Wednesday, February 18, 2004

Mid-day Update

S&P 500 1,155.06-.16%
NASDAQ 2,080.29 unch.

Leading Sectors

Lagging Sectors
Oil Service-.82%

Crude Oil 35.60+1.17%
Natural Gas 5.39+1.24%
Gold 413.80-.62%
Base Metals 115.72+2.93%
U.S. Dollar 85.23+.31%
10-Yr. Long-Bond Yield 4.01%-2.9%

Market Movers
ELN+30.0% on accelerated schedule for new ms drug.
RMBS+30.0% on dismissal of patent-fraud case, resulting in as much as $3B in royalties.
CMX+4.6% on winning contract from FEP covering 3.9M workers.
MHS-10.7% on losing contract to CMX.
NTES+21.0% on strong earnings report, strength of on-line gaming was big surprise.
BRCM+8.8% on expectations of positive conf. call after close.
NTAP+7.7% on strong 3rd Q and raised 4th Q guidance.

Goldman says Manufacturing sector capex for tech should increase 16% this year, dramatically improving in recent weeks. Goldman raising price forecasts for base metals across the board, favorites are AL, N and AA. Goldman raises rating on PCS to "Outperform" and NXTL raised to "In-Line." Citigroup's favorite semis are CY, FCS, INTC, MU and NSM. Also, Citi says BRCM may acquire PXLW, TRID or GNSS to bolster digital TV offerings. Leerlink raising target on CMX to $45 on massive contract win from Federal Employees Health Benefit Plan. JP Morgan raises VIP to "Overweight" and lowers MBT to "Neutral."

Mid-day News
U.S. stocks are down modestly at mid-day on weaker housing numbers. U.S. housing starts came in at 1903K, below the 1910K estimate. Building permits were 1899K, also failing to meet estimates of 1910K. The shortfall was blamed on cold weather and storms in some parts of the country. Cablevision(CVC) says capital costs low and margins high for VOIP, already seeing 40% direct margins. Copper prices hit an 8-yr. high as basic materials continue their strong advance.

BOTTOM LINE: The stair-step pattern continues as the markets rest after yesterdays strong advance. This is very healthy. I wouldn't be surprised to see a rally later in the day. A lot of stocks are moving up significantly on good news. Breadth is pretty good. My indicators are still on short-term sell in tech, so I will postpone my buying in this area for now. I haven't made any changes today, the Portfolio is currently down for the day and is 100% net long. I don't think the housing numbers are a big deal and I expect the market to resume its upward move shortly.

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