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From Briefing.com: 4:20 pm : Monday's market reflected investors' wait-and-see stance ahead of a busy week in terms of both earnings and economic news. The major indices spent the session in flat line vacillation mode, and trading volume was notably lower than last week's.

The Energy sector led the session. Ahead of tomorrow's OPEC meeting, that area of the market received added attention. According to the Associated Press, the cartel has ruled out any change in production at its meeting this week, but oil ministers from Venezuela and Saudi Arabia said Monday that it has a consensus to cut output in March. The price of crude futures ($68.40 per barrel) gained 1.1% today, and helped drive buyers to the sector. A record fourth quarter earnings report from Exxon Mobil (XOM 63.12 +1.83) was also behind the rise, and strong results from Smith International (SII 44.35 +1.62) added more momentum. Those companies' reports underpin the Overweight rating that Briefing.com maintains on Energy. Refiners fared particularly well ahead of reports from SUN and VLO due out this week.

Largely to the credit of the hardware industry, the Technology sector advanced 0.5%. After declining about 17% over the past two weeks, Apple (AAPL 75.17 +3.14) attracted bargain hunters and was the particular bright spot. Relative weakness in semiconductors, due to some profit taking, capped the sector's advance. Materials (+0.2%) also closed higher, and Industrials finished on the flat line.

While gains, outside of Energy's, remained contained, losses were similarly limited. Due to weakness in pharmaceuticals, following a disappointing earnings report from Schering-Plough (SGP 19.60 -0.48), Healthcare (-0.5%) levied the weightiest loss. The biotech industry was also a sore spot, and Boston Scientific's (BSX 20.80 -0.83) extended decline pressured the equipment group. Ahead of tomorrow's FOMC meeting and accompanying policy statement, the market's most rate-sensitive areas reflected traders' cautious sentiment. Banks kept the Financial sector (-0.2%) in the red, and wide-spread selling took Utilities (-0.6%) lower. Investors within the stock and bond markets alike fully expect a 25 basis point hike in the fed funds rate, but there is less certainty over the Fed's policy statement. The market expects just one more rate increase following tomorrow's, and will attempt to glean confirmation of such in the statement's wording. Our forecast calls for two more rate hikes over the course of the next two meetings, after which the tightening cycle will pause. With respect to financials, brokers helped limit the downside.

Some broad-based selling sent the Consumer Staples sector (-0.4%) south, but Wal-Mart (WMT 46.40 +0.56) shares offered support. This morning, the world's largest retailer announced a preliminary 4.7% gain in January same-store sales. That figure, which is at the high end of its forecast, follows its disappointing December same-store sales gain. The rise in January suggests there was an accelerator effect from gift card spending that is likely to show up in the same-store sales results from other retailers. After Wednesday's close, the industry will begin to announce its January data. An encouraging fiscal Q2 report from Sysco (SYY 32.48 +1.91) lent further upside within the Staples sector.

Along with upgraded Gap (GPS 18.07 0.69) shares, General Motors (GM 24.19 +0.39) was the Discretionary sector's (-0.2%) strongest crutch. Upon reports that Citigroup (C 46.83 -0.04) is working with Cerberus Capital in offering $11.5 billion for its GMAC business, the stock jumped. On a related note, Wachovia (WB 54.75 +0.35) is also reportedly interested in making a bid. Further to the M&A front, Arcelor rejected Mittal's (MT 35.69 +1.43) unsolicited $23 billion cash proposal, and Fairmont Hotels (FHR 44.24 +0.42) will be acquired by Kingdom Hotels and Colony Capital for $3.9 billion in cash.

The economic calendar featured two items. Personal income was up 0.4% (consensus 0.4%); personal spending rose 0.9% (consensus 0.8%). As the data generally matched expectations, and because the Q4 GDP figures have already been reported, the markets essentially overlooked the data. Investors remain focused upon tomorrow's FOMC and OPEC meetings and Friday's employment report.DJ30 -7.29 NASDAQ +2.55 SP500 +1.48 NASDAQ Dec/Adv/Vol 1629/1487/1.94 bln NYSE Dec/Adv/Vol 1702/1592/1.66 bln

4:09PM Zoran beats by $0.08, guides Q1 above consensus (ZRAN) 20.99 +0.60 : Reports Q4 (Dec) earnings of $0.23 per share, excluding non-recurring items, $0.08 better than the Reuters Estimates consensus of $0.15; revenues rose 46.2% year/year to $109.3 mln vs the $105.1 mln consensus. Co issues upside guidance for Q1, sees EPS of $0.10-0.12, ex-items vs. $0.10 consensus; sees Q1 revs of $103-106 mln vs. $100.10 mln consensus.

10:25 am Schering-Plough (SGP)

19.78 -0.30: Drug maker Schering-Plough on Monday reported a fourth profit, reversing a year-ago loss, due to lower income taxes and strong growth of key products, such as arthritis drug Remicade and hepatitis treatment Peg-Intron. However, shares of the company are trading lower as the latest results fell short of analysts' expectations.

For the fourth quarter, the Kenilworth, New Jersey-based company earned $104 million, or $0.07 per share - a penny shy of the Reuters Estimates consensus of $0.08 per share. Last year, the company posted a loss of $856 million, or ($0.58) per share, which included an $807 million charge for taxes on foreign profits returned to the United States. Global sales for the fourth quarter rose 6% to $2.32 billion, but fell slightly below analysts' target of $2.38 billion.

On the top line, Prescription Pharmaceuticals, which exclude the cholesterol joint venture with Merck & Co. (MRK), increased 10% to $1.9 billion. Performance in the segment was led by sales of Remicade, which rose 19% to $251 million, and Peg-Intron, which rose 55% to $214 million. Among other products, sales of cancer treatment Temador grew 7% to $160 million, while sales of allergy drug Clarinex were down 14% to $139 million as it continues to experience reduced market share in a declining market. Meanwhile, cholesterol joint venture sales, which includes Vytorin and Zetia, totaled $755 million, up 89% year/year. In Consumer Health Care, sales decreased 9% to $198 million, due in large part to lower sales of Claritin-D and increased restrictions on other OTC products containing pseudoephedrine. Animal Health sales fell 4% to $220 million, reflecting lower sales of cattle products and an unfavorable impact from foreign exchange.

As the company continues its turnaround, "moving from survival mode into thrive mode," it believes the strength and breadth of its drug portfolio and cholesterol franchise will drive long term performance, despite a competitive health care environment and the impact of patent expirations. Looking to the first quarter, analysts are expecting Schering-Plough to earn $0.14 per share on revenue of $2.49 billion, according to Reuters Estimates. Last year, the company posted earnings of $0.09 per share on revenue of $2.37 billion.

--Richard Jahnke, Briefing.com

10:13 am Wal-Mart (WMT)

46.77 +0.93: Wal-Mart's latest weekly sales summary was short on detail, but long on importance for the broader market.

Recall that Wal-Mart had been forecasting a 3-5% increase in January same-store sales, but with January 27 marking the end of its measurement period, Wal-Mart now expects January same-store sales to be up approximately 4.7%. For Wal-Mart's final week, it was noted that food comparative sales were stronger than general merchandise, that average ticket drove the comp sales, and that the Northeast was its strongest region.

Several conclusions can be drawn from Wal-Mart's same-store sales performance in January and they are as follows:

Consumer spending was steady in January and it should ultimately be revealed that the deceleration in Q4 GDP growth was an aberration
Following Wal-Mart's disappointing 2.2% increase in December same-store sales, the uptick in January suggests there was an accelerator effect from gift card spending that is apt to show up in the same-store sales results from other retailers
Wal-Mart's success will continue to come at the expense of traditional grocers (i.e. SWY, KR, ABS, SVU)
The pullback in energy prices has provided spending relief for the low- to middle-income consumer
In retrospect, the 2005 holiday selling season will be viewed as having been solid given the tough comparison to the prior year
Wal-Mart's news has provided a lift to the retail sector and other discount-oriented retailers such as Kohl's (KSS), TJX Cos. (TJX), and its biggest competitor, Target (TGT). At its current level, Wal-Mart trades at 18.3x trailing twelve month earnings, which is roughly a 40% discount to its 5-year historical average and underscores the value proposition we highlighted on our bargain Hunting page last October.

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

09:35 am Exxon Mobil (XOM)

61.29: As expected, the world's largest oil company reported another blowout quarter. Exxon's fourth quarter profits rose 27% on record oil and natural gas prices to $10.7 billion, setting a new all-time record as the most profitable company in US history.

Net income swelled to $10.7 bln, or $1.71 per share, reflecting higher price realizations and improving refining and marketing margins. Excluding a gain from a lawsuit, per share profits were $1.65 per share - 20 cents above analysts' projections. Exxon's profits rose 8% from the September quarter, as revenues rose 20% to $99.7 bln - larger than the GDP of Sweden and Taiwan, according to Bloomberg. Rising demand for oil and gas, coupled with disruptions from the hurricanes, catapulted prices to new record levels in the quarter. The average profit for refining crude into distillates (gasoline, heating oil, jet fuel) widened to a record high of $11.00 per barrel.

Exxon increased its capital investment program in the quarter bringing the yearly tally to $17.7 bln, up 19% over 2004 levels. With cash flows rising to $11. 9 bln, Exxon also distributed $6.8 bln in dividends and share purchases in the quarter totaled $23.2 bln for the full year, up 56%. Oil-equivalent production declined by 1%. But, stripping out the hurricane impacts, divestments and entitlement effects, production rose 2% driven by a 30% rise in Africa, offsetting declines in Europe, Asia, and the US. Liquids production rose to 2,629 thousands of barrels per day, up 6% net of hurricanes, while natural gas production fell marginally due to fields declines, hurricanes, and divestments.

On January 1, long-time CEO Lee Raymond retired, and was replaced by Rex Tillerson who looks to capitalize on high energy prices by expanding output in Russia, Africa and SEAsia. Exxon also hopes to increase its refinery capacity, which is second only to Chevron (CVX). Exxon is the fourth of the super-majors to report a record quarter. For Exxon, as well as the industry, 2006 will be all about reserve replacement and production growth, achieved either through the drill bit or M&A activity. We continue to suggest an overweight weighting in the energy sector with preference for the oil services, drillers, and equipment companies. Still, the E&Ps retain their allure as value generators for the long term. Exxon is one of those stocks investors should buy and hold.

--Kimberly DuBord, Briefing.com

09:26 am Sysco (SYY)

30.57: For the second straight quarter, Houston-based Sysco Corp. missed Wall Street's expectations. Net earnings at North America's leading foodservice marketer and distributor fell 12.2% year/year to $204.2 mln, as the company reported Q2 (Dec) earnings of $0.33 per share. The Reuters Estimates consensus was $0.35.

Results contained $0.04 for incremental stock-based compensation, which analysts included in their estimates after management said in their previous earnings release (Oct. 31) that stock-option expenses for fiscal 2006 would range from $90-110 mln, reducing earnings by $0.14-0.17 over the year. Also weighing on Sysco's bottom line were higher operating expenses. In particular, there was an additional $13 mln spent on fuel, as well as an increase in sales and marketing personnel to serve key customers that helped boost sales.

Revenues rose 8.7% year/year to $7.97 bln, topping the $7.89 bln consensus estimate and returning to Sysco's historical performance levels. Also, gross profit margins increased 21 basis points in Q2 - the largest increase in the last 14 consecutive quarters - due to an improved customer mix. Sysco's industry has endured a variety of challenges in the past several quarters, especially in terms of fuel costs and the effects of food cost inflation. However, by remaining focused on long-term goals Chairman and CEO Richard Schnieders believes it has "executed on the basic building blocks of our business and positioned ourselves for future success."

Sysco shares are currently trading near a 52-week low of $29.98, which was reached on Nov. 7, 2005, but are off just 1% for the year compared to a 4.4% year-to-date decline for rival Performance Food Group (PFGC), the nation's No. 3 foodservice distributor. While both SYY and PFGC are expected to grow earnings 13% over the next five years, SYY has the better risk-reward proposition between the two, as PFGC's high price-to-earnings growth ratio of 2.17 ("PEG") does not justify its richer forward P/E multiple of 28.5x. Sysco trades at 20.9x forward earnings of $1.46 per share and has a PEG ratio of 1.48.

--Brian Duhn, Briefing.com

09:07 am Eastman Kodak (EK)

26.37: Eastman Kodak on Monday reported a narrower fourth quarter loss, helped by strong demand for digital products and services, as well as a tax settlement with the Internal Revenue Service. For the period, Kodak posted a net loss of $52 million, or ($0.18) per share, compared with a loss of $59 million, or ($0.20) per share, in the year ago period. The results, which include a $283 million after-tax restructuring charge, were offset in part by a tax benefit stemming from the settlement with the IRS, and may not be comparable to the Reuters Estimates consensus of $0.39 per share.

Revenue for the period rose 12% year/year to $4.2 billion, led by a 45% increase in the sale of digital products and services. Digital sales were $2.64 billion, representing approximately 54% of total revenue. That marked the first time in the company's history that digital revenue surpassed traditional. Over the past two years, Kodak has been aggressively expanding its digital portfolio as demand for traditional film continues to decline.

Separately, the company announced that Robert Brust, Kodak's Chief Financial Officer and Executive Vice President, plans to retire when his contract expires at the end of January 2007.

Looking to 2006, the company expects total revenue growth between negative 2% and positive 4%, with digital revenue growth of 16% to 22%. As it continues to make progress in its digital transformation, it expects to increase digital earnings to a range of $350 million to $450 million, with total earnings from operations of negative $900 million to negative $1.1 billion. The outlook largely reflects the company's ongoing restructuring actions as it continues to strengthen its position in digital products and services. While Kodak shares fell more than 25% in 2005, they are up about 12% since the beginning of the year.

--Richard Jahnke, Briefing.com

08:59 am Smith International (SII)

42.73: Smith International, an oil and gas services company out of Houston, reported a 53% hike in fourth quarter profits on strong sales of drilling equipment. High energy prices have resulted in a flush of spending across the global energy patch, as producers look to increase reserves. Activity in the quarter was driven by robust drilling activity associated with the seasonal breakup period in Canada, along with increased activity in the Middle East and Latin America that increased demand for the company's diamond drill bits and tubular products. Following on the heels of strong results from its competitors, this was Smith's strongest quarter in terms of revenue and earnings growth on a sequential basis.

Net income rose to $88.6 mln, or $0.44 per share, on revenues of $1.53 bln. Excluding a non-recurring charge, earnings rose 60% yearly and 20% sequentially, coming in two cents ahead of what the market was expecting. The top line rose 26% over the prior year and 9% over the September quarter driven by land-based drilling activity in North America, favorable mix in the US offshore market, and higher price realizations. Outside North America, the strongest area was offshore production and exploration spending in West Africa - a theme we keep seeing reiterated over and over. This is a high growth area for E&Ps and a reason we like Transocean (RIG), as it currently has the largest percentage of rigs (16) that are operating, or are en route to the area.

The fourth largest oilfield services company forecasted the earnings momentum will continue due to improved pricing, product volumes, and further operating margin expansion, which has topped 30% for the past two quarters. For FY06, it sees earnings in a range of $2.00-2.10 per share - above the current consensus estimate of $1.97 per share. A higher level of planned E&P investment will likely deliver strong earnings growth across the entire oilfield service industry. This fact underscores our reasoning behind holding BJ Services (BJS), Grant Prideco (GRP), and Transocean as suggested holdings in our Active Portfolio. SII trades at 28.4x current earnings, compared to the Oil Services Index (OSX) at 29.2x.

--Kimberly DuBord, Briefing.com

08:44 am Mattel (MAT)

14.78: Mattel reported fourth-quarter net income of $279.2 mln, or earnings of $0.69 per share. Excluding a tax benefit of $0.11, operating earnings from the nation's No. 1 toy maker checked in at $0.58 per share, nine cents better than the Reuters Estimates consensus of $0.49. However, according to Chairman and CEO Robert A. Eckert, Mattel "continued to experience extensive cost pressures and sales declines in the Barbie brand," which offset much of the growth Mattel experienced throughout its portfolio.

Total revenues fell 0.4% year/year to $1.84 bln, coming in shy of the $1.89 bln consensus. Worldwide gross sales for the Mattel Brands Girls and Boys business unit were down 6% year/year to $1.06 bln as an 11% decline in worldwide sales for its Barbie brand offset a 12% increase in American Girl branded products sold directly to consumers. Worldwide sales for the Fisher-Price Brands business unit rose 6% year/year to $694.8 mln due to strong international sales but were overshadowed by a 7% decline in sales for the Wheels category, which includes the Hot Wheels, Matchbox and Tyco R/C brands, and a 13% decline in sales for the Entertainment business, which includes Games and Puzzles (eg. Scrabble, UNO and Outburst).

Separately, Mattel generated strong cash flow and the balance sheet remained healthy with approximately $1 bln of cash at year-end, which led to the authorization of a $250 mln increase to its existing share buyback program, reflecting management's confidence in Mattel's future profitability and ongoing commitment to return value to shareholders.

Mattel shares are off 6.6% so far this year compared to a 2.8% year-to-date rise for the S&P 500 and a 6.6% gain for rival Hasbro (HAS), which is scheduled to report Q4 earnings on February 6. Both companies fall under the Consumer Discretionary sector, which is currently rated Underweight by Briefing.com.

--Brian Duhn, Briefing.com

09:45 am Gap Inc: Banc of America Sec upgrades Neutral to Buy. Target $23. Upgrade is based on the firm's belief that at the current valuation the risk reward is compelling. They see limited downside and expectations in the stock. Yet, they see 3 potential scenarios, which they think should lead to improvement in the '07/'08 time frame: 1) business improves given current initiatives, least likely; 2) changes in sr divisional leadership drive improvement, or; 3) the lack of scenarios 1 or 2 ultimately leads to more dramatic senior mgmt changes.The firm says that admittedly, one may need to be patient here, and time may be the biggest risk, but they like the fact that from here, good news is good news and bad news should be viewed as potential good news.

09:44 am Cott: UBS reiterates Reduce . Target $11.5 to $11.5. Firm believes the co's growth outlook will remain challenged in 2006 due to 1) ongoing execution issues, 2) higher costs, 3) aggressive marketing and innovation efforts by branded players, and 4) volume impact of price increases given price sensitivity of P.L. Firm prefers TAP over COT.

09:43 am Affymetrix: Global Crown Capital downgrades Neutral to Underweight . Target $34. Downgrade is based on what they perceive as limited potential for share price appreciation over the next 3-6 months. In their opinion, FY-06 rev guidance leaves no room for underperformance in consumables growth. In addition, recent gross margin guidance fell significantly below their previous expectations.

09:42 am Asyst: Am Tech/JSA Research upgrades Hold to Buy. Target $12. As the semi equipment industry is rebounding in order growth, firm believes that ASYT should also benefit from strong orders and rev growth. While the mis-steps of late 2003 in the FPD business translated to an unprofitable year in 2004, firm says mgmt has demonstrated operational improvements through 2005, and they think that ASYT has regrouped and is poised for profitability in 2006.

09:36 am Schick Technologies, Inc.: CL King reiterates Strong Buy. Target $38 to $38. Target change is based on firm's projection of the co's digital dental x-ray and CEREC C.A.D/C.A.M revs will remain strong given the low mkt penetration that both of these technologies have achieved to date relative to their mkt potential and given the benefits provided by both technologies.

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