U.S. MARKET AVERAGES

This week for the fourth day in-a-row broader averages managed to gain.

Earnings related sell-off induced by General Electric and others last week was overshadowed by generally positive earnings from more than half of three hundred plus companies. Notably Caterpillar, Lockheed Martin, Proctor & Gamble and Microsoft reported earnings that met or exceeded earnings estimates.

Microsoft ((MSFT: chart) announced revenue of $11.84 billion for the quarter ended December 31, 2005, a 9% increase over the same period of the prior year, marking the highest quarterly revenue in the company's history. Net income for the quarter was $3.65 billion, which grew 5% from $3.46 billion for the same quarter of the previous year. Diluted earnings per share for the quarter were $0.34. Net results included $108 million, or $0.01 per share, in tax benefits.

Holland based Mittal steel (MT: chart), world’s largest steel maker announced $22.8 billion unsolicited offer to acquire Luxembourg based second largest steel maker Arcelor SA. If the deal is successful Mittal has agreed to sell recently acquired Canadian steel maker by Arcelor, Dofasco, to German based Thyssen Krupp. Mittal Steel is offering 0.8 share and Euro 7.05 for every share of Arcelor. The deal is judged to be the largest deal ever in the steel industry.

Commerce Department reported that sale of new homes in December rose 2.9% and 6.6% for the year 2005. Initial read on growth in Gross Domestic Product for the fourth quarter in the year 2005 was reported at 1.1% significant decline from the third quarter growth at 4.1%. Most traders believe that this initial read is likely to be revised upwards in the coming weeks.

MOVERS AND SHAKERS

Bebe Stores (BEBE: chart), clothing retailer, posted Q2 profit of $25 million, or 27 cents a share, compared with $24.3 million, or 26 cents a share, during the year-earlier period, beating estimates of earnings of 26 cents a share. The company reported quarterly revenue of $167.9 million, compared with $152.6 million a year ago, below expectations of revenue of $170 million. The stock gained 19%.

Broadcom (BRCM: chart), chipmaker, said that fourth-quarter profit more than doubled on 52% sales growth of its wireless chips used in consumer electronic devices and high-speed Internet networking gear. The company reported Q4 net income of $194.8 million, or 50 cents a share, up from $71.1 million, or 20 cents a share a year earlier. It also authorized an additional share repurchase program worth $500 million. The stock surged 19%.

Take-Two Interactive Software (TTWO: chart) was downgraded at Banc of America to sell from hold, with the broker citing numerous risks for the company, including lower earnings and over-valuation, as well as potential SEC investigations and accounting restatements. The firm also lowered its price target to $12 from $17. The company’s shares dropped 14%.

SanDisk (SNDK: chart), flash-memory developer, reported a Q4 profit that rose 72% from a year ago on increased demand for its digital media players resulted in higher sales of its flash-memory chip products. The company earned $134 million, or 68 cents a share, on $751 million in revenue, compared with a net income of $78 million, or 42 cents a share, on $549 million in revenue a year ago. The results exceeded analyst estimates of 62 cents a share, on revenue of $727 million. The company’s shares fell 10.3%.

ECONOMIC NEWS

The Department of Commerce released is report on new home sales in the month of December on Friday, showing that sales rose more than economist had expected after falling rather sharply in the previous month. With the increase, sales for the full year reached a record high.

The report showed that new home sales rose 2.9 percent to a seasonally adjusted annual rate of 1.269 million units in December from a revised rate of 1.233 million units in November. Economists had expected new home sales to rebound to a 1.250 million unit rate from the 1.245 million unit rate originally reported for November.

As mentioned above, the increase in December lifted the number of new homes sold in 2005 to 1.282 million, a new record high. New home sales in 2005 were up 6.6 percent from 1.203 million in 2004. The report also showed that the median sales price of new houses came in at $221,800 in December, down 2.2 percent from the previous month. This marked the third consecutive month of falling prices.

Additionally, the seasonally adjusted estimate of new houses for sale at the end of December rose 2.4 percent to 516,000. The Commerce Dept. said that this represents a supply of 4.9 months at the current sales rate.

The U.S. economy grew at its slowest pace in three years in the fourth quarter, according to a report from the Department of Commerce. The report showed that the gross domestic product for the quarter grew much less than economists had been expecting.

The Commerce Dept. said that its advanced reading of the fourth quarter GDP showed an annual rate of growth of 1.1 percent, the slowest rate of growth since the fourth quarter of 2002. Economists had expected growth of about 2.8 percent compared to the 4.1 percent growth seen in third quarter.

The deceleration in GDP growth in the fourth quarter was primarily due to a slowdown in consumer spending, an acceleration in imports, a downturn in federal government spending, and a slowdown in spending on equipment and software.