U.S. MARKET AVERAGES

Market traded in a tight trading range and at a lower trading volume than average in the morning hours ahead of FOMC meeting. S&P downgrade of General Motors debt closer to junk status and weaker than expected earnings at Best Buy put market on the defensive.

Energy sector stocks rallied in the morning on the news of mega merger news between ConocoPhillips and Burlington Resources. The deal is valued at $35.6 billion. Shares of natural gas producers rose in the session led by Southwestern Energy, Chesapeake Energy, Devon Energy, EOG Resources and XTO Energy. ConocoPhillips is buying Burlington Resources at 9.9% above yesterday’s stock price at closing and 19% above close of stock price on Friday. Burlington has most of its resources located in the North America and ConocoPhillips is acquiring natural gas resources at $3 per thousand cubic feet.

On earnings front mixed picture was presented to the market. Best Buy reported earnings 2 cents below estimates and Lehman Brothers reported earnings 14 cents above estimates. Proctor and Gamble also guided earnings near top end of the previously released guidance. Shares of Best Buy (BBY: chart) fell 12%, Lehman Brothers (LEH: chart) rose 33 cents, Proctor & Gamble (PG: chart) rose close to 3% at close.

Market rose in the afternoon as Fed hiked the fed fund rates as expected by 25 basis points to 4.25%. The rate hike was expected but it appears that language of the minutes of meeting suggests that Fed may increase rates in future again. Market rallied on the expected rate hike. Shares of homebuilders, financials and select technology companies rose at close. Market closed at its best level of the day.

MOVERS AND SHAKERS

Best Buy Co., Inc (BBY: chart) posted third-quarter earnings of $138 million, or 28 cents a share, up from $125 million, or 25 cents a share, a year earlier. Total revenue rose 10% to $7.3 billion, and sales at stores open at least one year rose 3.3%. The quarterly results failed to meet expectations of 30 cents a share, and revenue of $7.34 billion. The stock dropped 10.7%.

CuraGen (CRGN: chart) said its Phase II trial of velafermin, which treats oral mocositis in patients receiving chemotherapy, failed to meet its primary endpoint. While velafermin reduced oral mucositis in come instances, the results were not statistically significant. The stock fell 22%.

Insmed Inc (INSM: chart), biopharmaceutical company, said the Food and Drug Administration has approved Iplex to treat growth failure in children with severe primary IGF-1 deficiency or with growth hormone gene deletion who have developed neutralizing antibodies to growth hormones. The company said that Iplex is entitled to seven years of marketing exclusivity for the treatment of primary IGFD. Company’s shares rose 24.7%.

Celanese Corp. (CE: chart) raised its 2005 earnings per share outlook to a range of $2.10 to $2.20, from the previous range of $1.95 to $2.05, citing continued strength of its Ibn Sina joint venture in Saudi Arabia, lower personnel costs, and a lower tax rate. The Dallas-based chemicals company also said it expects 2006 earnings in a range of $2.50 to $2.90. Thre stoch gained 6.9%.

ECONOMIC NEWS

The Department of Commerce released its report on November retail sales on Tuesday, showing that sales growth came in slightly below economist estimates. At the same time, the report showed a notable upward revision to October sales.

The Commerce Dept. said retail sales rose 0.3 percent in November, matching a revised increase in October. Economists had been expecting sales to grow by 0.5 percent in November compared to the 0.1 percent decrease originally reported for October.

The November sales growth was partly due to a rebound in sales by motor vehicle and parts dealers, which rose by 2.6 percent in November after falling 1.3 percent in October.

Excluding auto sales, total sales fell 0.3 percent in November compared to a 0.8 percent increase in October. The decrease in ex-auto sales surprised economists, who had been expecting an increase of 0.1 percent.

The decrease in sales outside the auto sector was partly due to a 5.9 percent drop in sales by gasoline stations, which reflected a drop in gas prices. Sales by gas stations fell 0.6 percent in October.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mixed with gains capped ahead of a key Bank of Japan survey Wednesday. The Nikkei hit a five-year intraday high of 15,782.30 to close up 0.3%, boosted by strong steel and metals stocks. Among regional markets, Hong Kong’s Hang Seng lost 0.3%, Australia’s All Ordinaries fell 0.5%, while South Korea’s Kospi gained 0.2%.

European stocks closed slightly higher on strong energy stocks and ahead of U.S. Fed Reserve interest rate meeting today. The German DAX 30 gained 0.2%, the French CAC 40 advanced 0.4%, and London’s FTSE 100 added 0.1%. The euro fell 0.2% against the dollar to $1.1930.

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