Monday Close

Indices
S&P 500 1,181.27 +.85%
Dow 10,489.94 +.60%
NASDAQ 2,062.41 +1.31%
Russell 2000 624.02 +1.80%
DJ Wilshire 5000 11,627.25 +.95%
S&P Barra Growth 567.53 +.66%
S&P Barra Value 609.50 +1.03%
Morgan Stanley Consumer 583.41 +.15%
Morgan Stanley Cyclical 753.89 +1.12%
Morgan Stanley Technology 473.66 +1.43%
Transports 3,598.48 +1.48%
Utilities 343.46 +1.15%
Put/Call .68 -11.69%
NYSE Arms .88 -31.78%
Volatility(VIX) 12.82 -3.17%
ISE Sentiment 155.00 -13.41%
US Dollar 83.57 +.11%
CRB 284.75 +.20%

Futures Spot Prices
Crude Oil 48.15 -.10%
Unleaded Gasoline 134.20 -.42%
Natural Gas 6.29 -.49%
Heating Oil 134.60 -.16%
Gold 424.20 +.02%
Base Metals 122.86 +.26%
Copper 143.00 -.35%
10-year US Treasury Yield 4.13% -.24%

Leading Sectors
Disk Drives +2.59%
I-Banks +2.39%
Airlines +2.27%

Lagging Sectors
Telecom -.11%
Papers -.12%
Drugs -.46%

After-hours Movers
ARBA -20.68% after missing 1Q estimates.
ISSX -5.06% after beating 4Q estimates and widening 1Q/05 guidance.
OS +6.79% after boosting 4Q estimates on higher plate demand and lower scrap prices.
SRX +4.41% after beating 2Q estimates, raising 3Q/05 guidance.
VLTR -8.12% on profit-taking after beating 4Q estimates.
RNOW -7.95% after meeting 4Q estimates, reiterating 1Q outlook and lowering 05 guidance.
ATRS -5.41% on profit-taking after beating 4Q estimates.

Detailed Market Summary
Market Wrap CNBC Video(bottom right)
Futures Recap
NASDAQ 100 After-hours Indicator
Real-time/After-hours Stock Quote

Afternoon Recommendations
-Goldman Sachs: Reiterated Outperform on LVS, XOM, RE, DIS and WYNN.

After-hours News
US stocks finished higher today on optimism over the Iraqi election, increased merger activity and short-covering. After the close, Duke Energy, the biggest US utility owner, may begin auctioning its wholesale electricity unit within six weeks, the Power Finance & Risk newsletter said. China will probably expand the band where it lets is currency trade against the dollar by 3% or more this year, the Nikkei Financial Daily reported. Time Warner’s HBO channel sold the rights to “The Sopranos” to A&E Television Networks for a record price of about $195 million, or $2.5 million per episode, Daily Variety reported. Huawei Technologies, China’s top phone-equipment maker, has considered selling its optical and access units to foreign buyers as part of a review, the Financial Times reported. The US dollar had its biggest monthly advance against the euro since May 2001, Bloomberg said. Brazil sold $1.25 billion of 20-year bonds and Mexico’s credit rating was lifted by Standard & Poor’s, underscoring increased confidence in the creditworthiness of Latin America’s two biggest economies, Bloomberg reported. The European Union may hold consultations with the US and Japan over its possible lifting of its arms embargo on China and any subsequent arms sales, the Financial Times reported.

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my internet, retail, computer and RFID longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. The tone of the market improved in the final hour as most sectors rose and the advance/decline line finished near its daily highs. Small-caps, financials and technology outperformed throughout the afternoon. Long-term interest rates fell again today and look to be headed still lower over the next few months. It was disappointing to see oil rise in the face of more stability in Iraq. As well, most measures of investor anxiety fell and volume was lighter. I expect US stocks to continue heading modestly higher in the near-term on increased optimism, more dovish Fed comments and strong earnings reports.

Mid-day Report

Indices
S&P 500 1,180.08 +.74%
Dow 10,491.12 +.61%
NASDAQ 2,060.40 +1.21%
Russell 2000 620.29 +1.19%
DJ Wilshire 5000 11,608.07 +.78%
S&P Barra Growth 567.23 +.61%
S&P Barra Value 608.67 +.89%
Morgan Stanley Consumer 583.08 +.10%
Morgan Stanley Cyclical 753.53 +1.07%
Morgan Stanley Technology 473.84 +1.46%
Transports 3,592.38 +1.31%
Utilities 342.30 +.81%
Put/Call .68 -11.69%
NYSE Arms .87 -32.56%
Volatility(VIX) 12.97 -2.11%
ISE Sentiment 185.00 +3.35%
US Dollar 83.49 +.01%
CRB 283.16 -.36%

Futures Spot Prices
Crude Oil 46.65 -.81%
Unleaded Gasoline 128.40 -1.85%
Natural Gas 6.19 -1.10%
Heating Oil 130.20 -2.69%
Gold 423.10 -1.17%
Base Metals 122.86 +.26%
Copper 143.30 -.38%
10-year US Treasury Yield 4.14% +.14%

Leading Sectors
Airlines +2.74%
Iron/Steel +2.66%
I-Banks +1.86%

Lagging Sectors
Telecom -.11%
Drugs -.67%
Boxmakers -.84%

Market Movers
WYE -7.3% after missing 4Q estimates, lowering 05 guidance and Prudential downgrade to Neutral.
AAPL +4.2% after unveiling faster, more affordable PowerBooks.
CREO +13.65% after Eastman Kodak(EK) agreed to buy it for $980 million in cash.
AVL +19.87% after saying GE gave it exclusive rights to distribute certain parts for GE’s CF6-50 and CF6-80A aircraft engines.
NOVN +17.21% after the FDA denied pending citizen petitions intended to prevent or delay the approval of certain generic versions of Johnson & Johnson’s Duragesic product and RBC upgrade to Outperform.
SEE +9.63% after substantially beating 4Q estimates and raising 05 guidance.
RYAAY +9.05% after raising 3Q estimates and 4Q outlook.
GRMN +7.53% after saying the original equipment parts and accessories provider for Chrysler, Dodge and Jeep will begin offering a new Garmin-built GPS automotive navigation system as a dealer-installed option.
MSTR +3.9% on Maxim upgrade to Buy.
NVEC +11.56% after confirming that Magnetoresistive Random Access Memory alpha samples recently announced by Cypress Semiconductor are covered by NVE’s technology agreement.
RSTG -13.68% on profit-taking.
SIR -33.88% after lowering 4Q estimates and saying it may restate results after an internal review found accounting errors.
HSP -7.4% after lowering 05 outlook.

Market Internals
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
-Personal Income for December rose 3.7% versus estimates of a 3.4% increase and a .4% gain in November.
-Personal Spending for December rose .8% versus estimates of a .8% increase and a .4% rise in November.
-PCE Deflator(YoY) for December rose 2.4% versus estimates of a 2.4% increase and a 2.7% increase in November.
-PCE Core(YoY) for December rose 1.5% versus estimates of a 1.5% gain and a 1.6% rise in November.
-New Home Sales for December were 1098K versus estimates of 1200K and 1097K in November.
-Chicago Purchasing Manager for January rose to 62.4 versus estimates of 59.0 and a reading of 61.9 in December.

Recommendations
-Goldman Sachs: Reiterated Outperform on SBC, BBY and TSMC. Reiterated Underperform on T and MMC. Reiterated Underweight rating on Newspaper stocks.
-Citi SmithBarney: Upgraded CEG to Buy, target $55. Downgraded EOP to Sell, target $26. Reiterated Buy on NE, target $65. Upgraded SII to Buy, target $73. Reiterated Buy on HAL, target $50. Reiterated Sell on MYG, target $11. Reiterated Buy on WMT, target $65. Reiterated Buy on DNA, target $87.50. Reiterated Sell on NYB, target $17. Reiterated Sell on MU, target $11.50. Reiterated Sell on SIVB, target $34. Reiterated Buy on STZ, target $53.
-UBS: Raised MATR to Buy, target $55.
-Banc of America: Rated ISTA Buy, target $13.
-Morgan Stanley: Cut HAL and BJS to Underweight.
-CSFB: Raised JBL to Outperform, target $28.
-CIBC: Raised RTEC to Sector Outperform, target $20.
-Legg Mason: Raised CCE to Buy, target $26. Raised COTT to Buy, target $30. Raised PBG to Buy, target $32.
-Prudential: Cut NUE to Underweight, target $43. Cut FISV to Underweight, target $35. Cut T to Underweight, target $16.
-Merrill Lynch: Raised AWA to Buy, target $7. Raised CAL to Buy, target $14.
-Bear Stearns: Rated NCTY Outperform, target $32.
-Raymond James: Raised RSAS to Strong Buy, target $22. Cut SBC to Underperform. Raised VRSN to Buy, target $35.

Mid-day News
US stocks are higher mid-day on optimism over the outcome of the Iraqi elections, merger activity and lower energy prices. Yahoo! plans to increase its financial data offerings online, a move that would allow the company to add to its popular finance site and become a data provider for other sites, the Wall Street Journal reported. MetLife is close to buying Citigroup’s Travelers Life & Annuity unit for about $12 billion, the Wall Street Journal reported. The SEC is considering rules that would give investors a better idea of how much their mutual funds spend to buy and sell securities, the Wall Street Journal reported. Time Warner’s cable unit plans to provide America Online accounts to high-speed Internet customers at no extra cost, the Wall Street Journal reported. Vivendi Universal SA has filed suit against EchoStar Communications to force the No. 2 US satellite-television service to carry a new 24-hour music channel, the NY Post reported. Coach Inc. plans to add 100 new stores over the next four to five years, bringing the company’s total outlets to almost 300, the NY Daily News reported. International home-video sales are the fastest-growing part of the film industry, although the Motion Picture Association of America and most studios won’t give specific figures, the NY Times reported. An internal UN investigation and a US Justice Department probe over corruption in the UN/Iraq Oil-for-food Program have clashed over access to documents and witnesses, the NY Times reported. American Indian tribes in Southern California are trying to transform their desert casinos into resorts to compete with Las Vegas, the LA Times reported. SBC Communications agreed to buy AT&T for about $16 billion in stock and cash, marking the end of the 130-year-old company that brought phones into American homes, Bloomberg reported. Lee Enterprises, which operates 44 daily newspapers in 19 states, agreed to buy Pulitzer, owner of 14 daily newspapers, for about $1.41 billion in cash, Bloomberg said. US personal spending accelerated in December and incomes jumped the most on record as Microsoft made a one-time $32.6 billion dividend payout, Bloomberg reported. French President Chirac offered US President Bush help with the training of the Iraqi police force following yesterday’s election, Bloomberg said. Crude oil fell to its lowest in almost three weeks after Iraq’s election yesterday passed without attacks against pipelines and OPEC agreed to leave production quotas unchanged, Bloomberg reported. Marsh & McLennan agreed to pay $850 million to settle NY Attorney General Spitzer’s accusations that it rigged bids and took kickbacks from insurers, Bloomberg said. US sales of new homes rose .1% last month to 1.098 million houses at an annual rate, capping the fourth consecutive all-time record year, Bloomberg reported. US fourth-quarter GDP figures were likely adversely affected as much as .5 percentage points by an error in Canada’s trade report for November, a Commerce Department official said. United Airlines pilots voted to ratify a new contract that will cut pilot pay be 12% and help save the company $180 million annually as part of the airline’s plan to stem losses and exit bankruptcy, Bloomberg said. Iraqi interim Prime Minister Allawi said today the country’s new national assembly should work with Sunni Arabs to create a government and constitution, Bloomberg reported.

BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my retail, internet, networking and computer longs. I added a few new longs this morning, thus bringing the Portfolio to 125% net long. One of my new longs is AUO and I am using a $14.50 stop-loss on this position. The tone of the market is pretty good today as most sectors are higher and the advance/decline line is very good. Small-caps and technology shares are outperforming. On the negative side, volume is lighter than I would like to see on a rally and oil isn’t declining as much as I anticipated. As well, measures of investor anxiety are falling. I expect US stocks to rise modestly into the close on more optimism, short-covering and bargain-hunting.

Monday Watch

Weekend News
Arab airlines grew the fastest last year of any regional grouping by number of passengers carried, boosting profits, Arabian Business magazine reported. New York my become the first state to offer a so-called work-readiness credential to students who voluntarily take a test on skills needed to perform entry-level jobs, the NY Times reported. Kaiser Permanente, a California-based hmo, will no longer sell Pfizer's Bextra in its pharmacies after some tests found the arthritis and pain drug may increase the risk of heart attacks and strokes, the NY Times reported. Advisers to President Bush have recommended he propose personal Social Security accounts that let individuals invest initially in three to five diversified funds under a system similar to the Thrift Savings Plan for federal workers, the Boston Globe reported. SBC Communication's possible bid for AT&T will make Verizon Communications, BellSouth and Qwest Communications consider whether to purchase MCI Inc., the NY Times reported. A few days before a Parliament debate to loosen limits on the 35-hour work week, 77% of the French people say they would prefer to leave their working time unchanged, Le Journal du Dimanche reported. Comcast and Time Warner have completed a joint off for the bankrupt Adelphia Communications and may be the only bidder for the whole company by the Jan. 31 deadline, the LA Times reported. Bill Gross, CIO for PIMCO, expects the yield on 10-Year T-notes may rise to 4.75% or 5.0% within 12 months, Barron's reported. Some Trump Hotels and Casino Resorts shareholders and a bank that once offered to buy a controlling stake in it have filed motions blocking the company's plan to exit bankruptcy, the Star-Ledger reported. Public health officials say AIDS infections in newborn babies may be almost eradicated in the US because of more effective drugs, public education and testing, the NY Times reported. The Qatari government is trying to sell unprofitable Al Jazeera after Bush administration officials have complained about biased and false reporting on the Arab language television station, the NY Times reported. International Speedway will sell Nazareth Speedway, once the home track for now-retired race drivers Mario and Michael Andretti, the Morning Call of Allentown, Pennsylvania reported. The British Broadcasting Corp. said it mistakenly reported that US forces and their allies killed more civilians than insurgents fighting in Iraq, Bloomberg reported. Halliburton and Baker Hughes won a government contract to drill for gas in Bahrain, a Persian Gulf archipelago, in an effort to meet demand from its power plants and aluminum industry, Middle East Economic Digest said. Iran, holder of the world's second-largest oil reserves, will increase oil production from its Mansouri field by a third to 150,000 barrels a day as it seeks to increase total production, Petroenergy Information Network said. Boeing CEO Stonecipher is backing plans to build an advanced version of the company's 747 airliner, raising the possibility of the plane's launch in the next few months, the Business reported. Afghan President Karzai was urged by two human rights organizations yesterday to prosecute war criminals after decades of human rights abuses in the nation, the NY Times said. Beating back President Bush's plan to let workers invest a small part of their Social Security taxes in private accounts is the Democratic Party's most important priority this year, the NY Times reported. Russia has as many spies in the US as the former Soviet Union had during the Cold War, and the National Security Council has instructed intelligence agencies to follow the threat closely, Time magazine reported. A US tax amnesty, offset by tax breaks in the American Jobs Creation Act, may reap about $100 billion of foreign exchange earnings for the US, the Financial Times said. Saudi Arabia's OPEC minister said crude oil at $50 a barrel has done nothing to slow economic growth, signaling the group will do little to stop a year long really in prices, Bloomberg said. China's vice premier and deputy central bank chief said they want to maintain a "stable" exchange rate, rebuffing calls from the US and Europe to let the Chinese currency strengthen, Bloomberg said. Libya auctioned off rights to explore for oil in its first such sale for 40 years, with US oil companies, led by Occidental Petroleum, winning the bulk of the bidding, Bloomberg reported. Dubai said it bought a $1 billion stake in DaimlerChrysler AG, making the Persian Gulf emirate the third-largest shareholder in the world's biggest maker of luxury cars, Bloomberg said. Israeli Prime Minister Sharon and Palestinian Authority President Abbas will hold a summit meeting next week to push forward the Middle East peace process after a 19-month lull, Bloomberg said. As many as 8 million Iraqis, or about 60% of eligible voters, voted for a National Assembly, defying insurgents to hold the country's first democratic election since 1953, Bloomberg reported. President Bush called the elections in Iraq a "resounding success" that proves the commitment of Iraqis to democracy and freedom, Bloomberg said. National Semiconductor forecast its China sales will rise by more than 20% this year on expanding demand for electronic and telecommunications products, Bloomberg reported. Crude oil futures are falling, heading for their biggest two-day drop in a month, after Iraq's first free election in 50 years reduced concern that the country's oil supply would be disrupted and OPEN said it may raise output in the second quarter, Bloomberg reported.

Weekend Recommendations
-Bulls and Bears: Had guests that were positive on UDI, AH, PJC, PG, INTU and mixed on ATK, DAL.
-Forbes on Fox: Had guests that were positive on HAL, WWW, TK, MHX and mixed on LLL, PTEN.
-Cashin' In: Had guests that were positive on DUK, MCD and mixed on ISL, BHP.
-Barron's: Had positive comments on SHPGY, FWHLF, TIIPF, AIZ, LEAP, IGI, JPM, FITB, FNF, PFE, LYO, ALL, EP, OMM and CRY. Had negative comments on HOV, TOL, LEN and CTX.
-Goldman Sachs: Reiterated Outperform on MDT, SII, INTC, SPG, ALK, UTX, NFX, BLS and DNA. Reiterated Underperform on PCZ and MU.

Night Trading
Asian Indices are higher, +.50%. to +1.25% on average.
S&P 500 indicated +.43%.
NASDAQ 100 indicated +.76%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell Video(bottom right)
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Analyst Actions
Macro Calls
CNBC Guest Schedule

Earnings of Note
Company/Estimate
AFL/.58
XOM/1.07
HLT/.16
K/.45
MAT/.48
SEE/.67
SYY/.36
TSN/.25
DIS/.29
WYE/.67
ZMH/.64

Splits
None of note.

Economic Data
-Personal Income for December is estimated to rise 3.3% versus a .3% increase in November.
-Personal Spending for December is estimated to rise .9% versus a .2% increase in November.
-PCE Deflator(YoY) for December is estimated to rise 2.4% versus a 2.6% increase in November.
-New Home Sales for December are estimated at 1200K versus 1125K in November.
-Chicago Purchasing Manager for January is estimated to fall to 59.0 versus 61.9 in December.

BOTTOM LINE: I expect US stocks to open higher in the morning on optimism over the Iraqi elections, increasing potential for meaningful US reforms, lower energy prices, short-covering and bargain hunting. The Portfolio is 100% net long heading into the week.

Weekly Outlook

There are a number of important economic reports and many significant corporate earnings reports scheduled for release this week. Economic reports include (Mon.)-Personal Income/Spending, PCE Deflator, New Home Sales, Chicago Purchasing Manager (Tues.)-Construction Spending, ISM Manufacturing/Prices Paid, Total Vehicle Sales (Wed.)-FOMC Rate Decision (Thur.)-Preliminary 4Q Non-farm Productivity/Unit Labor Costs, Initial Jobless Claims, Factory Orders, ISM Non-Manufacturing (Fri.)-Unemployment Rate, Change in Non-farm Payrolls, Univ. of Mich. Consumer Confidence. Personal Spending, New Home Sales, Chicago Purchasing Manager, ISM Manufacturing, FOMC Rate Decision, ISM Non-Manufacturing, Change in Non-farm Payrolls and Consumer Confidence all have market-moving potential.

Mon. - AFLAC Inc.(AFL), Exxon Mobil(XOM), Hilton Hotels(HLT), Kellogg(K), Nortel Networks(NT), Walt Disney(DIS), Zimmer Holdings(ZMH) Tues. - Avon Products(AVP), Boston Scientific(BSX), Chicago Mercantile Exchange(CME), Chubb Corp.(CB), Emerson Electric(EMR), Google(GOOG), HCA Inc.(HCA), Ingersoll-Rand(IR), Tyco Intl.(TYC) Wed. - Amazon.com(AMZN), Boeing(BA), Harrah's Entertainment(HET), Northrop Grumman(NOC), Pulte Homes(PHM) Thur. - Comcast (CMCSA), International Paper(IP), Sprint Corp.(FON), Starwood Hotels(HOT) Fri. - Cardinal Health(CAH), Newmont Mining(NEM), Time Warner(TWX) are some of the more important companies that release quarterly earnings this week. There are also a few other events that have market-moving potential. The CSFB Energy Summit(Mon.-Fri.), Lehman Brothers Industrial Conference(Tues.) and the Fed's Greenspan speaking(Fri.) could also impact trading this week.

Bottom Line: I expect US stocks to finish the week higher on a very positive outcome with the Iraqi elections, increased optimism over meaningful US reforms, declining energy prices, better fund inflows, strong earnings reports and more dovish Fed comments. Economic reports for January will likely show modest deceleration, thus keeping long-term interest rates low. The Fed will likely raise rates by 25 basis points and maintain their language of "continuing hikes at a measured pace." However, I am not ruling out the possibility of comments suggesting a slowing of the pace of their hikes and do expect this at some point in the near future. The markets would view this positively as I believe investors are worried the Fed is now raising rates unnecessarily, given slowing global growth, decelerating inflation and a stabilizing US dollar. My short-term trading indicators are still giving Sell signals and the Portfolio is 100% net long heading into the week.

Economic Week in Review

ECRI Weekly Leading Index 133.20 -.08%

Consumer Confidence for January rose to 103.4 versus estimates of 101.0 and a reading of 102.7 in December. Consumer confidence unexpectedly rose to a six-month high after the economy added more jobs and incomes grew, raising the odds that spending will continue to spur the economy, Bloomberg reported. Wages and salaries rose 4.8% at an annual rate in the third quarter and a 5.7% increase in the previous three months. The percentage of consumer who saw jobs as hard to get fell to 24.7%, the lowest since August 2002, Bloomberg said. Optimism about the current economic situation rose to the highest in 31 months. "Consumer spending has been stellar for the past two quarters, so these levels of consumer optimism are evidently consistent with robust demand," said Stephen Stanley, chief economist at RBS Greenwich Capital.

Existing Home Sales for December fell to 6.69M versus estimates of 6.8M and 6.92M in November. Sales for all of 2004 rose 9.4% to an all-time record. "The housing sector looks very healthy," said David Lereah, chief economist at the National Association of Realtors. "It's down a bit, but the fundamentals are very strong in housing." The median price of an existing home rose 8.1% from the same month last year and the inventory of houses for sale fell to a record low of 3.9 months from 4.3 months, Bloomberg reported. The rate on a benchmark 30-year mortgage averaged 5.84% in 2004, well below historic norms. Increased hiring and rising wages, along with borrowing costs that are still very low by historic standards should keep home buying near last year's record in 2005, economists said.

Durable Goods Orders for December rose .6% versus estimates of a .7% increase and an upwardly revised 1.8% gain in November. Durable Goods Orders Less Transportation for December rose 2.1% versus estimates of a 1.3% increase and an upwardly revised .9% decline in November. Orders rose 8.8% for computers and related products and 17.8% for communications equipment, Bloomberg said. 2004 was the best year in a decade for makers of appliances, autos and other long-lasting items as orders surged 10.9%, Bloomberg reported.

Initial Jobless Claims for last week rose to 325K versus estimates of 332K and 318K the prior week. Continuing Claims were 2840K versus estimates of 2683K and 2698K prior. "The overall picture, when you look at confidence surveys and other reports, is that the labor market is doing better," said MFR Inc. Chief Economist Joshua Shapiro. The volume of help-wanted advertising in major US newspapers in December rose to its highest level in six months, the Conference Board said. "We do have on balance a pretty bright outlook for 2005 for the US economy," Federal Reserve Bank of Kansas City President Hoenig said. About 2 million jobs may be added to the economy this year, Hoenig also said.

Advance 4Q GDP rose 3.1% versus estimates of a 3.5% rise and a 4.0% increase in 3Q. Advance 4Q Personal Consumption rose 4.6% versus estimates of a 4.3% increase and a 5.1% gain in 3Q. Advance 4Q GDP Price Deflator rose 2.0% versus estimates of a 2.1% increase and a 1.4% gain in 3Q. The Employment Cost Index for 4Q rose .7% versus estimates of a .8% gain and a .9% increase in 3Q. For all of last year the US economy grew 4.4%, the most since 1999, Bloomberg said. The trade deficit shaved 1.7 percentage points from growth in the last quarter. The trade gap should detract less this year as a weak US dollar boosts exports, economists said. Consumer spending, inventory building and business spending were among the main contributors to the economy in the fourth quarter, Bloomberg said.

Bottom Line: Overall, last week's economic data were modestly positive. The fact that consumer confidence rose in the face of stock market declines, increased violence in Iraq, domestic terrorism fears and higher energy prices is a big positive. I continue to expect confidence to fall modestly from current levels before setting new cycle highs in the second half of the year. The record low supply of existing homes bodes well for the homebuilding sector and should spur further gains this year as mortgage rates remain very low by historic standards. The 2.1% rise in Durable Goods Orders excluding volatile transportation is a nice rebound from November's decline and remains one of the main engines of economic growth. Initial Jobless Claims were better-than-expected for the second week in a row. I continue to believe the labor market will improve at a moderate pace, thus holding down unit labor costs while allowing unemployment to decline slowly. GDP growth was exceptionally strong for all of 2004, however 4Q growth was disappointing considering the effects of hurricane rebuilding, tax incentives, etc. In my opinion, the Fed should slow their pace of rate hikes as economic growth may fall below 3% this quarter, the dollar stabilizes and measures of inflation decelerate. The 4.6% gain in personal spending, after a 5.1% increase in 3Q, is exceptional and once again proves the death of the US consumer has been greatly exaggerated. I expect the consumer to remain relatively healthy as job prospects improve, energy prices fall from current levels and long-term interest rates remain low. The small decline in the ECRI Weekly Leading Index is also a positive considering the prior week's very strong gain.

Market Week in Review

S&P 500 1,171.36 +.30%

Click here for the Weekly Wrap by Briefing.com.

Bottom Line: The bears’ inability to send shares lower before the lifting of much uncertainty next week is a positive. Crude oil futures were unable to close above the psychologically important $50/bbl. level even in the face of cold weather, the possibility of extreme violence in Iraq, an OPEC meeting and a better-than-expected GDP report from China. Utility stocks made new highs for this cycle and the transports rebounded from recent losses. Outperformance by semiconductors was also a positive. Overall, there were enough positive events this last week to send shares higher under normal circumstances. However, rising apprehension ahead of the weekend held gains in check.