EARNINGS SEASON KICKS OFF IN THE WEEK AHEAD-WHAT TO BUY AND SELL RIGHT NOW

1/5/2008 11 pm CT Saturday

BY DAVE HARRIS

It's been a rough start to 2008 for the stock market. The latest employment report from the labor department stunned Wall Street, with a less than expected 18,000 jobs added in December and the unemployment up to 5 percent. Oil hit $100 a barrel last week.  Economic growth continues it's sluggish pace and the next quarter is expected to be slow down even further. With the street so worried about a recession and weak consumer spending, stocks have trended downward. The Dow Jones industrials fell 3 and a half percent already for the year, and ended Friday at 12,800.18. I believe the upcoming earnings season will offer the best chance for some upside in equities in the short term.

On Wednesday, aluminum maker Alcoa (AA) kicks off the unofficial start to earnings season when the company reports fourth quarter results. Expectations are for an 8 percent profit loss compared to last year. I think the sector was stronger than that, and expect to see Alcoa beat those views.

In the weeks ahead look for reports from the likes of chip maker Intel (INTC), banks Citigroup (C) and Wells Fargo (WFC), IBM (IBM) and General Electric (GE).

Fed chairman Ben Bernanke will speak about the economy on Thursday in Washington. No doubt the market will listen for any clues about the direction of interest rates at the next meeting, which is January 29^th and 30^th. Most expect the central bank to cut. In my view the poor employment report, and the fact housing is problematic for the broader economy, gives the Fed a good reason to cut. Cutting makes money easier to get and would jump start consumer and corporate spending.

Many good quality companies have taken a hit only because the broader market is down, and not because of any problems at the individual companies. For me, that has always meant a good opportunity to buy. Google (GOOG) is down to $657 from its 52 week high of $747! My favorite real estate REIT Simon Property Group (SPG) is way too cheap at $79, near its 52 week low. Johnson and Johnson (JNJ) got hit in recent days. At $65 the stock should be picked up. Shoe maker Nike (NKE) traded in the upper 60’s a few weeks back, now it's down to $61. Apple (AAPL) recently crossed the $200 mark, and now it's selling at $180. All these stocks are at bargain prices!

Also in this environment, I especially like companies with international exposure that pay dividends. Farm equipment maker Caterpillar (CAT) is a buy here and should go higher in the long term. The stock closed down 1.85 at $68.53 on Friday, yielding 2 percent.

I don't like the automakers now, but one day will be the time to buy. Supposedly in turnaround mode, Ford (F) just lost their #2 spot for US sales to Toyota (TM). I would also avoid General Motors (GM) here. December was generally a big struggle for the automakers.

I may not like the company's stock...but I love my 2008 Ford Shelby GT500!