Thursday, February 26, 2004

Mid-day Update

S&P 500 1,145.34 +.15%
NASDAQ 2,032.69 +.48%

Leading Sectors
Homebuilding +2.05%
Networking +1.78%
Gaming +1.24%

Lagging Sectors
Drugs -.14%
Papers -.47%
Defense -.73%

Crude Oil 35.27 -1.15%
Natural Gas 5.32 +1.99%
Gold 395.00 -.28%
Base Metals 112.90 +.13%
U.S. Dollar 87.63 +.44%
10-Yr. Long-Bond Yield 4.05% +1.15%
VIX 14.81 -.80%
Put/Call .64 -15.79%
NYSE Arms .70 -10.26%

Market Movers
DRI +7.0% on 3Q outlook and multiple upgrades.
DCGN +26.1% on the announcement of a 7-year agreement with Merck to develop new medicines.
FCS +6.4% on upgrade to Outperform by Thomas Weisel.
NOVN +20.9% on better-than-expected 4Q and upgrade from W.R. Hambrecht.
SBUX -3.88% after saying recent strong trends aren't sustainable.
CENX -11.6% on better-than-expected 4Q earnings, but J.P. Morgan downgrades on outlook.
Homebuilders up across the board on TOL earnings.

Economic Data
Durable Goods orders fell 1.8%, below expectations of a gain of 1.4%.
Durable Goods ex transportation rose 2.0% vs. expectations of 1.8%.
Initial Jobless Claims rose to 350K last week vs. expectations of 345K.
New Home Sales were 1106K vs. expectations of 1075K.
Help Wanted Index was 38 last months vs. expectations of 39.

Morgan Stanley cut CHTR to Underweight. IRF raised to Outperform at Thomas Weisel. NXTL cut to Neutral at CSFB. Goldman says INTC and AGR/A are favorites coming out of their tech conference. JWN cut to In-line at Goldman. TIF raised to Outperform at GS on improvement in Japan. GS reiterated Outperform on SYMC and raised estimates. Finally, GS upgraded WMT to Outperform. Citi Smith Barney is upgrading NSM to 1H. Citi reiterating Buy on AFCI and raising earnings estimates. Citi also positive on EXTR. Citi says it is still early in semi equipment cycle and sell-off is buying opportunity.

Mid-day News
U.S. stocks are mostly higher Thursday afternoon, as shares of homebuilders rose on Toll Brother's earnings and tech shares continued their oversold bounce. Defense shares are pressuring the Dow. An Illinois couple is suing the federal government over restrictions on purchasing prescription drugs in Canada. Diane Swonk, chief economist for Bank One, told CNBC that U.S. manufacturers are seeing bottlenecks because they don't have enough workers, raw materials or supplies. Infineon Tech, the world's third largest chipmaker, is struggling with delivery problems as demand surpassed the company's capacity the CEO said. JC Penney's CEO said on CNBC it is attracting more younger customers. The U.S. lifted its ban on American travel to Libya to reward it for agreeing to dismantle nuclear programs. Disney's ABC network, last in ratings among the top 4, is getting a record average of $1.5M for 30 second commercials on its Sunday broadcast of the Academy Awards.

BOTTOM LINE: The Portfolio is having a very good day today as my shorts are down and longs are up. I have not made any changes yet and continue to maintain market exposure of 75% net long. I may close out some profitable shorts later as I uncover new long opportunities. The tone of the market is much better the last 2 days, I am not ruling out the possibility that the recent correction has run its course.

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