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From Briefing.com: 5:49PM Preliminary Support And Resistance Table : -Technical- On the surface the market put in a strong performance on Tuesday as all the averages (except the Dow) pushed to new 52-wk intraday highs with decent sector leadership noted. While all except the S&P 400 (-0.02%) ended the session in the black, the final hour was marked by a sizeable wave of profit taking. To see the support and resistance levels for tomorrow go to The Technical Take.

Close Dow +21.85 at 10856.86, S&P +1.61 at 1263.70, Nasdaq +3.12 at 2260.76: The market showed some resilience in the face of late-day consolidation efforts, as stocks, which were much higher throughout the session amid tame inflation data and upbeat corporate news, limped into the close just above the flat line. Before the bell, investors embraced an upward revision to Q3 productivity (to 4.7% from 4.1%) and eased inflation concerns following a larger than expected 1.0% decline in unit labor costs. The latter part of the Labor Dept.'s report, which typically has limited significance on trading unless times of inflationary uncertainty warrant more importance, boded especially well for bond traders, as renewed buying interest in Treasuries knocked the yield on the 10-year note (+21/32) down to 4.48%. Nonetheless, while the influential Financial sector initially took notice, participants eventually locked in recent gains that had taken the AMEX Securities Broker/Dealer Index to historic highs and year-to-date gains to a sector leading 29%. Of the five economic sectors which helped the major averages cling to small gains, the Materials sector turned in the day's best performance as gold futures again closed near their best levels in over 20 years. Providing more leadership, however, was Technology. Hardware led the way higher, as raised FY06-07 estimates and a revised price target to $86 (from $74) at UBS helped Apple Computer (AAPL 74.07 +2.25) close at a new all-time high. Chip stocks were another bright spot, getting a boost following optimistic guidance from Maxim Integrated (MXIM 39.06 +1.56) and Altera (ALTR 19.40 +1.10). Consumer Discretionary also traded higher as reaffirmed Dec. same-store sales growth guidance of 4-5% from Target (TGT 53.20 +0.59) helped retail regain positive footing for the year. Energy, supported in part by a mid-day rebound in oil prices, and Industrials, benefiting from an analyst upgrade on FedEx (FDX 99.01 +3.22), helped offset weakness in Health Care and Consumer Staples. The latter lost ground after Kroger (KR 19.52 -0.71) merely matched analysts' Q3 expectations while weakness in biotech, drug and medical devices weighed on the former. Separately, Oct. factory orders growth of 2.2% matched economists' forecasts, however, since the report is very predictable, and non-durables (+0.5%) was the only new component, the data was largely ignored. DJTA +1.0, DOT -0.2, Nasdaq 100 +0.4, Russell 2000 +0.1, SOX +1.0, XOI +0.2, NYSE Adv/Dec 1774/1514, Nasdaq Adv/Dec 1625/1398

12:35PM SanDisk files patent suit against STMicroelectronics (SNDK) 49.40 +0.84: -Update- The Co filed a patent lawsuit today in the Northern District of California against STMicroelectronics, (STM) asserting that STMicroelectronics' NAND and NOR flash memory chips infringe SanDisk's U.S. Patent No. 5,991,517, entitled "Flash EEprom System With Cell by Cell Programming Verification

9:08AM More On The Wires :Mattson Technology, (MTSN) announces that a major Japanese logic chipmaker has selected the company's Helios RTP, Aspen III ICPHT and next-generation strip systems for use in volume production...

9:00AM Maxim Integrated raises guidance (MXIM) 37.50 :Co issues upside guidance for Q2 (Dec), sees EPS of $0.42 vs. $0.40 Reuters Estimates consensus; sees Q2 (Dec) sequential rev growth of 5%, which implies Q2 revs of $445.6 mln vs. $441.47 mln consensus.

10:24AM Kroger (KR)
19.90 -0.33: Kroger Co. on Tuesday reported strong financial results for its fiscal third quarter as it continues to make progress in its sales recovery in Southern California. For the latest quarter, the Cincinnati, OH-based grocer said it earned $185.4 million, or $0.25 per share, compared with $142 million, or $0.19 per share, in the year ago period. Operating profits rose 2.96% year/year to $414.9 million. According to Reuters Estimates, the results matched the average analyst EPS estimate of $0.25.

Sales for the third quarter rose 9.1% from a year earlier to $14.0 billion, ahead of the consensus estimate of $13.6 billion. Identical store sales increased 6.6% including fuel, and a strong 3.7% without. This represents Kroger's ninth consecutive quarter of positive comps, excluding fuel, and the highest same-store sales figure since its merger with Fred Meyer in 1999.

Although Kroger has maintained sales growth and margin preservation recently, gross margin for the latest quarter declined 62 basis points to 24.5% of sales. Excluding the impact of fuel, however, gross margin decreased by a slender six basis points. Operating, general, and administrative costs, as a percentage of sales, fell 69 basis points as the company was better able to leverage higher sales to offset higher energy prices, as well as operational progress in Southern California.

While Kroger continues to recover from a five month strike in Southern California that ended in February 2004, strong top-line growth has helped lift shares nearly 18% since the beginning of the year. At the current level, the stock is trading at approximately 13.9x forward earnings, compared with 17.7x for Albertson's (ABS) and 15.6x for Wal-Mart (WMT), which continues to place significant price pressure on the industry. While Kroger shares remain attractive from a valuation standpoint, increased competition from the nation's largest retailer presents a notable concern for continued growth.

--Richard Jahnke, Briefing.com

9:19AM AutoZone (AZO)

86.95: AutoZone, the nation's largest auto parts retailer, on Tuesday said net income for its fiscal first quarter declined 6.7% from a year ago, due to hurricane and share-based expenses. Specifically, net income for the period decreased to $114.4 million, or $1.48 per share, from $122.5 million, or $1.52 per share, a year earlier. Excluding $2.8 million for hurricane-related costs and $3.7 million for share-based expenses, adjusted earnings were $1.54 per share - a penny shy of the consensus EPS estimate of $1.55.

AutoZone noted that over 125 stores in Louisiana, Mississippi, and Texas were impacted by the Gulf Coast hurricanes during the quarter, and 13 locations remain closed due to the storms. As of November 19, the company said it had 3,612 domestic stores and 84 stores in Mexico.

Sales for the latest quarter climbed 4% from the year ago period to $1.34 billion, while domestic same-store sales were up 1%. The higher top-line, however, was offset by increased operating expenses as a result of hurricane and share-based expenses, as well as actions to improve the in-store customer experience. AutoZone said, on a comparable basis, operating expenses increased 171 basis points over last year to 33.2% of revenue. Accordingly, operating margin decreased 148 basis points to 15.3%, while operating profit slipped 5.1% from the prior year period.

Notwithstanding gasoline-related pressures, which have impacted consumer discretionary spending, particularly for scheduled auto maintenance, AutoZone continues to experience slowing growth as competitors move to narrow the sales gap. As such, an investment at this time is not warranted, given the mounting competitive pressures and subsequent decline in margins.

--Richard Jahnke, Briefing.com

9:12AM Sears Holdings (SHLD)

116.71: The largest department store operator in the US reported a lower quarterly profit on sluggish sales. Sears Holdings Corp. posted a third quarter profit of $58 mln, as same-store sales plummeted 11%. The company said it plans to scale back its Sears Essentials format - a key reason Kmart purchased Sears, Roebuck & Co. in March. This was the third report from the combined company, which suffered lifeless sales from electronics to home products.

Net income declined to $58 mln, or $0.35 per share, compared to adjusted results from last year of $150 mln, or $0.93 per share. The average estimate called for $0.32 per share. Sales of appliances was the only standout, in what can be characterized as a lackluster period for Sears as it continues to struggle with poor apparel sales. Kmart performed slightly better, with same-store sales declining only 2.8% due to poor electronic sales. Revenues rose 175.7% to $12.2 bln versus expectations of $12.95 bln.

The retailer said the planned conversion of Kmart stores into Sears Essentials stores, where Kmart's discount merchandise is mixed with Sears' staples, will be scaled back in 2006. Lampert, the hedge fund manager responsible for taking Kmart out of bankruptcy and orchestrating the Sears takeover, has been cutting costs and repositioning the retailer. Hoping to cash in on Lampert's hedge fund success, shares in SHLD, which have been viewed more as a real estate play, have risen almost 18% year-to-date.

---Kimberly DuBord, Briefing.com

9:06AM Target (TGT)

52.61: After Monday's close Target Corp. reaffirmed its December same-store sales outlook of 4-5% growth. The company said that its outlook for the current month is based on actual sales at Target stores during December's first week, combined with its expectations for the remainder of the month. Target has faced tough year-over-year comparisons of late, but this estimate is close to the 5.1% increase in the year-ago period.

Target's forecast follows the 2.6% same-store sales gain reported for November that was regarded as disappointing given the company's original guidance that called for a gain of 4-6%. Rival Wal-Mart (WMT), meanwhile, expects December same-store sales to rise 2-4%. While Briefing.com maintains an Underweight rating on the Consumer Discretionary sector, we believe that discounters are poised to do particularly well this holiday season. The reaffirmation of December same-store sales guidance from both Target and Wal-Mart reinforces that view.

--Lisa Beilfuss, Briefing.com

8:52AM Time Warner (TWX)

18.23: A deal is likely to be penned by Time Warner (TWX) and Microsoft (MSFT) by the end of the month that involves an agreement to set up an online advertising service, which will compete directly with Google (GOOG), according to the Wall Street Journal . The Journal, citing unidentified people familiar with the talks, said the agreement would involve combining related advertising assets with little money changing hands.

What is unknown at this point is whether AOL may decide to strengthen its relationship with Google, but according to WSJ that is unlikely. Under the current agreement, Time Warner's AOL unit would end its relationship with Google as its main search engine, switching instead to Microsoft's MSN service. At present, Google gives AOL part of the advertising its generates from AOL customers, which totaled $300 mln last year, according to the Journal. For Google's part, it received 11% of its first half revenues from AOL.

Speculation has run rampant throughout the last year over what plans Time Warner has for its struggling AOL unit. Recently, TWX was thought to be in discussions to sell off the once step child unit, but a sale is unlikely now. According to the article, buyers may backing off in favor of a smaller-scale deal.

TWX and MSFT have been in talks for some time about how to use Microsoft's technology with Time Warner's content business. In recent years, it was thought antitrust concerns created too many roadblocks with MSFT possibly buying AOL. In 2003, AOL settled a private antitrust lawsuit that its Netscape unit brought against Microsoft, which agreed to pay AOL Time Warner $750 mln. People familiar with the deal expect the companies to announce an agreement by the third week in December.

--Kimberly DuBord, Briefing.com

9:53AM Weight Watchers (WTW) Banc of America Sec initiates BUY. Target $60. BofA initiates Weight Watchers as they believe the co will continue to experience a recovery in sales and margins in its North American operations over the next 12 months, as the low-carb diet fad wanes and the benefits of the corporate solutions program materialize.
9:51AM 4 Kids Entertainment (KDE) Jefferies & Co upgrades Underperform to HOLD. Target $15.25 to $15.75. Jefferies thinks KDE warrrants a Hold valuation now following their decline in the public markets based on fundamentals. Q4 is traditionally the strongest, and therefore the firm is changing its fair value from $15.25 to $15.75 as we enter the holiday season.

9:38AM Portfolio Recovery Assoc. (PRAA) Jefferies & Co upgrades Underperform to HOLD. Upgrade follows co's announcement an increase to its credit facility to satisfy higher purchase volumes. Firm ups Q4 purchase estimate to $60.4 mln, increase from prior estimate of $18 mln, ups Y06 EPS estimate to $2.66 from $2.43. Jefferies says PRAA's aggressive purchase numbers in Q4 are a result of increased portfolio sales from credit card issuers, who are selling off a greater amount of debt in an effort to recoup some of their losses from the dramatic increase in bankruptcies. Firm's long term concerns remain over higher prices and the erosion to margins and returns over time.

9:37AM Merit Medical (MMSI) Brean Murray initiates ACCUMULATE. Target $15. Brean Murray initiates MMSI saying the share price is depressed because start-up and R&D costs for new products/business lines impaired the gross margin in 3Q05 and they forecast this will continue through 1H06. Firm says normalization to consistent historic gross margin levels, and probably higher, should begin in 2H06 and drive earnings re-acceleration combined with upward multiple revaluation. Firm says aiding Merit in reaping the fruit of the new business development, the co is jumpstarting the sales effort by adding as much as 18% to the sales force. In addition, it is expanding manufacturing capacity by about three times.

9:36AM MEMC Elec (WFR) JP Morgan initiates OVERWEIGHT. The firm's positive view on MEMC is driven by expectations of an improving wafer pricing environment, potential for market share gain, coupled with continued top-tier financial and operational performance. Leveraging the ongoing tightness in polysilicon supply, a key raw material for wafer production, and high utilization rates, the firm believes MEMC and other wafer manufacturers are beginning to increase wafer ASPs. The firm expects the impact of favorable pricing to be reflected in MEMC's financials starting C1Q06, and are modeling the gross margins to expand by 190 basis points to reach 39.0% in 2006. MEMC stock is trading at 15.4x the firm's C2006 pro forma estimates, vs. the firm's group average of 19.6x and its consumable peer group average of 21.3x. As MEMC demonstrates pricing leverage through top line growth and margin expansion, the firm expects WFR's discount with respect to its peer group to narrow, and the stock to outperform.

9:35AM Hewitt Associates (HEW) William Blair upgrades Mkt Perform to OUTPERFORM. Firm notes that the co lowered expectations several times in 2005, and they believe this experience has chastened mgmt and caused them to set conservative 2006 guidance. Firm's best guess is that numbers are now at a level where mgmt can meet or beat expectations.

9:34AM WebSideStory (WSSI) Avondale Partners initiates MKT OUTPERFORM. Target $21. The firm says while the co's core market - web analytics - is growing approx 17% CAGR, even higher growth rates are being seen by the pure-play vendors and on-demand analytic companies like WebSideStory. The firm mentions the subscription model gives good visibility. Firm notes the WebSideStory purchase of Atomz, saying in the latest quarter, 25% of all bookings for Atomz' solutions came from WebSideStory customers, helping to fuel continued strong growth rates. The firm says they believe WSSI deserves premium multiples due to its visible revenue model and premium growth rates, which no other co in its comp group enjoys.

9:33AM KEMET (KEM) Lehman Brothers initiates UNDERWEIGHT . Target $5.5. Firm says they are hard-pressed to justify KEMET's current P/E multiple of nearly 50x their CY06 EPS est. Firm believes the current stock price fully discounts the best case earnings scenario, and although KEM's outlook has brightened lately, the co still faces many challenges.