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From Briefing.com: 4:20 pm : Stocks snapped a two-day winning streak Tuesday as policy makers failing to back down on their inflation concerns and mixed corporate news left investors questioning the sustainability of a 4 1/2-month rally.

Per usual, all eyes were fixed on today's FOMC meeting. With much of the market's Q4 rally predicated on the possibility of the Fed easing no later than March, investors were especially interested to see whether policy makers would reveal any clues pertaining to the timing of an eventual cut in interest rates. However, there were almost no changes in the wording of the policy directive, and thus, no evidence to support the market's optimism that rate cuts are on the way.

The inclusion of the word "substantial" in the statement to describe the cooling of the housing market garnered some added attention, but that modifier only seemed to excite bond traders as stocks languished in the red all afternoon.

Fortunately for the bulls, the ensuing rally in Treasuries that pushed the yield on the 10-year note (+07/32) down three basis points to 4.49% provided enough of a floor for rate-sensitive bank stocks to help offset profit taking in two of the Financials sector's biggest names.

With Citigroup (C 52.24 -0.64) up more than 4% over the last two days, the Dow component merely naming a new COO, but stating there will be no other management changes, prompted investors to take some money off the table. As expected, Goldman Sachs (GS 200.19 -2.33) handily topped analysts' expectations for a fourth straight time. However, the stock succumbed to some profit taking after having been bid up to the tune of 37% from its September lows in anticipation of another record quarter.

With Financials finishing flat, that left the second most influential sector in focus -- Technology. As evidenced by the Nasdaq turning in the day's worst performance among the majors, the absence of tech leadership weighed on sentiment throughout the session. The biggest drag on the sector was Apple Computer (AAPL 86.16 -2.59), which dropped nearly 3% after a report suggested iTunes sales are collapsing.

Texas Instruments (TXN 29.77 +0.47) was another focal point as its lowered Q4 guidance was viewed as benign and even garnered an analyst upgrade. Yet, it's 1.6% advance was no match for consolidation across the sector.

Consumer Discretionary was another weak spot. Best Buy (BBY 51.29 -2.63), which missed analysts' earnings expectations, led the way with a 5% decline while Federated Department Stores (FD 38.00 -1.50) tacking on a 3.8% decline to yesterday's 2.2% downgrade-induced drop placed additional pressure on retailers. DJ30 -12.90 NASDAQ -11.26 SP500 -1.48 NASDAQ Dec/Adv/Vol 1900/1146/1.95 bln NYSE Dec/Adv/Vol 1865/1412/1.46 bln

3:55PM Market View: Indices work off lows but still range bound (TECHX) : A weaker bias dominated for much of the session but it was essentially more of the same despite a midday slide and post-Fed volatility as trading ranges noted over the last week or so (Nasdaq Comp 2459-2416, S&P 500 1418-1403, Dow 12360-12243) remained intact. The modest afternoon bounce leaves the indices near the midpoint of their ranges. Weighing on the action have been Steel -4.3%, Airline -2.4%, Coal -2.2%, Mining -1.7%, Restaurant -1.3%, Computer-Hardware -1.2%, Transports -1.1%, Disk Drive -1% and Retail -0.9%. Limited strength has noted in Telecom HOLDRs +0.8%, Regional Bank HOLDRS +0.6%, Utility +0.4% and Insurance +0.3%.

6:23AM AMD and IBM detail early results using immersion and ultra low-K in 45nm chips : At the Intl Electron Device Meeting today, IBM (IBM) and AMD (AMD) presented papers describing the use of immersion lithography, ultra-low-K interconnect dielectrics, and multiple enhanced transistor strain techniques for application to the 45nm microprocessor process generation. AMD and IBM expect the first 45nm products using immersion lithography and ultra-low-K interconnect dielectrics to be available in mid-2008

4:00 pm General Electric (GE)

35.65 +0.43: Dow component General Electric provided investors with a reassuring outlook at its aptly-named "annual outlook meeting." Its stock has gotten a boost as a result, but true to recent form, GE hasn't proven to be much of a market-mover.

Its lack of influence is a conundrum of another sort, but setting that point aside, today's update should be viewed as good news for GE investors and the broader market.

The industrial giant expects to close out 2006 with 13-16% EPS growth in the fourth quarter, which translates to a profit of $0.62-0.64 per share (consensus $0.64), and 2-3 times GDP organic revenue growth. Those numbers in turn put the company on track to deliver a full-year profit of $1.97-1.99 per share (consensus $1.98) which would be up 15-16% from 2005.

GE's 2007 guidance accounts for some deceleration in profit growth, but a forecast for 10-13% EPS growth, or $2.17-2.23, isn't shabby by any means, particularly when one takes into account the more pessimistic economic outlook that is priced into the Treasury market. Once again, the bottom-line growth is expected to be driven by organic revenue growth that it is 2-3 times GDP.

It is worth noting that the consensus revenue forecast for FY07 is pegged at $175.8 billion or 8% above the consensus estimate for 2006. Keeping that in mind, it's fair to say that GE isn't expecting a recession next year.

The market still has its share of skeptics with respect to the pace of economic growth, though, and that played a part in why GE's good news didn't ignite a broad market rally.

--Patrick J. O'Hare, Briefing.com

2:33 pm FOMC Stays the Course

The Federal Reserve policy statement released today at 2:15 ET gave no indication that the rate cuts the market is expecting in 2007 are on the way.

The Fed left the current fed funds target at 5.25%. That was expected. The policy statement was little changed. It continued to emphasize the risk of inflation.

In fact, the paragraph on inflation was exactly the same, and still said, "Readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures." This shows the Fed is not backing down on its inflation concerns.

The only change in the entire statement was the previous statement of "Economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market. Going forward, the economy seems likely to expand at a moderate pace."

The latter was changed to "Economic growth has slowed over the course of the year, partly reflecting a substantial cooling of the housing market. Although recent indicators have been mixed, the economy seems likely to expand at a moderate pace on balance over coming quarters." That modest change probably doesn't reflect much of a change in sentiment at the Fed.

There just isn't much evidence to support the market's optimism that rate cuts are on the way.

The fed funds futures contracts were priced this morning with an assumption of a 1/4% rate cut by May of 2007. Futures assume another rate cut by late summer, and yet another rate cut by the end of the year. That makes for three rate cuts that would take the fed funds rate target down to 4.50%.

In order for the Fed to do that, core inflation rates would probably have to drop down under 2%. They are currently at about 2.50%. That is a significant move and would probably only occur with economic growth slowing further. That doesn't appear to be developing.

Today's policy statement in itself probably won't do it but the market needs a wake up call that its Fed policy outlook is too optimistic.

--Dick Green, Briefing.com

11:29 am Citigroup (C)

52.03 -0.85: Citigroup's stock has been stuck in a rut for some time. In fact, when December began Citigroup had risen a mere 6.3% since the start of 2004 versus a 27.5% gain for the S&P 500.

Fortunately, Citigroup's investors have received added compensation with dividend payments that have lifted Citigroup's total return to 19%. Being in a business that is all about outperformance, however, it is fair to say that Citigroup's stock has been a big disappointment relative to the S&P 500 and S&P Financial sector, which have logged total returns of 34.5% and 39.2% over the same period.

It was little surprise, then, that Citigroup's stock caught a bid this week on speculation that it may soon announce a break-up of the company that would presumably spark stronger growth and bolster shareholder value. The momentum behind that rumor was curious considering CEO Chuck Prince went on record earlier this year saying the idea of breaking up the company was "the dumbest idea I ever heard of."

It was also rumored that CFO Sallie Krawcheck might leave the company. Citigroup ultimately denied the Krawcheck rumor. As for the break-up, well, that apparently is not what Citigroup has been considering of late.

Instead, Citigroup announced last night that it has named Robert Druskin, President and CEO of Corporate and Investment Banking, to be Chief Operating Officer. While Druskin will remain CEO of the Corporate and Investment Banking unit, Michael Klein and Thomas Maheras will take over day-to-day operations and serve as co-Presidents of that key business segment. The new roles for Klein and Maheras suggest to some that they have moved ahead of Krawcheck in the line of possible CEO successors.

The management changes haven't been met with enthusiasm, not so much because these individuals aren't able leaders, but because the market has been clamoring for a plan that offers clear potential for stronger growth - and adding another layer of management isn't what it had in mind. Accordingly, Citigroup's stock is down today in a disappointment trade that is grounded in the belief that it will remain business as usual for Citigroup and its stock.

--Patrick J. O'Hare, Briefing.com

10:06 am Goldman Sachs (GS)

201.41 -1.11: The venerable investment bank known as Goldman Sachs might as well be referred to these days as Golden Sachs, because the fourth quarter results the bank reported this morning capped a fiscal year that was flat-out golden.

To be sure, Goldman Sachs is a tough act to follow for the other investment banks that will be reporting their results. Lehman Bros. (LEH) and Bear Stearns (BSC) are due out later this week. Heck, Goldman Sachs has made it hard on itself as its stellar performance has created some very challenging comparisons in the year ahead, not to mention some lofty expectations.

The market recognizes that business isn't likely to continue at such a fevered pitch, as the FY07 consensus EPS estimate is $17.93 or 9% lower than what Goldman reported for FY06. That point notwithstanding, Goldman Sachs' performance and the current market outlook underscore its investment appeal and validate why Briefing.com has long held a bullish view of the stock, calling it a favorite investment idea in the financial sector.

For the fiscal year, Goldman's net revenues surged 49% to $37.67 billion, net earnings rose 69% to $9.54 billion, and diluted EPS increased 76% to $19.69. Records were set in its investment banking, FICC, equities, principal investments, and asset management businesses.

The company did an admirable job, too, of keeping expenses in check relative to its net revenue growth. With employment levels up 12%, the ratio of compensation and benefits expenses to net revenues slipped to 43.7% from 46.6%. Non-compensation expenses, meanwhile, jumped 28%.

In many respects, the fourth quarter was a microcosm of the full-year as Goldman's Trading and Principal Investments segment powered a huge quarter in which net revenues jumped 47% to $9.41 billion and net earnings soared 93% to $3.15 billion. The latter translated to a diluted profit of $6.59 per share, including stock option expense, that exceeded the Reuters Estimates consensus estimate by $0.59.

The Trading and Principal Investments business accounted for 70.5% of fourth quarter net revenues, followed by Asset Management (15.2%) and Investment Banking (14.2%). From a trading standpoint, the only soft spot noted was in currencies and mortgages, which saw lower net revenues than the year-ago period. Still, the Trading and Principal Investments business achieved 57% growth year-over-year and 37% growth on a sequential basis.

--Patrick J. O'Hare, Briefing.com

10:01 am Dollar General (DG)

15.18: Investors in Dollar General Corp. (DG) put in their two cents regarding DG's latest earnings Tuesday as they took the shares slightly lower in premarket trade. The discount retailer reported third quarter earnings of $0.14 per share, excluding $79.2 million in inventory changes and planned store closings. That was $0.01 worse than the Reuters Estimates consensus of $0.15. Revenues rose 7.3% year over year to $2.21 billion versus consensus of $2.22 billion.

DG announced in late November that it would shut about 400 stores and record $138 million in charges as it attempts to revive sales growth. The company said same-store sales rose 2% in the latest period.

While it's undergoing some revamping, the company's results and fundamentals pale in comparison to that of much more solid competitor Family Dollar Stores Inc. (FDO), which beat on its most recent earnings report. We've taken a bullish stance on FDO since May, and we continue to favor FDO over DG.

--Christine Marie Nielsen, Briefing.com

09:54 am Nucor (NUE)

64.35: Nucor, the second largest steelmaker in the US, reduced its fourth quarter profit forecast due to lower steel prices, higher inventories, and record imports. The move took the market by surprise, sending steel stocks lower in pre-market trading. The Charlotte, North Carolina-based company estimated profits of $1.05 to $1.15 per share. Comparatively, NUE reported record net income of $1.68 per share last quarter.

As a mini-mill, which uses scrap metal to make steel, Nucor is seen as a barometer for the broader steel industry in terms of pricing trends. As such, the downdraft in forecasts will weigh on other mini-mills including Steel Dynamics (STLD), IPSCO (IPS), and Commercial Metals (CMC). Nucor stated spot prices for sheet and bars are lower than expected and scrap prices have remained higher than anticipated, weighing heavily on margins. Further, it stated record levels of finished steel are delaying an inventory correction, the balancing out of which will depend heavily on a significant reduction in import volumes from China.

Mini-mills, which are non-union, are generally more efficient than the integrateds that make steel from scratch, including US Steel (X) and AK Steel (AKS). Steel stocks have been one of the best performers this year based on fundamentals as well as global consolidation. This run may come to an abrupt end, at least for the near-term, as pricing concerns prevail over heated expectations for major deals which we anticipate will likely include X and AKS.

--Kimberly DuBord, Briefing.com

09:32 am Best Buy (BBY)

53.92: Shares of Best Buy traded sharply lower on Tuesday, after the electronics retailer posted lower than expected quarterly earnings, as an extremely competitive environment put pressure on margins. The stock, which is up nearly 25% this year, fell more than 5% in pre-market trading following the announcement.

For its fiscal third quarter, Best Buy reported net income of $150 million, or $0.31 per share, compared with $138 million, or $0.28 per share, in the year ago period. Analysts, however, were expecting a higher profit of $0.35 per share, according to Reuters Estimates.

Meanwhile, quarterly revenue rose 15.5% year/year to $8.47 billion, narrowly beating the consensus estimate of $8.45 billion. Growth in the quarter was attributed to new store openings and strong sales in the consumer electronics segment. The company added 227 new stores in the quarter, and recorded a comparable store sales gain of 4.8%, reflecting a mix shift toward higher-ticket items, such as flat panel televisions, which posted a strong double-digit comparable store sales increase.

Gross margin for the period was 23.5% of revenue, a decrease from 24.4% in the same quarter last year. The company said the 90 basis point decline was driven primarily by higher promotional spending and increased mix of lower-margin products, such as notebook computers and gaming systems.

Still, Best Buy reaffirmed its full-year outlook as it begins its important holiday quarter, due to new store openings, market share gains and cost controls. The company said it continues to see earnings in a range of $2.65 to $2.80 per share, versus analysts' estimate of $2.82 per share. It also forecast same store sales between 4% to 5%, up from its previous estimate of 3% to 5%.

At the current price level, Best Buy shares are trading at 19.1x this year's projected earnings, compared to 22.5x for rival Circuit City Stores (CC). Despite lower than expected quarterly earnings amid increased competitive pressures, we believe the stock remains poised for further gains as it continues to benefit from strong demand for consumer electronics ahead of the holiday season, as well as strong underlying fundamentals.

--Richard Jahnke, Briefing.com

09:25 am Texas Instruments (TXN)

29.30: In a scheduled business update, Texas Instruments lowered the bar for the fourth quarter, reflecting conditions within the wireless market. The downdraft in semiconductor revenues was attributed to higher demand for low-end over high-end handsets in addition to weakness within the 3G market. Given industry weakness in analog, market participants were expecting tempered guidance from TI. But the severity of the revision came as a surprise and is reflective of broader industry trends.

While management did not provide specific guidance for the first quarter, it indicated that the fourth quarter book to bill will likely come in below 1 and revenues would decline sequentially. As a result, consensus estimates are likely to be revised even lower. Across the board, analysts have been reducing FY06 and FY07 estimates over the past month. Consensus EPS now stands at $1.66 and $1.82, respectively.

The near-term worsening in fundamentals will likely weigh on the stock despite a positive outlook over the longer-term based on TI's strong product cycle in 3G, high-performance analog, and market share gains. And while the bulls would point to TXN's attractive valuation of 16.0x forward earnings, we wouldn't be looking to step in until after the first quarter seasonality runs its course.

TI's guidance underscores trends within the wireless market. While handset demand remains healthy, a greater percentage of overall growth is coming from the emerging markets through the proliferation of low-end phones. Manufacturers have been gaining market share as penetration rates rise, but are feeling the pinch in profitability as average selling prices decline.

As a greater than 10% customer, TI's update will likely result in downside pressure in shares of Nokia (NOK) as well as other manufacturers including Motorola (MOT) given the industry implications. While MOT has remained a suggested holding in our Active Portfolio given its leading product portfolio and improving profitability, overriding concerns over pricing pressure continue to weigh on the stock. Therefore, the stock is currently being reviewed for removal given Q1 seasonality. As such, investors should be selling into any strength.

The specifics of TI's revised guidance are as follows. It took its fourth quarter revenue estimate to $3.35-$3.50 bln, representing a 7-11% sequential decline. This is a marked decline from its prior estimate of flat to an 8% sequential decline to $3.46-$3.75 bln. The main culprit was the semiconductor segment, where TI estimates Q4 revenues of $3.28-$3.42 bln, down 4-8%. Again, this is a significant change from previous guidance of a decline of 5% to a gain of 2% sequentially to $3.39 bln to $3.66 bln. As a result, EPS was lowered to $0.37 to $0.40 (vs. $0.40-$0.46), which is even greater than the downdraft in revenue due to reduced utilization rates as it attempts to reduce inventories.

--Kimberly DuBord, Briefing.com

09:04 am Nasdaq Stock Market (NDAQ)

36.30: Shares in Nasdaq Stock Market, Inc. (NDAQ) were a little over 1% higher in premarket trade Tuesday after the parent of the Nasdaq stock exchange formally launched a hostile $5.3 billion takeover bid for the London Stock Exchange Group PLC. An NDAQ-LSE combination would create the world's largest equity market by number of listings. LSE shareholders have until Jan. 11 to accept or reject NDAQ's offer.

Media reports said LSE executives contended the terms - just a smidgen above the $5.1 billion offer rejected by LSE executives in November - were too low. The decision is not really in their hands, however. In pitching its terms directly to shareholders, NDAQ reduced the number of acceptances needed to 50% from 90%. LSE executives have urged shareholders to reject the offer.

The equity-exchange sector has taken on a world-wide scope in recent days. NDAQ, in particular, hopes to position itself against a European exchange to be created by seven major investment banks and the New York Stock Exchange's (NYX) proposed deal for a handful of Euronext exchanges. NDAQ beat on both its top and bottom lines in the latest period.

We continue to view NDAQ shares as attractive as the company acts on an ambition to be a leading force in the hot exchange space. Also worth noting is that the company has seen 83% quarterly revenue growth on a year over year basis, yet it trades at a considerable discount to NYX shares at 54.2x trailing 12-month earnings compared to about 83.5x. Indeed, NYX shares were losing some ground early Tuesday.

(Disclosure: Briefing.com has a business relationship with Nasdaq)

--Christine Marie Nielsen, Briefing.com