Goldilocks Payroll Report

Morning News of Note:

• TWX: The Financial Times reports dissident shareholders led by Carl Icahn are looking at splitting Time Warner (TWX) into four separate cos as part of a more radical restructuring of the media group than they have put forward so far, according to people familiar with the discussions. The final plan, which will form the basis of a proxy fight for board control, is still in the process of being developed by Lazard, the investment bank hired this week by Mr Icahn to analyze "strategic alternatives", and might come up with a different conclusion
• INTC AMD: Digitimes reports Intel is expected to solidify its position as the world's leading semiconductor supplier this year, posting the highest revenue growth among the top 10 chipmakers for the year, according to a preliminary ranking from iSuppli. The US microprocessor giant is expected to generate semiconductor revenue of US$35.8 billion in 2005, up 14.4% from US$31.3 billion in 2005, according to iSuppli. This represents nearly 6 percentage points more revenue growth than the next-fastest growing company among the top-five suppliers, Texas Instruments. (TXN). Based on its quarterly semiconductor market-share research of the 100 leading semiconductor suppliers, iSuppli has increased its forecast for global chip revenue in 2005 to US$237.3 billion, up 4.4% from US$227.3 billion in 2004. iSuppli's previous forecast, issued in September, called for 2.4% growth in 2005
• GPRO: Gen-Probe-GPRO approval of Procleix WNV a positive but expected-OP@TWPT The firm believes the commercial impact have minimal impact on their model but adds the approval does remove the perceived uncertainty around WNV
• Fund Flows: equity funds rptd net inflows $3.674bln, domestic funds rptd inflows fourth consecutive wk for first time since 7/20/05, inflows into tech sector for fifth consecutive week for first time since 11/15/00, inflows into growth and income sector $1.027bln lgst since 1/7/98; ETF flows: VO inflows $542m, VB inflows $441m, SPY inflows $317m, VBR inflows $292m, XLF inflows $274m, EWJ inflows $240m; IYR outflows ($438m), QQQQ outflows ($402m), OEF outflows ($377m), RWR outflows ($262m); bond funds rptd inflwos $129m, investment grade fund inflows $225m, hy fund inflows $225m, tsy fund inflows $270m; money mkt funds rptd outflows $13.3bln -- AMG Data
• Mad Money Summary: Cramer was positive on shares of Logitech (LOGI) and sees them as a play on eBay's (EBAY) acquisition of Skype and the whole Cramer tech rally. While he is positive on shares, he recommended waiting for a pullback and would not chase the stock. Responding to a question, Cramer said that Conexant (CNXT) is the way to play cable modem companies, not Cisco (CSCO). Cramer also recommended staying away from shares of Level 3 Communications (LVLT). Cramer commented on Payless ShoeSource (PSS), Shoe Carnival (SCVL) and DSW's (DSW) sales and said "these are compelling numbers." Cramer said that the best way to play an industry is the "worst of breed" and says that Finish Line (FINL) fits the shoe. Cramer does not believe this will be the last up quarter for Finish Line and that the stock trades at a discount to all of the other stores. Cramer also noted that the shares have a huge short position and he gave them a "'mon back." Cramer also noted that he would avoid shares of Foot Locker (FL), in response to a question. Herb Greenberg joined Cramer last night to talk about Merck (MRK), Pfizer (PFE), United Online (UNTD) and OmniVision Technologies (OVTI). Greenberg said that Cramer is wrong on shares of Pfizer and Merck and believes that shares have good cash flows; Cramer said that Greenberg is "dead wrong" and he thinks "you could really hurt people with this." Cramer recommended going with Schering-Plough (SGP) if you liked shares of Merck. Greenberg still sees shares of United Online heading to the "internet junk pile" and believes that OmniVision Technologies is still not a good investment. Cramer summed up his show by saying that there is easy money to be made in NorthWestern (NWEC). Cramer believes that investors could make $3 if a deal for NorthWestern goes through and that the most they could lose would be $1

Market Comments: November payrolls rose 215,000, as close to the 210k consensus as I have seen in a long time. (Did the economists get it right? Or did they just get lucky?) This is a good number, as it is not too strong as to worry the bond market (and push rates higher), nor is it so weak it will hurt the stock market. Not too hot, not too cold.

Stocks staged a very strong rally yesterday, pretty much wire to wire, so a day of rest would not be surprising. But we need to see new highs next week to avoid the charts turning down and leaving a lower high vs. the November highs. The Nazz eked out a higher high yesterday, so it is in a little better shape.

The market opened slightly lower this morning, but is pretty much hovering around the flat line. Energy stocks are up again or higher oil prices (near $59), while biotechs are the early laggards.

My SOTD is iRobot (IRBT), which finally looks like it could be ready to rally again.

long INTC, TWX