Bear Radar

Style Underperformer:
Small-cap Value (-3.19%)

Sector Underperformers:
Airlines (-5.60%), HMOs (-5.60%) and Insurance (-4.93%)

Stocks Falling on Unusual Volume:
GMXR, LNC, CLF, TI, KNDL, FSLR, WYNN, ASTE, GTIV, FWLT, ODFL, SPWRB, AMED, ZN, HEI, HLF, CCH, RUK, CNP, CRT, AP, SJM and DWA

Stocks With Unusual Put Option Activity:
1) CI 2) MUR 3) FSLR 4) TEX 5) CF

Bull Radar

Style Outperformer:
Large-cap Growth (-2.04%)

Sector Outperformers:
Education (-.15%), Semis (-.32%) and Retail (-.76%)

Stocks Rising on Unusual Volume:
NEM, SSRI, KR, SWY, HPQ, KTC, FCX, JCOM, PZZA, TRMK, CPSI, APSG, DISCA, SXCI, EPIQ, DLTR, BCPC, MELI, CHSI, HURN, ONXX, SNDA, TNDM, HITT, CECO, LIHR, CRI, TFX, HRL, TYN, TRA and POR

Stocks With Unusual Call Option Activity:
1) LRCX 2) LLY 3) CBI 4) FSLR 5) RMBS

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
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In Play
NYSE Unusual Volume
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Chart Toppers
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HFR Global Hedge Fund Indices

Wednesday Watch

Late-Night Headlines
Bloomberg:

- Canada’s dollar, down 20% in a year as the global financial crisis spurred investors toward the safest of assets, may remain depressed against the US dollar as an expected rebound in oil prices fails to materialize, according to RBC Capital Markets. While the wide spread between spot oil and longer-term oil futures was taken to signal a recovery in the global economy, the spread’s narrowing to below $20 from $20-$30 per barrel “highlights the risk that oil demand will remain very sluggish and that prices could well languish near or below $50 per barrel through 2009 and into 2010,” Watt said.

- The cost of protecting Asia-Pacific bonds from default fell. The Markit iTraxx Japan Index of credit-default swaps fell 5 basis points to 470 at 10:15 am in Tokyo, according to BNP Paribas SA prices. The Markit iTraxx Asia index of credit-default swaps on 50 investment-grade borrowers outside Japan dropped 15 basis points to 425 at 9:15 am in Hong Kong, according to Barclays Plc prices. The Markit iTraxx Australia index was quoted 10 basis points lower at 362.5 as of 10:50 am in Sydney, Citigroup Inc. data show.

- More than 1 million households would benefit from seeking protection from creditors under a proposed law that would let bankruptcy judges modify mortgage terms, the Congressional Budget Office said. The House of Representatives is scheduled to vote Feb. 26 on legislation with a so-called cram-down provision allowing federal judges to order banks to reduce the mortgage principal payments and interest rates for homeowners that file for Chapter 13 bankruptcy protection.

- China’s real-estate developers don’t expect the property market to recover until at least the second half of this year, as prices need to fall further before attracting more buyers, according to Goldman Sachs Group(GS). “A sustainable property market is out of sight,” Goldman Sachs analysts Thomas Deng and Kinger Lau wrote in a report, which was based on observations from company visits in southern China and published today.

- Hong Kong’s economy shrank by the most since the first quarter of 1999 as the worst financial crisis since the Great Depression sent exports tumbling and unemployment climbing. Gross domestic product fell 2.5 percent in the fourth quarter of 2008 from a year earlier, the Census and Statistics Department said today on its Web site, after growing 1.7 percent in the third quarter. Economists surveyed by Bloomberg News had estimated a 2 percent contraction.

Wall Street Journal:

- President Barack Obama addressed the nation in a State-of-the-Union-style speech aimed at building realistic hopes for an economic turnaround while persuading ordinary Americans that his ambitious plans ultimately will help them and won't reward irresponsible bankers and speculators. Seeking to ease Americans' growing anxiety about the complex and increasingly global downturn, Mr. Obama sought to refocus the country's attention on the country's historic sources of strength -- its ideas and innovative spirit. "While our economy may be weakened and our confidence shaken; though we are living through difficult and uncertain times, tonight I want every American to know this: We will rebuild, we will recover, and the United States of America will emerge stronger than before," Mr. Obama said.

- A potential blueprint for European finance regulation will propose establishing a supervisor to watch over the region's biggest banks and insurers, according to people familiar with the matter. But the report, slated for release on Wednesday, won't call for a continent-wide set of regulations.

- Leaders at Ford Motor Co.(F) will take a sizeable cut to their compensation this year, a move announced one day after the auto maker exacted new concessions from its hourly workers. In a memo from Ford Executive Chairman William Ford Jr. and Chief Executive Alan Mulally, the top leaders of the company said they agreed to accept a 30% reduction in their salaries over the next two years. Ford's board of directors will also forgo the cash portion of its members' compensation this year, according to the memo sent to all Ford employees Tuesday afternoon. Performance bonuses for salaried employees and senior executives for 2009 will be eliminated.

- The government's $200 billion program to revive the market for securities backed by consumer loans may end up excluding the very industry that needs it most: U.S. auto makers. As the Federal Reserve hashes out final terms of its Term Asset-Backed Securities Loan Facility, or TALF, it is becoming clear that securities that help finance auto dealers mightn't meet some criteria. That would block a form of funding that auto companies had hoped would provide immediate relief as they fight for survival.

- Bank stocks soared, leading the broader market higher Tuesday after Federal Reserve Chairman Ben Bernanke made the strongest comments yet against nationalizing major Wall Street firms.

MarketWatch.com:
- The Hearst Corp. said Tuesday that unless the San Francisco Chronicle can undertake "critical" cost-cutting measures including job cuts within weeks, the media giant will be forced to sell or close the 144-year-old newspaper.

CNNMoney.com:
- House Democratic leaders have killed the Bush administration's plan to double the size of the U.S. emergency crude oil reserve, while the Obama administration may create gasoline and diesel fuel stockpiles.

Reuters:

- Northern Trust Corp(NTRS) took a pounding on Tuesday from U.S. lawmakers who said the bank must repay millions of taxpayer bailout dollars spent on "lavish parties" during a Southern California golf tournament. The Chicago-based bank's sponsorship of the expensive bash prompted Sen. John Kerry, a Massachusetts Democrat, to say he will introduce a bill this week to end "extravagant spending practices of U.S. banks" that receive taxpayer bailouts.

Financial Times:
- Cash-strapped investors have put more than $540m (€420m) of private equity and hedge fund stakes up for sale on a new platform launched Tuesday, aiming to draw out possible buyers for the otherwise illiquid holdings. The platform introduced by newcomers SecondMarket is a bold move to break the log-jam in markets for second-hand private equity and hedge fund stakes, where prices have plunged to record lows as sellers have far outweighed buyers. Hundreds of pension funds, endowments, banks, insurance companies, and wealthy individuals are looking to sell their private equity and hedge fund holdings to cover losses elsewhere in their investment portfolios.

- Russia’s economy contracted at an annual rate of 8.8 per cent in January, according to the economy minister. The figures provide the latest pointer to a sharp slowdown last month. Last week, Elvira Nabiullina, economic development minister, said the economy shrank by 2.4 per cent between December and January. Industrial production also fell 16 per cent year-on-year in January, while Russia saw a 17 per cent decline in construction, alongside a modest 2.4 per cent rise in retail trade. Officials predict that gross domestic product will contract by 2.2 per cent in 2009 overall. But economists are extremely pessimistic.

The Standard:

- Stronger measures are needed to boost domestic consumption so that China can sustain economic growth, President Hu Jintao said yesterday. He warned that the risk of deflation is rising, putting pressure on society. "China's advantageous economic conditions have not fundamentally changed, but downward pressure on economic growth has intensified," Hu was cited by state radio as saying during a State Council meeting.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (MGA), target $38.

Night Trading
Asian Indices are -.25% to +1.25% on average.
S&P 500 futures -.79%.
NASDAQ 100 futures -.69%.

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Conference Calendar

Who’s Speaking?
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Earnings of Note
Company/EPS Estimate
- (MSO)/.18

- (ZLC)/.48

- (SJM)/.86

- (SPW)/1.86

- (DLTR)/1.12

- (DLM)/.22

- (EV)/.19

- (TJX)/.50

- (ESRX)/.83

- (FLS)/1.89

- (CRM)/.07

- (FLR)/.91

- (DNR)/.14

- (LTD)/.65

Economic Releases

8:30 am EST

- Existing Home Sales for January are estimated to rise 1.1% versus a 6.5% gain in December.

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,250,000 barrels versus a -138,000 barrel decline the prior week. Gasoline supplies are expected unch. versus a +1,105,000 barrel increase the prior week. Distillate inventories are expected to fall by -1,200,000 barrels versus an-813,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.10% versus a +.72% the prior week.

Upcoming Splits
- None of note

Other Potential Market Movers
- Fed Chairman Bernanke gives monetary policy report before House panel, weekly MBA mortgage applications report, Jeffries Internet Conference, UBS Industrials Conference, BMO Capital Global Metals & Mining Conference, Robert Baird Business Conference, Merrill Lynch Insurance Conference, CSFB Global Services Conference, Goldman Tech & Internet Conference, Pacific Crest Technology Summit and the (VOLC) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by automaker 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.

Stocks Finish at Session Highs, Boosted by Financial, REIT and Homebuilding Shares

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In Play

Stocks Surging into Final Hour on Bank "Stress Test" Details, Short-Covering, Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Medical longs, Retail longs and Computer longs. I covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is above average. Investor anxiety is also above average. Today’s overall market action is very bullish. The VIX is falling 15.45% and is very high at 44.48. The ISE Sentiment Index is slightly below average at 122.0 and the total put/call is around average at .85. Finally, the NYSE Arms has been running low most of the day, hitting .39 at its intraday trough, and is currently .48. The Euro Financial Sector Credit Default Swap Index is rising .96% today to 161.0 basis points. This index is hitting a new record again today, eclipsing its high of 157.81 on Sept. 16^th. The North American Investment Grade Credit Default Swap Index is rising 3.53% to 220.99 basis points. The TED spread is falling 2.98% to 95 basis points. The TED spread is now down 372 basis points in about four months. The 2-year swap spread is rising 4.40% to 65.25 basis points. The Libor-OIS spread is falling .71% to 100.0 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 11 basis points to 1.00%, which is down 170 basis points in about seven months. The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown. The 3-month T-Bill is yielding .30%, which is up 3 basis points today. Fed Chairman Bernanke’s detailed comments regarding the forthcoming bank “stress tests” have alleviated some uncertainty surrounding this plan, which is a large positive. The most heavily-shorted groups are seeing the largest gains today. The MS Cyclical Index is rising 6.4%, as well. Inflation expectations have taken another meaningful fall over the last few days. Moreover, less safe-haven buying is also weighing heavily on gold again today. I suspect we will see another follow-through surge higher in US stocks at some point over the next few days, but it is too early to tell whether yesterday’s low was “the low.” Nikkei futures indicate an +270 open in Japan and DAX futures indicate an +88 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on diminishing financial sector pessimism, short-covering and less forced selling.