Pros Say: Jump on Santa Rally — Then Buy Energy

An auto industry bailout package seems inevitable Tuesday — and the dollar and U.S. stocks are riding the expectation higher. The news continued to be glum for small business owners struggling with the recession and retailers, whose holiday sales may be even weaker than expected. But top analysts told CNBC they expect a Christmas-New Year's Eve rally and see an energy stock recovery in the works.

Near-Term Markets Look Good (Thanks, Santa)

Jeffrey Saut of Raymond James and Elliott Wave International's Steve Hochberg were both upbeat about the short-range prospects for the markets. Saut explained the current rally as a "throwback bounce," the result of "pushing down on a spring." Hochberg said the bear market still probably has years to run and the current challenge should not be spotting bottoms, but detecting tops.

Rough Earnings No Surprise — With More to Come

Thomson Reuters director of research Ashwani Kaul said that although his firm's current outlook is 9 percent S&P earnings growth next year, that's certain to fall to a 2- to 3-percent decline after this year's Q4 numbers. He said no one should've been startled by a grim outlook from FedEx, because of the company's heavy reliance on corporate shipping.

Hedge Fund Titan: For-Profit Educators Will Flunk

Kynikos Associates founder and president Jim Chanos predicts that investigators examining student loans are likely to turn their attention to the for-profit educators, like Apollo and ITT Education, in 2009. Chanos says the graduates of on-line colleges, who leave school $60,000 or more in debt, generally do no better than the graduates of free community colleges.

Rally Sustainability in Doubt; Time to Move to Energy, Commodities

Craig Peckham of Jefferies & Co. said the credit markets have been a reliable indicator of trouble to come; with spreads remaining wide, they show nothing to support a rally continuation. He says it's best to remain on the defensive side. Kanaly Trust's James Shelton said supply disruptions are likely when the recession is over, and those will be extremely favorable for energy companies.

Lower Oil Prices: A Mixed Blessing

Kevin Caron of Stifel Nicolaus said plunging oil prices alone cannot revive the U.S. economy: a windfall for consumers of oil, but painful to the producers. He said real recovery requires a reversal of the current slide in volumes, asset prices, and profit margins; a decline (or lack of an increase) in corporate taxes; and a change in the current trend to lessen leverage.

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