Tuesday, March 02, 2004

Mid-day Update

S&P 500 1,150.08 -.51%
NASDAQ 2,047.33 -.50%


Leading Sectors
Iron/Steel +.56%
Fashion +.39%
I-Banks +.30%

Lagging Sectors
Telecom -1.22%
Wireless -1.51%
Airlines -2.5%

Other
Crude Oil 36.68 -.3%
Natural Gas 5.55 +.09%
Gold 392.80 -1.7%
Base Metals 114.35 -.88%
U.S. Dollar 88.99 +1.68%
10-Yr. Long-Bond Yield 4.06% +2.27%
VIX 14.75 +2.42%
Put/Call .71 -4.05%
NYSE Arms 1.48 +114.49%

Market Movers
MAMA +113% on 4Q sales up 127%.
MU +4.1% on SoundView upgrade to Outperform.
SLNK +23.44% after signing an OEM agreement with NT. NT will brand and sell SLNK's wireless phones as components of its enterprise voice over IP product suite.
VAPH +8.9% on continued optimism over its Athlete's Foot treatment.
MVK +9.7% after presentation at Raymond James conference.
MVL -6.9% after beating 4Q estimates, announcing 3-for-2 split and lowering 04 guidance.
MERQ -4.3% on downgrade to Sell at Oppenheimer.
MVSN -9.0% on beating 4Q estimates, but lowering 1Q guidance.

Economic Data
Auto sales have not yet been reported. Greenspan is currently speaking at the Economics Club of NY.

Recommendations
SEPR price target raised at Deutshe Bank to $49. MU raised to Outperform at SoundView. UOPX and GSF cut to Neutral at CSFB. TXN, PXD, PPP, TLM, NXY and CHK raised to Buy at Bank of America. BOFA cut UHS to Neutral. UBS raised price target on URBN to $52. Morgan Stanley rates TYC Overweight. MERQ rated Sell at Oppenheimer, while FFIV and PKTR were raised to Buy. BMC and BEAS rated Underperform at Bear Stearns, while CA, ORCL and TIBX were rated Outperform. Goldman Sachs is saying carrier spending on cell-towers will continue to accelerate through 05, raised estimates on AMT, CCI and SSI. GS says online advertising is showing continued strength. GS also positive on BBY ahead of earnings. Goldman is also recommending RRI for a turnaround play. Finally, GS would be buying MERQ on weakness. Citi Smith Barney initiating coverage of Oil majors with Cautious View, XOM and COP sell. Citi also thinks Oil Service stocks fully valued. Citi reiterated 1L rating on AXP. XLNX and IDTI may raise guidance before open tomorrow, according to Citi. TheStreet.com is saying PSUN will likely exceed estimates after close.

Mid-day News
U.S. stocks are mostly lower mid-day on concerns that rising interest rates and U.S. dollar could crimp future profit growth. U.S. Attorney General John Ashcroft announced criminal charges against former WorldCom CEO Bernie Ebbers. As well, former WorldCom CFO Scott Sullivan has agreed to plead guilty and will cooperate with the U.S. government. AT&T is being investigated in Mass. for allegedly sending phone bills to people who weren't customers and then trying to sell them services when they complained, the Boston Globe reported. The U.S. dollar had its biggest rally against the euro in a year, and surged to a 4-month high against the yen, on speculation U.S. employment growth is accelerating. Bombers attacked Shiite Muslims in Iraq and Pakistan on a holy day, killing at least 184 and injuring 590, the U.S. suspects al-Qaeda involvement. Applied Materials said it may add 500 manufacturing jobs this year to help fill increasing orders from chipmakers.

BOTTOM LINE: The recent market leaders are pulling back today. Tech is outperforming in a down market. I took profits in a few cyclical longs, bringing market exposure for the Portfolio down to 75% net long. The Portfolio is up slightly today, as a few longs are up significantly, offsetting small losses elsewhere. The market seems to be anticipating a strong jobs report on Fri. Further deterioration on the close will likely result in more long sales for the Portfolio. However, with such a high Arms Index reading, it is more likely the markets will rally modestly late afternoon.

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