Weekly Outlook

Click here for Wall St. Week Ahead by Reuters.

Click here for Stocks in Focus for Monday by MarketWatch.com.

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

Economic reports for the week include:

Mon. – None of note

Tues. – CaseShiller Home Price Index, Richmond Fed Manufacturing Index, Consumer Confidence, Existing Home Sales, weekly retail sales

Wed. – Weekly MBA Mortgage Applications Report, weekly EIA energy inventory report, Durable Goods Orders

Thur. – Final 2Q GDP, Final 2Q Personal Consumption, Final 2Q GDP Price Index, Final 2Q Core PCE, Initial Jobless Claims, New Home Sales

Fri. – Personal Income, Personal Spending, PCE Core, Chicago Purchasing Manager, Construction Spending, Univ. of Mich. Consumer Confidence

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

Mon. – Thor Industries(THO)

Tues. – Discover Financial(DFS), Factset Research(FDS), HB Fuller(FUL), Red Hat(RHT), Resources Connection(RECN)

Wed. – Bed Bath & Beyond(BBBY), Copart Inc.(CPRT), Paychex Inc.(PAYX), Worthington Industries(WOR)

Thur. – Accenture(ACN), BearingPoint(BE), Christopher & Banks(CBK), Cintas Corp.(CTAS), Finish Line(FINL), Global Payments(GPN), Jabil Circuit(JBL), KB Home(KBH), McCormick & Co.(MKC), Texas Industries(TXI)

Fri. – CSK Auto(CAO), Hartmarx(HMX)

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

Mon. – The Fed’s Fisher speaking, (COL) analyst meeting, UBS Global Life Sciences Conference, Piper Jaffray Solar Conference

Tue. – The Fed’s Plosser speaking, (AMAT) solar power meeting, (LOW) analyst conference, Jeffries Shipping/Logistics/Offshore Services Conference, Piper Solar Conference, CSFB Chemical Conference, UBS Global Life Sciences Conference, Merrill Global Power Conference, Thomas Weisel Consumer Conference, RBC Financial Institutions Conference

Wed. – The Fed’s Poole speaking, (SPW) analyst meeting, Merrill Global Power Conference, UBS Global Life Sciences Conference, Jeffries Shipping/Logistics/Offshore Services Conference, CSFB Chemical Conference, RBC Financial Institutions Conference, Thomas Weisel Consumer Conference

Thur. – The Fed’s Mishkin speaking, Fed’s Evans speaking, (INTU) investor day, (FCS) analyst meeting, UBS Global Life Sciences Conference, CSFB Chemical Conference

Fri. – The Fed’s Mishkin speaking, Fed’s Poole speaking, Fed’s Yellen speaking, Fed’s Lockhart speaking, (PRX) analyst meeting

BOTTOM LINE: I expect US stocks to finish the week mixed as diminishing credit market fears, lower energy prices, investment manager performance anxiety, a stronger US dollar, better consumer confidence and short-covering offsets more hawkish Fed commentary, lower home sales and profit-taking. My trading indicators are now giving bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,525.75 +2.80%*

Click here for the Weekly Wrap by Briefing.com.

*5-day % Change

Weekly Scoreboard*

S&P 500 1,525.75 +2.80%
DJIA 13,820.19 +2.81%
NASDAQ 2,671.22 +2.65%
Russell 2000 813.11 +3.78%
Wilshire 5000 15,300.93 +2.75%
Russell 1000 Growth 614.15 +2.76%
Russell 1000 Value 853.88 +2.71%
Morgan Stanley Consumer 741.06 +3.09%
Morgan Stanley Cyclical 1,055.73 +4.31%
Morgan Stanley Technology 657.28 +2.60%
Transports 4,827.36 +.64%
Utilities 508.26 +2.16%
MSCI Emerging Markets 144.58 +5.63%

Sentiment/Internals
NYSE Cumulative A/D Line 68,191 +2.04%
Bloomberg New Highs-Lows Index +147 +293.4%
Bloomberg Crude Oil 22% -37.1%
CFTC Oil Large Speculative Longs 238,336 +3.07%
Total Put/Call .86 -20.4%
NYSE Arms .83 -9.78%
Volatility(VIX) 19.0 -23.76%
ISE Sentiment 162.0 +19.1%
AAII % Bulls 39.2 -1.9%
AAII % Bears 31.7 -10.3%

Futures Spot Prices
Crude Oil 81.23 +4.6%
Reformulated Gasoline 210.20 +3.96%
Natural Gas 6.05 -4.1%
Heating Oil 225.0 +2.21%
Gold 738.70 +2.99%
Base Metals 247.49 +5.6%
Copper 357.90 +5.75%

Economy
10-year US Treasury Yield 4.62% +16 basis points
4-Wk MA of Jobless Claims 320,800 -1.1%
Average 30-year Mortgage Rate 6.34% +3 basis points
Weekly Mortgage Applications 673.20 +2.4%
Weekly Retail Sales +2.5%
Nationwide Gas $2.80/gallon unch.
US Cooling Demand Next 7 Days 42.0% above normal
ECRI Weekly Leading Economic Index 140.60 -.14%
US Dollar Index 78.58 -1.28%
CRB Index 333.15 +3.81%

Best Performing Style
Small-cap Value +3.96%

Worst Performing Style
Mid-cap Value +2.45%

Leading Sectors
Steel +8.29%
Oil Service +6.01%
Wireless +4.73
Telecom +4.66%
Semis +4.45%

Lagging Sectors
HMOs +.82%
Airlines +.80%
Restaurants +.55%
Retail +.36%
Foods -2.13%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Surging Again into Final Hour on Earnings Optimism and Lower Long-term Rates

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is positive today as the advance/decline line is higher, sector performance is mostly positive and volume is heavy. AMG Data reported the largest total for weekly inflows in at least three years as a result of the massive flows into the (SPY). As well, it's a positive to see inflows into taxable bond funds and the (XLF). Once again, domestic funds ex-ETFs saw outflows, while non-domestic funds saw inflows, which has been the case for most of the last five years. The 10-year yield is falling 7 basis points after yesterday's spike higher, and the dollar is up slightly as the yen weakens. The dollar is very oversold and sentiment is extraordinarily negative regarding the currency, which could lead to a reversal at anytime. Moreover, the 10-year yield was up 33 basis points in nine days. While we could potentially get one more thrust higher in rates, I suspect the majority of the move is done. I still think the drag from credit and housing will mute economic activity to modestly below trend rates over the intermediate term, notwithstanding fed funds rate cuts. The dollar-based three-month Libor rate is falling another basis point today and is down 23 basis points in 10 days. As well, the speculative grade credit default swap index is down 20% over the last five days, which is a big positive. Google (GOOG) is making a new all-time high today and is up 21.3% for the year. I still don't think it is too late to board the Google train, and it remains my largest equity long position. The company will grow at a relatively high rate for much longer than investors expect, and shares remain cheap relative to its Internet peers and the market. Moreover, it is the exact type of stock investors will seek given the current macro backdrop, which should lead to multiple expansion. It is also noteworthy that Masco (MAS) lowered its guidance on a lower housing start forecast, and the stock is surging 2.6%. The Rasmussen daily consumer confidence index continues to rebound. It came in at 110.7 today. This is now above the level seen for the entire month of June, before the credit turmoil began. Scott Moritz, of the TheStreet.com, is reporting that people familiar with Apple (AAPL) are expecting the company to sell 2.35 million iMacs and MacBooks this quarter, which would be 400,000 more units than analysts had expected. I have been writing for quite some time that I believed the "halo effect" was intensifying at a much more rapid rate as a result of the iPhone and that computers would propel Apple's earnings above even the most optimistic estimates. I still think the stock will exceed $180 before year-end, and it remains my second-largest long position behind Google (GOOG). Also noteworthy, Engadget.com is reporting that Apple is readying a new line of slimmer aluminum laptops. The fact that Apple's high-priced products are flying off the shelves is also damaging to the imminent consumer collapse thesis. The iShares FTSE/Xinhua China 25 Index (FXI) has soared 40.4% in just over a month. It is up 110.2% over the last 12 months. I am seeing numerous small-cap low-priced Chinese ADRs rocketing higher recently on little news and abnormal volume. Take a look at China Eastern Airlines (CEA), and it is one of the less speculative examples. This type of extreme speculative activity usually indicates, at the very least, a correction in the group is approaching. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, lower long-term rates, less economic pessimism and investment manager performance anxiety.

Today's Headlines

Bloomberg:
- US stocks are climbing after earnings reports from Oracle Corp.(ORCL) and Nike Inc.(NKE) topped analysts’ estimates, sending the market toward its biggest weekly gain since March.
- Treasury Secretary Henry Paulson said he’s open to temporarily allowing Fannie Mae(FNM) and Freddie Mac(FRE) to package jumbo mortgages into securities if Congress creates a tougher regulator for government-sponsored enterprises, or GSEs.
- Wilbur L. Ross Jr., who helped pioneer investing in bankrupt companies, offered to pay at least $435 million for the servicing unit of American Home Mortgage Investment Corp.(AHM)
- Texas Instruments(TXN) increased its share buyback plan by $5 billion and raised its dividend for the second time this year to reassure investors after two quarters of declining profit.
- Estee Lauder(EL) shares surged the most since January and option trading increased amid speculation the maker of Clinique cosmetics will be taken over.
- Investor confidence in high-risk, high-yield loans improved for a 10^th day amid signs banks are starting to sell debt mandated before the global credit slump, according to traders of credit-default swaps.
- Crude oil is falling $1.00/bbl. on speculation that prices are overvalued because of slowing demand growth and increased OPEC output.

Wall Street Journal:
- After oxygen, raw silicon is the most abundant element on the planet, but a shortage of a highly purified version of the stuff is shaking up the solar-power industry, giving companies that didn’t exist a decade ago a chance to challenge longtime leaders.

Forbes.com:
- Sam Zell On The Credit Crisis: It’s Not That Bad.

NY Post:
- Prices of single-family residences in NY’s affluent Hamptons neighborhoods on eastern Long Island have been boosted by “monster trophy homes,” citing a Suffolk Research Service survey. Median prices have risen at double-digit rates since the start of the year through August.
- Democratic NY Governor Eliot Spitzer is expected to announce a new policy today that will allow illegal immigrants to obtain driver’s licenses.

CommsDay.com:
- Google(GOOG) plans new undersea “Unity” cable across Pacific.

AP:
- The US $5 banknote has been redesigned for the 21^st century with splashes of purple and gray partly to make the currency more difficult to counterfeit.

Financial Times:
- Mohammad Khatami, the former Iranian president, is considering running in the country’s 2009 presidential election on a platform of détente with the West, citing unnamed allies of Khatami.

Reuters:
- China could become the world’s top wind power market in three to five years but will grow faster if it reforms its subsidy system, executives of major wind turbine maker Vestas said.

Economic Releases

- None of note