.14 -5.68%
Transports 3,666.02 -5.66%
Utilities 375.77 -.70%
MSCI Emerging Markets 24.38 -2.84%

Sentiment/Internals
NYSE Cumulative A/D Line 21,239 -1.42%
Bloomberg New Highs-Lows Index -602 -9.45%
Bloomberg Crude Oil % Bulls 46.0 -19.3%
CFTC Oil Large Speculative Longs 191,433 +3.42%
Total Put/Call .96 +3.23%
OEX Put/Call 2.34 +103.48%
ISE Sentiment 116.0 -4.13%
NYSE Arms .50 -46.24%
Volatility(VIX) 56.10 -6.34%
G7 Currency Volatility (VXY) 19.85 -13.81%
Smart Money Flow Index 6,335.18 -5.47%
AAII % Bulls 44.83 +20.71%
AAII % Bears 33.33 -17.85%

Futures Spot Prices
Crude Oil 61.15 -9.45%
Reformulated Gasoline 135.0 -9.21%
Natural Gas 6.78 +1.04%
Heating Oil 198.40 -4.18%
Gold 735.60 +1.54%
Base Metals 132.86 -2.12%
Copper 170.95 -9.05%
Agriculture 282.04 -2.61%

Economy
10-year US Treasury Yield 3.80% -16 basis points
10-year TIPS Spread .96% +5 basis points
TED Spread 2.0 -59 basis points
N. Amer. Investment Grade Credit Default Swap Index 190.24 -5.32%
Emerging Markets Credit Default Swap Index 652.89 -4.15%
Citi US Economic Surprise Index -96.20 -34.73%
Fed Fund Futures imply 97.0% chance of 50 basis point cut, 3.0% chance of 25 basis point cut on 12/16
Iraqi 2028 Govt Bonds 52.61 +5.74%
4-Wk MA of Jobless Claims 477,00 unch.
Average 30-year Mortgage Rate 6.20% -26 basis points
Weekly Mortgage Applications 379,900 -20.31%
Weekly Retail Sales +.6%
Nationwide Gas $2.31/gallon -.24/gallon
US Heating Demand Next 7 Days 13.0% below normal
ECRI Weekly Leading Economic Index 110.90 -1.77%
US Dollar Index 85.91 +.32%
Baltic Dry Index 829 -2.59%
CRB Index 256.84 -4.30%

Best Performing Style
Large-cap Value -4.03%

Worst Performing Style
Small-cap Value -6.40%

Leading Sectors
Telecom +1.95%
HMOs +.36%
Insurance -.41%
Utilities -.70%
Biotech -1.34%

Lagging Sectors
Steel -8.67%
Retail -9.16%
Homebuilding -9.28%
Gaming -13.52%
Coal -16.47%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish at Session Highs, Boosted by REIT, Construction, Utility, Energy, Alt Energy, Wireless and Pharma Shares

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
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 Real-Time Stock Bid/Ask
After-hours Stock Quote
After-hours Stock Chart
In Play

Stocks Rising into Final Hour on Short-Covering, Bargain-Hunting, Falling Credit Angst

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs and Biotech longs. I covered all my (IWM)/(QQQQ) hedges and some of my (EEM) short this morning, thus leaving the Portfolio 100% net long. The tone of the market is mildly bullish as the advance/decline line is higher, most sectors are rising and volume is slightly below average. Investor anxiety is very high. Today’s overall market action is mildly bullish. The VIX is falling 8.4% and is very high at 58.33. The ISE Sentiment Index is low at 115.0 and the total put/call is above average at .96. Finally, the NYSE Arms has been running around average most of the day, hitting 1.59 at its intraday peak, and is currently .77. Nikkei futures indicate an +180 open in Japan and DAX futures indicate an +30 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting, less forced selling and diminishing credit market angst.

Today's Headlines

Bloomberg:
- Ambac Financial Group Inc. has a stable business model, is ``extremely solvent'' and is unlikely to need direct help from the federal government, Chief Executive Officer David Wallis said.

- The cost of borrowing dollars for three months in London fell to a four-year low after central banks around the world cut benchmark borrowing costs and kept the financial system flooded with cash to restore lending. The London interbank offered rate, or Libor, that banks say they charge one another for loans fell 10 basis points to 2.29 percent today, the lowest level since November 2004, the British Bankers' Association said. The overnight rate held at a record low of 0.33 percent and the TED spread, a gauge of bank cash availability, dropped under 200 basis points for the first time since the day before Lehman Brothers Holdings Inc. collapsed.

- At least 20 percent of the vessels most commonly hired to haul coal and ore are sitting empty as steelmakers cut output and dwindling trade credit halts deliveries, Lorentzen & Stemoco A/S shipbroker Kjetil Sjuve said.

- Goldman Sachs Group Inc.(GS) and Morgan Stanley, the U.S. investment banks that converted to bank holding companies in September, had their fourth-quarter and 2009 earnings estimates cut by JPMorgan Chase & Co.(JPM).

- Business schools should teach empirical analysis and drop risk-management models that failed to foresee the worst market declines since the Great Depression, according to “Black Swan” author Nassim Taleb. Universities teach mathematical theories such as the Black- Scholes model of pricing options that don’t express risk properly, Taleb said in a Bloomberg Radio interview. Options are derivatives that give the right but not the obligation to buy an underlying security at a set price and date. “Recent events have proved that all risk management was wrong,” Taleb, a former options trader, said. “We need to do something drastic immediately to stop quantitative risk managers from inflicting more damage.” Academic teaching resists change because tenured professors aren’t forced to adapt or subject to the same standards that the market imposes on Wall Street, Taleb said.

- General Motors Corp.(GM), seeking federal aid to avoid collapse, said it may not have enough cash to keep operating this year and will fall ``significantly short'' of the amount needed by the end of June unless the auto market improves or it raises more capital. The largest U.S. automaker reported a $4.2 billion third- quarter operating loss today and said its available cash fell to $16.2 billion on Sept. 30 from $21 billion at the end of June. Merger talks with Chrysler LLC were suspended.

- Qualcomm Inc.(QCOM), the biggest maker of mobile-phone chips, rose as much as 10 percent in Nasdaq trading after investors predicted earnings growth can't get any worse.

Wall Street Journal:

- After October's massive equities sell-off, intrepid investors are picking over the investment landscape, figuring there must be some bargains amid the rubble. If it seems like a buying opportunity for stocks, it's shaping up to be an even better one for high-yield bonds and leveraged loans. Risk premiums in both asset classes have surged past previous all-time highs, even as default rates remain below historic norms.

NY Observer:
- YouTube is trying to make nice with major studios so they can offer feature films on their site. CNet announced the news yesterday that the Google-owned company is in negotiations to launch an ad-supported, streaming movie service.

NY Post:

- Citadel Investment Group founder Ken Griffin continues to be haunted by the Wall Street meltdown horror show, as October proved to be more challenging than September. The Chicago-based hedge fund lost about 22 percent last month, which followed a 16 percent loss in September. October's loss was Griffin's biggest setback since he launched the now $18 billion fund nearly 20 years ago with $1 million in capital. Year to date, Griffin's Wellington and Kensington flagship multi-strategy hedge-fund vehicles are down 38 percent, according to people familiar with Citadel's performance.

Bespoke Investment Group:

- Table: Country Default Risk As Measured By CDS Prices.

Reuters:
- Apple Inc's(AAPL) new iPhone, already racking up blockbuster sales with consumers, appears to be making small but steady inroads into the coveted U.S. corporate market dominated by Research in Motion Ltd's BlackBerry.

Folha Online:
- Brazil may have as many as 100 billion barrels of oil in the country’s so-called pre-salt fields, citing Haroldo Lima, director general of Brazil’s National Petroleum Agency. Brazil has at least 50 billion barrels of oil and as many as 80 billion barrels in blocks that have been auctioned, Lima said. The country’s oil reserves may top 100 billion barrels including blocks that haven’t been auctioned.

El Nacional:
- Venezuela’s annual inflation rate will end 2008 at about 28%, missing the government’s target of 27%, citing comments by Finance Minister Ali Rodriguez.