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From Briefing.com: 8:09 pm Weekly Wrap

It was another solid week for the stock market. The indices were close to unchanged after the first three days, but then rallied sharply on Thursday and held the gains on Friday. Strangely, Thursday was the only day on which the news was not bullish.

Monday through Wednesday the indices were essentially flat. There was a lot of talk that the market was "tired" or that a top was forming. This was despite good news virtually every day. On Monday, oil prices were down and there were reports that Sabre Holdings and Biomet might soon be acquired.

Tuesday brought news of a fantastic earnings report from Goldman Sachs. General Electric raised their dividend 12% and reaffirmed guidance for 2007, and most importantly, the Fed kept rates unchanged and made little change to the policy statement. The S&P dipped that day despite that collection of news.

Wednesday was not much different. November retail sales jumped a better than expected 1.1% with across the board strength. Airline stocks got a boost on reports that UAL was in merger talks with Continental. But the S&P managed only a 2 point gain.

Then on Thursday the S&P shot up 12 points even though there was little to prompt the move. The major news was that oil prices were up sharply on reports that OPEC would cut production further in February. That is hardly something to rally on. Nevertheless, as the S&P 500 index broke through some key resistance levels, the market took off.

The most bullish news of the week came on Friday. The core CPI for November was unchanged. That was lower than the expected 0.2% increase and represents a steady downtrend after the 0.1% October number, the three 0.2% increases before that, and two 0.3% gains before that. The price weakness was across a broad array of categories. Inflationary pressures appear to be easing much as desired by the Fed in line with a soft landing. Yet, the S&P 500 index was up only 2 points on Friday.

On balance, the news this past week was bullish. The Fed policy statement reflected a focus on containing inflation, but that is what has to be expected from central bankers. It provided few clues as to whether the Fed will indeed cut rates in the first half of 2007, as the market currently expects. That will depend on incoming data - and the inflation report was important in that respect. Expectations have risen that the Fed will ease policy in 2007.

The economic data this week was also bullish overall. The retail sales report noted above showed that housing weakness has, at least not yet, had much impact on consumer spending. New claims for unemployment for the week ended December 9 dropped to a low level of 304,000, suggesting that a recent pop upward was aberrant. And November industrial production rose 0.2%. That isn't great, but it isn't down either.

The corporate news was generally favorable. Lehman Brothers and Bear Stearns joined Goldman with good earnings reports. Illinois Tool Works and Black & Decker warned of lower earnings, but Procter & Gamble, United Technologies, Merck, and GE reaffirmed current forecasts.

The market is still benefiting from the typical year-end seasonal strength. Now, there is also increased confidence that inflation is coming back under control while economic growth stays moderately positive. Valuations are generally perceived as sufficiently low to provide ongoing support. The week ended with widespread optimism on Wall Street.

 
 Index      Started Week Ended Week Change % Change YTD  
 DJIA         12307.49    12445.52  138.03    1.1 % 16.1 %  
 Nasdaq        2437.36     2457.20   19.84    0.8 % 11.4 %  
 S&P 500       1409.84     1427.09   17.25    1.2 % 14.3 %  
 Russell 2000   792.56      792.71    0.15    0   % 17.7 %

4:10 pm : Stock prices inflated at the open after it became known by way of the November CPI report that inflation is being contained. Specifically, both total and core-CPI, which excludes food and energy, were unchanged last month.

The market had been expecting 0.2% increases at both levels, so there was no mistaking that the unchanged readings were good news, particularly since the year-over-year rate in core-CPI slipped to 2.6% from 2.7% as a result. In recognition of the encouraging trend, both stock and bond prices rallied in the early-going on the idea that today's data enhanced the possibility of a rate cut from the Fed occurring sooner rather than later.

The industrial production report, which showed a 0.2% increase in the month of November, didn't do anything to alter that belief as the production trend of late has fit neatly with the Fed's soft landing scenario.

As one might expect, then, stocks started the day on an upbeat note drawing added support from a noticeable drop in market rates and healthy leadership from the financial, technology and industrial sectors.

Earnings warnings from Black & Decker (BDK 78.26, -8.66) and Illinois Tool Works (ITW 46.80, -1.12), a continued uptick in oil prices, a lack of participation by the energy sector, and a sense that the stock market is overbought on a short-term basis, were among the limiting factors that kept the early gains in check on this quadruple witching options expiration Friday.

Although the stock market maintained a position in positive territory throughout the session, it spent a good part of the day seeing the early gains get pared on profit taking efforts. However, the outperformance of influential blue chip components like General Electric (GE 37.36, +1.15), Honeywell (HON 43.62, +0.93), Procter & Gamble (PG 64.11, +0.76), Citigroup (C 54.07, +0.96) and Cisco (CSCO 27.56, +0.25) kept selling efforts in check and the indices above the unchanged mark.

At the end of the day there weren't a lot of big movers from a sector standpoint, with the exception of Energy (-1.24%) which happened to be the prior day's biggest gainer.

Decliners actually outpaced advancers at the NYSE and Nasdaq, but the buying interest in large cap issues proved to be the difference that kept the indices from sporting negative signs at the closing bell.

Volume was heavier than usual which was a function of the increased trading that took place with the expiration of stock options, index options, index futures and single stock futures.DJ30 +28.76 NASDAQ +3.35 SP500 +1.60 NASDAQ Dec/Adv/Vol 1616/1456/2.16 bln NYSE Dec/Adv/Vol 1756/1491/1.72 bln

4:00PM Dell receives NASDAQ notice due to delay in filing of Form 10-Q (DELL) 26.53 -0.34 : Co announces it has received, as expected, a NASDAQ Staff Determination letter on Dec 15, 2006, indicating that the co is not in compliance with the NASDAQ continued listing requirements set forth in Marketplace Rule 4310(c) (14). The Determination letter relates to the company's Form 10-Q for the fiscal third quarter ended Nov 3, 2006. On Nov 2, 2006, the Company appeared before the NASDAQ Listing Qualifications Panel to present a plan for regaining compliance and to request continued listing on The NASDAQ Stock Market. The panel has not yet rendered a decision.

8:06AM Chipmos Technology raises Q4 rev guidance to $176-181 mln vs $172.0 mln consensus (IMOS) 6.02 : Co raises Q4 rev guidance to $176-181 mln vs $172.0 mln consensus, up from $168-172 mln prior guidance. Co expects a gross margin on a consolidated basis for the fourth quarter of 2006 to be in the range of 29% to 32%, compared to prior guidance of 26% to 29%.

09:22 am CalAmp: Ferris Baker Watts upgrades Neutral to Buy. Target $13.5. Ferris Baker upgrades CAMP to Buy from Neutral with a $13.50 tgt saying with CalAmp having recently begun shipping a new generation of products to both DIRECTV (DTV) and Echostar (DISH), they believe the co is poised for strong performance in CY07. The firm expects DIRECTV to be especially aggressive with its HDTV rollouts in mid- to late-2007, but they are already seeing aggressive marketing and anecdotal evidence of waiting lists for HD DVR set-tops. The firm believes CalAmp is very likely to begin seeing significant benefits from the new product cycle beginning in FY08.