Today's Headlines

Bloomberg:
- President Bush said today he is “making good progress” toward deciding on changes to US plans in Iraq after meeting at his Texas ranch with top national-security officials.
- OAO Lukoil, Russia’s largest oil producer, and state oil and gas companies from China, South Korea and Malaysia will start exploring oil and natural gas fields in Uzbekistan’s sector of the Aral Sea in March.
- Downtown Chicago office building sales surged to a record $5 billion this year as vacancy rates fell and some investors found returns there as attractive as those in New York and Los Angles.
- US Treasury yields are rising to seven week highs, after industry reports on consumer confidence, existing home sales and manufacturing were stronger than economists expected.
- Meat and milk from cloned pigs, cows and goats may soon be cleared for sale in the US after regulators determined that eating genetically duplicated farm animals doesn’t post safety risks for consumers.
- Copper prices are falling again in NY as inventories continue to rise.


USA Today:
- The number of companies selling stock to the public for the first time, and the amount of money they’ve been able to raise, failed to keep pace with a record-setting DJIA this year.

NY Times:
- Some Wall Street analysts expect a decline in US sales of drug-coated coronary stents to end next year.

AP:
- UAL Corp.’s United Airlines has cut fare prices to capture business in the traditionally slow post holiday period.

MTI:
- Karpat Energo, a Hungarian power plant company, plans to build a $261 million bioethanol plant in northeastern Hungary.

Job Market Healthy, Consumer Confidence Surges Near Cycle Highs, Chicago Purchasing Manager Improves, Existing Home Sales Rise Again

- Initial Jobless Claims for last week rose to 317K versus estimates of 320K and 316K the prior week.
- Continuing Claims rose to 2530K versus estimates of 2500K and 2514K prior.
- Consumer Confidence for December rose to 109.0 versus estimates of 102.0 and a reading of 105.3 in November.
- Chicago Purchasing Manager for December rose to 52.4 versus estimates of 50.0 and a reading of 49.9 in November.
- Existing Home Sales for November rose to 6.28M versus estimates of 6.19M and 6.24M in October.

BOTTOM LINE: US initial jobless claims and continuing claims edged up last week, Bloomberg reported. The four-week moving average of claims fell to 315,750, the lowest in six weeks. The unemployment rate among those eligible for jobless benefits, which tracks the US jobless rate, held steady at a low 1.9%. Despite housing and auto production-related job cutbacks, the US job market remains very healthy as other areas are picking up the slack. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Confidence among US consumers unexpectedly surged this month to the highest level since April, reflecting recent job and stock gains, Bloomberg reported. The Present Situation Component of the index rose to 129.9, the highest since July, versus 125.4 the prior month. The Expectations Component for the next six months increased to 95.1, the highest since June, versus 91.9 the prior month. The Jobs Are Plentiful component rose to 26.9% versus 25.7% the prior month. The percentage of people who expect their incomes to decrease fell to 7% from 9.1% the prior month and to the lowest since 2001. The overall surge in the index was mainly due to a 15.6% jump in Central Northeast sentiment. Overall, Consumer Confidence has only been higher one other month this cycle. In April it hit 109.8. I continue to believe new cycle highs in confidence will occur over the coming months as energy prices fall further, interest rates remain low, inflation decelerates more, the job market remains healthy, stocks rise further, housing stabilizes at relatively high levels and irrational pessimism lifts.

A gauge of US business activity rebounded from the first contraction in more than three years as orders and production increased, Bloomberg said. The production component rose to 56.2 versus 54.4 the prior month. The new orders component rose to 57.8 versus 52.0 the prior month. The prices paid index was unch. at 60.2. Manufacturing will likely remain muted until the second half of next year.

Sales of previously owned homes unexpectedly rose in November, adding to evidence the housing slowdown is ending, Bloomberg reported. The supply of previously owned homes for sale at the current pace fell to 7.3 months’ from 7.4 months supply in October. The median price of an existing home fell 3.1% to $218,000. I continue to believe the US housing market is stabilizing at relatively high levels.

Links of Interest

Market Snapshot
Detailed Market Summary
Quick Summary
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Thursday Watch

Late-Night Headlines
Bloomberg:
- New York City attracted a record 44 million tourists who added $24 billion to the economy in 2006.

Wall Street Journal:
- Bank of Japan Governor Toshihiko Fukui said the central bank will confirm that consumer prices are rising before deciding when to raise interest rates.

Financial Times:
- Apple Computer(AAPL) CEO Steve Jobs was given 7.5 million stock options in 2001 without the company’s board of directors authorizing the action as required. The options under review were handed to Jobs in October 2001, however Jobs later surrendered his options before they were exercised, implying that he didn’t gain any direct benefit from them. Apple has previously stated that its internal investigation revealed no misconduct by any current members of Apple’s management team, including Steve Jobs.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are unch. to +.25% on average.
S&P 500 indicated -.08%.
NASDAQ 100 indicated -.11%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Conference Calendar
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- None of note

Upcoming Splits
- (LFC) 2.66-for-1

Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to rise to 320K versus 315K the prior week.
- Continuing Claims are estimated to fall to 2500K versus 2520K prior.

10:00 am EST
- Consumer Confidence for December is estimated to fall to 102.0 versus a reading of 102.9 in November.
- The Chicago Purchasing Manager report for December is estimated to rise to 50.2 versus a reading of 49.9 in November.
- Existing Home Sales for November are estimated to fall to 6.19M versus 6.24M in October.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of 2,500,000 barrels versus a 6,323,000 decline the prior week. Gasoline supplies are expected to rise by 750,000 barrels versus a 1,058,000 barrel increase the prior week. Distillate inventories are expected to rise by 500,000 barrels versus a 1,206,000 barrel increase the prior week. Finally, Refinery Utilization is expected to rise .3% versus a 1.6% gain the prior week.

BOTTOM LINE: Asian indices are higher, boosted by technology shares in the region. I expect US equities to open modestly lower and to rise into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Dow Hits Another All-Time High as Energy Prices Fall and New Home Sales Surge

Indices
S&P 500 1,426.84 +.70%
DJIA 12,510.57 +.83%
NASDAQ 2,431.22 +.73%
Russell 2000 797.73 +1.21%
Wilshire 5000 14,306.90 +.74%
S&P Barra Growth 656.01 +.62%
S&P Barra Value 769.36 +.78%
Morgan Stanley Consumer 699.58 +.47%
Morgan Stanley Cyclical 898.08 +1.11%
Morgan Stanley Technology 570.11 +.71%
Transports 4,591.86 +1.13%
Utilities 459.35 +.30%
Put/Call .78 -7.14%
NYSE Arms .49 -43.65%
Volatility(VIX) 10.64 -5.51%
ISE Sentiment 138.0 -8.61%
US Dollar 83.97 -.11%
CRB 306.04 -.13%

Futures Spot Prices
Crude Oil 60.42 -1.11%
Reformulated Gasoline 159.35 +1.39%
Natural Gas 6.12 -3.36%
Heating Oil 161.26 -.66%
Gold 629.90 +.48%
Base Metals 237.11 +.69%
Copper 290.50 +.94%
10-year US Treasury Yield 4.65% +1.12%

Leading Sectors
Steel +2.34%
Homebuilders +1.5%
Networking +1.13%

Lagging Sectors
Biotech +.25%
Hospitals +.23%
HMOs +.05%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
Bloomberg:
- US stocks surged, propelling the Dow Jones Industrial Average above 12,500 for the first time, as oil tumbled to a one-month low and home sales exceeded estimates. The DJIA is now 19.5% higher for the year.
- Peter Beutel, president of energy consultant Cameron Hanover, says oil may break below $20/bbl. in 4-8 years.
- Natural gas fell 4% to the lowest level in more than 10 weeks as near record speculation by investment funds continues to subside with inventories near all-time highs.
- Democratic Representative Barney Frank, who will head the committee that oversees the SEC, said Congress should cap executive pay after the SEC changed rules for how companies value stock-options.

Dow Jones:
- Boeing Co.(BA) won a $1.15 billion order form the US Army to build 126 Apache helicopters over the next three years.

Boersen-Zeitung:
- SAP AG(SAP), the world’s largest maker of business-management software, expects double-digit growth in the coming years and may raise its dividend for 2006.

BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, Semi longs, Telecom longs and Medical longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was very positive today as the advance/decline line finished substantially higher, every sector rose and volume was above average. Measures of investor anxiety were mostly lower into the close. Today's overall market action was very bullish. The May housing futures are now predicting only a 1.9% drop in the average home price by May. This is up from a 5.2% loss projection just a couple of months ago. Negative arguments regarding housing data are well known. The median home price is up over 50% the past few years. In my opinion, you can't have a meaningful consumer slowdown without a home price collapse. Without a meaningful consumer slowdown, a recession is highly unlikely. This is why so many market participants in the current negativity bubble constantly try to scare and dissuade home buyers from stepping in. The possibility of a home price collapse looks increasingly remote, while the many bears tell us to ignore all data that don't fit their doomsday thesis. The bond market seems to agree. Oil is finished near session lows and continues to trade very poorly despite numerous potential upside catalysts and near universal love for the commodity by the investment community and media. Russia said last night that it may pump as much as 12 million tons of crude to Europe via a Ukrainian pipeline next year, almost three times the amount pumped this year, as the country "steps up exports to sustain economic growth." I continue to believe non-OPEC oil production will rise much more than expectations over the intermediate-term.

DJIA Making Another All-Time on Strong Home Sales and Falling Energy Prices

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Internet longs, Medical longs and Telecom longs. I added to my Apple Computer(AAPL) long today and took profits in a trading long, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, every sector is rising and volume is slightly below average. Apple Computer (AAPL), which I added to this morning when the stock was down 5%, is now at session highs, rising .30. Piper Jaffray said in a research note this afternoon that it was more confident than ever that Steve Jobs had no involvement in the alleged falsified documents. As well, Hitwise is reporting that Apple's iTunes' market share of visits soared 413% on Christmas Day from a year ago. Moreover, it reported that the Apple Store's market share of visits jumped 110% on Christmas Day vs. a year-ago and that the Apple Store was the fourth most visited Website in its Retail Index. I expect Apple to rise substantially from current levels next year. Today's morning weakness will likely be viewed as an exquisite buying opportunity. The stock remains my second largest long position. I expect US stocks to trade modestly higher into the close from current levels on more economic optimism, short-covering, portfolio manager performance anxiety and lower energy prices.