MAJOR PAPERS:

• The Wall Street Journal reported that Toyota Motor Corporation (NYSE: TM) is set to revamp its manufacturing operations in the U.S. in response to rising gasoline prices that have led to a shift toward fuel-efficient models. Officials at the auto maker said key moves may include dropping plans to produce the Highlander car-SUV crossover vehicles in a Tupelo, Mississippi plant, instead producing the Prius at the plant.
• Tomorrow Apple Inc (NASDAQ: AAPL) is set to launch its second version of the iPhone but it also will be opening its APP Store to software developers--an online bazaar--with the intent of bringing more applications to the phone as it has with music via its iTunes stores. Apple's goal is to turn the iPhone into a gadget that more resembles a personal computer, the Wall Street Journal reported.

• According to sources, the South China Morning Post reported that Wynn Resorts Limited (NASDAQ: WYNN) is considering a secondary listing in Hong Kong that would raise as much as $3B. The source said that the fund-raising plan has yet to be approved that that the company is a "long way" from a share sale and "might never do it."

• In an interview, Bloomberg reported that Former St. Louis Federal Reserve President William Poole said there is an increasing chance the U.S. may need to bail out "insolvent" Federal National Mortgage Association (NYSE: FNM), or Fannie Mae, and Federal Home Loan Mortgage Corporation (NYSE: FRE), or Freddie Mac. Poole said data provided show that the fair value of Fannie Mae's assets fell 66% to $12.2B in Q2, while Freddie Mac owed $5.2B more than its assets were worth during the quarter.

With stock market bears calling last week's stock market surge just a dead-cat bounce, it sure seems to me that this cat has nine lives, cause the market seems poised for a Santa-Claus rally. Bears like to point to a credit-crunch, slowing growth, and higher oil-prices as their reason for the stock market to continue dropping. The president of the St. Louis Fed, William Poole, said, " My sense from talking to [local community bankers] is that they do not feel their capital is impaired; they do feel some earnings pressure, everybody is more cautious, but I have no evidence that they are just closing the door to riskier credits."

Along with the lack of a credit crunch, the price of oil was dropping strongly last week until the pipeline explosion that has temporarily sent prices higher. I would fully expect prices to drop back into the mid-$80s in the short to near term. As for the slowing growth argument, with little evidence of inflation and the Fed ready to cut rates if needed, the chance of a recession is virtually zero.

The real risk to to stock prices will come from the banking sector. While analysts are worried about more write downs coming, I think that we will have to have some kind of really big surprise to shock the markets. With news coming out every day of another banking taking a multi-billion dollar charge, investors can hardly be shocked to hear this news. Like I said it would need to be a bank going under or something of that magnitude, in order to bring more fear into the markets and send stocks lower. The market has built in most of the bad news.

With historically low interest rates and little inflation, the climate is ripe for stocks to keep moving higher. Call it a dead-cat bounce if you like. I'll take a 5% move to the upside in just four days any time.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Author owns stocks and is long the market as of 12/2/07.