Daily Summary....

U.S. Markets

Dow +57.88 (+0.48%)
Nasdaq +15.21 (+0.66%)
S&P 500 +7.84 (+0.59%)

News That Moved the Market

Markets Up Despite Downward Pressure From AIG. Major indices fell at the open on news that American International Group (AIG, -11.7%) was being questioned by its auditor on how the insurer prices some of its derivatives, mainly CDOs. Fitch Ratings announced it may cut AIG's AA rating as a result of the disclosure. Despite the negative news, every sector besides financials and healthcare, which lost only 0.1%, ended higher. However, volume in general was light, making many believe that the sellers simply took the day off, rather than buyers came into Monday with great conviction.

BofA and Chevron Join The Dow Industrials. The Dow Industrial Average will add Bank of America (BAC, -0.1%) and Chevron (CVX, +1.5%) and drop Altria (MO, -0.9%) and Honeywell (HON, -0.3%). The new companies were inserted to reflect the increased importance of financials and oil industrials in the world economy. The additions will not get the same bounce as companies added to the S&P 500 because there are simply more portfolios and funds structured around the S&P 500 compared to the Dow.

Oil Finishes Higher On Supply Concerns. Crude jumped 2.1% on news a refinery in Delaware had to be shutdown because of weather conditions. In addition, Venezuelan president Hugo Chavez threatened to stop selling oil to the U.S. after the Venezuelan assets were ordered frozen by a judge following a legal altercation with Exxon Mobil (XOM, +1.9%). Experts however, do not believe Chavez will carry out his threat.

Motorola and Nortel Planning Joint Venture. Motorola (MOT, +2.8% is reportedly in talks with Nortel Networks (NT, -1.6%) to merge the companies' wireless infrastructure business according to the Wall Street Journal. The move could create a company with sales north of $10 billion/year.

Tomorrow Notable Earnings:

Credit Suisse (CS) Before Open
General Motors (GM) Before Open
Wynn Resorts (WYN) After Close

Salesforce.com Puts Itself Up for Sale....

Salesforce.com jumps on buyout rumor. Sources say Salesforce.com (CRM) approached Oracle (ORCL) with a potential offer to sell itself for $75/share -- close to a 50% premium over CRM's Friday close of $50.87. Shares are up sharply.

Another iPhone Price Drop Coming...

Sources say Apple (AAPL) will again drop prices on the iPhone and iPod Touch within the next two months -- by as much as $100.

Cree Inc. (CREE) Breaking higher....

CREE up 1.60 to $33.82

Cree Inc. is climbing back to the mid 30's, a level that has proven hard to break thru for the stock no less than 5 times in the past.

Keep a close eye on this as it looks like the stock is building momentum as it moves higher.

Noon Update....

Dow - 11
S&P + 2
Nasdaq +5


The market is holding up well in here following the negative news from AIG this morning. AIG is still down $5.75, but the Dow Average is about to turn positive.

The Dow fell to 12,069 this morning. The bottom made on January 22 was just above 12,000 (on the close). A retest would tend to reverse itself right around the 12,100 level....exactly where we turned around this morning. So....we're hoping that the retest may be over. Only time will tell. If we by chance slip below and close below 12,000...that would be very negative. If we hold above that 12,000 level, then maybe we can start to move forward. My guess is that we have bottomed.

AIG Pulls Down the Dow....

American International Group Inc., the world's largest insurer by assets, fell as much as 6.1 percent after auditors found a ``material weakness'' in how the company values its credit-default swap portfolio.

AIG hasn't yet determined the decline in value that will be included in its 2007 financial statements, the New York-based insurer said in a regulatory filing today.

AIG stock is down 5.05 to $45.60 (a 5-year low).

Bush to Sign Stimulus Package on Wednesday...

President George W. Bush says he will sign a $152 billion economic stimulus package on Wednesday. After a brief spat over the cost, Congress agreed Thursday to a measure that would provide investment incentives and one-time tax rebates.

New Phones for Sony Ericsson...

Sony Ericsson (SNE) (ERIC) unveiled numerous new phones, including a phone based on Microsoft (MSFT) software, and the G900, with a 5-megapixel camera and a 2.4" touchscreen that rivals Apple's (AAPL) iPhone. Sony Ericsson said an upgraded version of its PlayNow internet and mobile phone service will be available in 30 countries within the year. The service rivals Apple's iTunes and Nokia's Ovi. CEO Hideki Komiyama says Sony Ericsson is looking to bolster its weak presence in the U.S., but called a purchase of Motorola's (MOT) handset unit unattractive.

Oil Spikes on Chavez Threats....

Chavez threatens oil supply disruption over Exxon case. Venezuelan President Hugo Chavez expanded his threats to cut off oil shipments to the United States, saying he would close the tap if oil companies succeed with lawsuits challenging his nationalizations.

Oil ran up $4.50 on Friday to $91.78, causing the US market to sell off in the afternoon.

The Latest on Delta / Northwest Deal...

Delta Air Lines Inc. (DAL), Northwest Airlines Corp. (NWA). The Atlanta, Georgia-based air carrier and the Eagan, Minnesota-based airline are trying to build a common labour contract for the 11,000 pilots at both airlines before they complete a merger deal, The Wall Street Journal reported Saturday, citing people familiar with the matter.

The negotiations, considered essential for smooth integration of those key labour groups, centre on organizing a fair way of forming a unified, seniority-based roster, the paper added.

Earnings Due Today....

COMPANIES REPORTING EARNINGS

• Carlisle Cos. (CSL). Expected to post Q4 profit of $0.53 a share, down 3.96% from $0.56 per share earned same quarter last year.

• CNA Financial Corp. (CNA). Expected to report Q4 profit of $1.03 a share, up 13.19% from $0.91 earned same time last year.

• General Growth Properties Inc. (GGP). Expected to post a loss of $0.17 per share in the fourth quarter.

• Lincare Holdings (LNCR). Expected to post Q4 profit of $0.67 a share, up 14.2% from $0.59 earned same time last year.

• Valspar (VAL). Estimated to post profit of $0.23 a share in the first quarter.

Changes to the Dow Industrials....

Dow Jones will make changes to the Industrial Average for the first time since 2004.

They have decided to add:

Chevron Texaco - which was taken out of the average in 1999...now back in...probably at the top of Oil prices...

Bank of America - adding a financial, probably at an opportune time.

In exchange, they are taking out:

Honeywell - the smallest of the Dow companies...

Altria (Philip Morris) - probably about time for this one to be taken out.

Yahoo Rejects Microsoft's Offer....

Yahoo! Inc. (YHOO) plans to reject Microsoft Corp.'s (MSFT) unsolicited $44.6 billion offer for it. The Wall Street Journal reports that Yahoo's board determined that the $31 per share offer "massively undervalues" Yahoo, according to a person familiar with the situation. It also doesn't account for the risks Yahoo would be taking by entering into an agreement that might be overturned by regulators, the Journal said.

What happens to Yahoo's share price in the coming days could help determine Microsoft's response. The stock traded at 4 p.m. Friday at $29.20, up 16 cents from previous day, on Nasdaq. If the stock stays at that level or goes up, that could be a signal that investors believe Yahoo is worth more than Microsoft's current bid. If the shares decline following news of the offer's rejection, that could lessen the pressure on Microsoft to increase its offer.

Yahoo playing games here...reports were that YHOO thinks their company is worth $41 a share....Maybe in your dreams, Yahoo..

Barron's: 3 Tech Stocks With Serious Potential...

Barron's says the January 2008 tech downturn is in no way similar to the crash of the dot-com bubble. Demand for network bandwidth continues to grow, and despite potential corporate penny pinching, few companies can afford to cut back on their internet strategies.

Tech Trader Eric Savitz outlines the bullish case on three tech stocks:

Cisco (CSCO) -- CEO John Chambers once again spooked investors by noting orders were down sharply in January, and warning FQ3 revenue will come up short. Shares fell 7% in extended trading, but were up $0.30 by day's-end. Cisco is sticking to its long-term estimates of 12-17% growth. Down 33% from its highs, shares are a solid long-term investment at 15x 2008 earnings. The company also holds $22B in cash and investments.

Akamai (AKAM) -- a content-delivery network [CDN] leader, demand for CDNs continues to boom as internet TV becomes a reality, no doubt a factor in AKAM's recent blowout quarter. CEO Paul Sagan doubts an economic downturn would much affect the company. With estimated 40% growth and trading at 20x 2008 earnings, shares look cheap.

JDS-Uniphase (JDSU) -- signs the company's turnaround is finally taking hold include: 1) Hitting GAAP profitability for the first time without needing asset sales. 2) Four quarters in a row of EPS and cash-flow growth. 3) The most recent quarter was perhaps the first time JDSU has seen simultaneous improvement in both gross margin and revenue across all its businesses. At 20x 2008 earnings, shares aren't cheap, but it's "an interesting speculative play on bandwidth growth."