Mid-day Update

S&P 500 1,109.74 -.37%
NASDAQ 1,926.11 -1.67%

Leading Sectors
Tobacco +.71%
Energy +.61%
Drugs +.46%

Lagging Sectors
Biotech -3.24%
Internet -3.79%
Networking -4.15%

Other
Crude Oil 37.40 +.24%
Natural Gas 5.86 -1.0%
Gold 387.50 +.10%
Base Metals 104.19 +.72%
U.S. Dollar 90.52 -.06%
10-Yr. Long-Bond Yield 4.50% -.76%
VIX 16.78 +1.39%
Put/Call .68 -28.42%
NYSE Arms 1.55 +17.42%

Market Movers
FDRY -20.2% after missing 1Q estimate and lowering 2Q forecast.
SONO +18.5% after meeting 1Q estimate and raising 04 guidance.
MCK + 9.43% after beating 4Q estimates and raising 04 guidance.
IM -26.24% after missing 1Q estimate and lowering 2Q guidance.
BOBJ -23.2% after missing 1Q estimate and lowering 2Q guidance.
SFNT -19.17% after missing 1Q estimate and lowering 2Q guidance.
CELL -18.4% after missing 1Q estimates.
APCC -18.4% after missing 1Q estimates.

Economic Data
Personal Income for March rose .4%, meeting expectations and down from a .5% rise in February.
Personal Spending for March rose .4% versus a .7% expected rise and .4% rise in February.
Univ. of Mich. Consumer Confidence came in at 94.2 versus expectations of 94.0 and 93.2 prior month.
Chicago Purchasing Manager Report for April came in at 63.9 versus expectations of 61.0 and 57.6 prior month.

Recommendations
Goldman Sachs reiterated Outperform on ROH, NFX, BIIB, MUR, ASN, SRE, AET, AVP, ACS, GCI, TRB, KRI, XOM, PFGC, MCK, DDR, AMIS, STZ, SNDK, KMI and KMR. GS reiterated Underperform on PHS, FHCC and LVLT. Citi SmithBarney upgraded FON to Buy, target $22. Citi strongly reiterated Buy on BG, target $47. MCK raised to Outperform at Bear Stearns.

Mid-day News
U.S. stocks are lower this afternoon on continued weakness in technology shares. Positive earnings surprises for the first quarter are averaging 8% above consensus expectations, leading to almost 300 basis points of upward revisions to 04 estimates. The new 04 earnings growth rate is 16.4% versus 12.7% expectations last month, Bloomberg reported. Russia's RTS Index, the world's second-best performing benchmark in the first quarter, had its sharpest monthly drop in three years amid concern over a slowdown in China and possible bankruptcy at OAO Yukos Oil. The NYSE is applying to delist Gucci(GUC) and suspend its common shares, Dow Jones reported. Donald Trump's Trump Hotels & Casino Resorts, whose auditor in March expressed doubts about its ability to survive, said it may miss a $73.1 million interest payment due Monday, Bloomberg reported.

BOTTOM LINE: The Portfolio is unchanged today as my longs are falling and shorts are mixed. The weakness in technology shares is spilling over into the entire market. I expect this weakness to continue in the short-run as investor complacency is still too high.

Thursday Close

S&P 500 1,113.89 -.76%
NASDAQ 1,958.78 -1.55%

Leading Sectors
Telecom +.14%
Foods +.13%
Insurance +.03%

Lagging Sectors
Disk Drives -2.89%
Oil Service -3.35%
Networking -3.51%

Other
Crude Oil 37.53 +.56%
Natural Gas 5.94 +.27%
Gold 388.80 +.44%
Base Metals 103.45 +.57%
U.S. Dollar 90.44 -.80%
10-Yr. Long-Bond Yield 4.54% +.86%
VIX 16.60 +1.90%
Put/Call .95 +9.20%
NYSE Arms 1.32 -30.53%

After-hours Movers
CALM +17.45% after withdrawing proposed 5M share secondary.
FLML +6.43% after meeting 1Q estimates.
VTIV +5.41% after substantially beating 1Q estimates.
FDRY -26.86% after missing 1Q estimates and lowering 2Q forecast.
APCC -10.26% after missing 1Q estimates.
BOBJ -10.78% after missing 1Q estimate and lowering 2Q guidance.
GNSS -14.92% after meeting 4Q estimate and lowering 1Q forecast.
ITMN -16.71% after making negative comments on future drug prospects.

Recommendations
Goldman Sachs reiterated Underperform on UAL, BVF, AKS and MGM. GS reiterated Outperform on DOW, CMX, DNA and AET.

After-hours News
U.S. stocks finished lower Thursday on a below-expectations GDP report, rising interest rates and concerns over the Chinese economy. After the close, Bloomberg reported that automakers boosted the fuel economy of 2004 model-year vehicles for the second year in a row. Electronic Arts, the largest U.S. video game maker, said fourth-quarter profit surged as sales climbed 29%. Sequoia and Kleiner Perkins Caufield & Byers paid about $25 million combined in 1999 for a stake in Google. The 2 firms now stand to make a return of at least 150-fold from the investment, or about $4 billion, Bloomberg reported.

BOTTOM LINE: The Portfolio rose slightly today as my shorts fell more than my longs. I did not make any afternoon changes and the Portfolio is still 25% net short. One of the new short positions I initiated today is William Lyon Homes(WLS), a small-cap homebuilder. I am keeping a 90.5 stop-loss on this position. I think rising interest rates will continue to pressure this group short/intermediate-term. The tone of the market is still very poor. With my short-term trading indicators still giving sell signals and investor complacency still relatively high, I tend to think we have more to go on the downside before an oversold bounce.

Mid-day Update

S&P 500 1,120.48 -.17%
NASDAQ 1,973.20 -.82%

Leading Sectors
Insurance +.63%
Banks +.46%
Drugs +.42%

Lagging Sectors
Oil Service -2.48%
Homebuilders -2.41%
Semis -2.92%

Other
Crude Oil 37.05 -1.12%
Natural Gas 5.93 -.52%
Gold 387.10 +.36%
Base Metals 103.45 +.57%
U.S. Dollar 90.66 -.55%
10-Yr. Long-Bond Yield 4.55% +1.09%
VIX 16.35 +.37%
Put/Call .86 -1.15%
NYSE Arms 1.02 -46.32%

Market Movers
MACR +18.9% after substantially beating 4Q estimates, raising 1Q guidance and multiple upgrades.
MANT +15.4% after beating 1Q estimates, raising 2Q/04 guidance and multiple upgrades.
TARO -27.4% after disappointing 1Q earnings and multiple downgrades.
VAS -17.1% after missing 1Q estimates and JP Morgan downgrade to Underweight.
INSP -9.9% after disappointing 1Q and 2Q guidance.
ACH -6.2% on continued selling of Chinese commodity stocks.

Economic Data
1Q GDP was 4.2% versus 5.0% estimate and 4.1% last quarter.
1Q Personal Consumption was 3.8% versus 4.2% estimate and 3.2% prior quarter.
1Q GDP Price Deflator was 2.5% versus 2.0% estimate and 1.5% last quarter.
1Q Employment Cost Index was 1.1% versus .9% estimate and .8% prior quarter.
Initial Jobless Claims for last week were 338K versus estimate of 343K and 356K prior week.
Continuing Claims were 3013K versus estimates of 2987K and 3010K prior.
Help Wanted Index for March was 39 versus 41 estimate and 40 in February.

Recommendations
Goldman Sachs reiterated Underperform on TCO, LSI, STA, SYMC and QLGC. GS reiterated Outperform on AL, N, NUE, STLD, AKS, NEM, PDG, MO, AHC, ATG, AET, ACS, EMC and ATI. JP Morgan cut CUB and VAS to Underweight. ASD rated Buy at Bank of America, target $130. DOV rated Buy at Bank of America, target $50. GE rated Buy at Bank America, target $36. HON rated Buy at Bank of America, target $42. TYC rated Buy at Bank of America, target $36. MACR raised to Buy at Merrill, target $26. SPW cut to Sell at Bank of America, target $40. MANT raised to Buy at Legg Mason, target $29. Merrill Lynch cut ACAI to Sell. Jim Cramer, of TheStreet.com, thinks commodity stocks are overdone on the downside.

Mid-day News
U.S. stocks are lower mid-day on a relatively disappointing GDP report, interest rates worries and concerns over the possible slowing of Chinese economic growth. The U.S. government estimates that 41 million Americans have higher-than-normal levels of blood sugar, classifying them as having pre-diabetes and at greater risk of developing the disease, the AP reported. Microsoft is very close to reaching an agreement in its antitrust case with the European Commission, Dow Jones reported. Nokia's market share dropped to 29% in the first quarter, the lowest in at least three years, as competitors such as Siemens shipped more attractive models, Bloomberg reported. Dow Chemical, the largest U.S. chemical marker, said first-quarter profit rose more than 600% on higher prices and greater demand for its products, Bloomberg reported. The U.S. economy expanded at a slower-than-expected 4.2% annual rate in the first quarter, Bloomberg reported. Sinclair Broadcasting ordered its ABC affiliates to preempt "Nightline", saying the show appears to be motivated by an anti-war political agenda. Sinclair which owns 62 U.S. television stations said ABC is disguising political statements as news content, Bloomberg reported. U.S. Treasuries are falling, pushing the yield on the benchmark 10-yr note to a seven-month high, after a surge in measures of inflation tied to the first-quarter GDP report.

BOTTOM LINE: The Portfolio is up slightly today as my shorts are falling more than my longs. I added a few new shorts in the retail and homebuilding sectors in the morning, bringing the Portfolio's market exposure to 25% net short. I was very surprised by the very good, but below-expectations, GDP report and even more surprised by the bond market's reaction. Bond investors are focusing on the higher-than-expected inflation readings in the report rather than the actual report. This does not bode well for the short-term direction of interest rates. While the 4.2% GDP number was below expectations, it likely gives the Fed a little more room to hike rates at a gradual pace. As well, commodity prices continue to fall. Thus, the current higher-than-expected readings on inflation should be temporary and will likely decelerate throughout the remainder of the year. The semiconductor index(SOX) has now clearly breached its 200-day moving-average. This likely means more damage to the overall tech sector and the broader market to an extent. The daily drumbeat of negativity from the mainstream press has turned investor psychology very negative even as the sentiment indicators are not overly bearish. This usually indicates further downside with an eventual spike-up in fear indicators such as the VIX, ARMS and Put/Call ratio signaling a short-to-intermediate term bottom.

Thursday Watch

Earnings Announcements
Company/Estimate
APCC/.19
ANDW/.11
CELL/.20
BOBJ/.15
CE/.17
COX/.05
DOW/.43
DUK/.37
ERTS/.21
XOM/.75
FIC/.42
FDRY/.17
FLML/.03
GR/.36
IM/.24
KROL/.30
MCK/.65
MGM/-.08
NTES/.37
PTEN/.26

Splits
None of note.

Economic Data
1Q Gross Domestic Product estimated +5.0% versus 4Q growth of 4.1%.
1Q Personal Consumption estimated +4.2% versus 4Q growth of 3.2%
1Q Employment Cost Index estimated +.9% versus +.8% in 4Q.
Initial Jobless Claims last week estimated at 343K versus 353K prior week.
Continuing Claims estimated 2987K versus 3019K prior week.
Help Wanted Index for March estimated at 41 versus 40 in February.

Recommendations
Goldman Sachs reiterated Outperform on AG, KMT, PPL, WON, DRE, BIIB, STLD, MO, OG, and NUE. GS reiterated Underperform on NFG, EQR, GSIC and HRB.

Late-Night News
Asian indices are down across the board after the Chinese government called on its banks to restrict lending and stopped construction of a $1.3 billion steel plant, as it escalates attempts to slow the economy, Bloomberg reported. China has already raised banks' reserve ratio, restricted lending to the steel, cement and aluminum industries and banned new construction projects to slow the economy and prevent inflation. Still, the second-largest economy in Asia grew at a faster-than-expected 9.7% in the first quarter with investment jumping 53% in the first 2 months, including a 173% increase in money invested in the steel industry, Bloomberg reported.

Late-Night Trading
Asian Indices -3.25% to -.50%.
S&P 500 indicated -.08%.
NASDAQ indicated -.10%.

BOTTOM LINE: I expect U.S. stocks to open lower tomorrow as an exceptionally strong GDP report will likely push interest rates higher. I expect US 1st quarter GDP growth of around 6%, versus economists' expectations of 5%. Commodity-related stocks will probably remain under pressure as investors panic-sell any stock that has benefited from China. It is possible that the major U.S. indices could see a substantial sell-off tomorrow as bonds fall more than I currently anticipate. I will analyze the situation on the open and decide whether to increase or decrease market exposure.

Wednesday Close

S&P 500 1,122.41 -1.38%
NASDAQ 1,989.54 -2.12%

Leading Sectors
Utilities +.18%
Restaurants +.12%
Hospitals -.47%

Lagging Sectors
Homebuilders 3.15%
Nanotechnology -3.24%
Papers -3.58%

Other
Crude Oil 37.26 -.53%
Natural Gas 5.93 -.60%
Gold 384.80 -.29%
Base Metals 102.86 -4.18%
U.S. Dollar 91.17 +.84%
10-Yr. Long-Bond Yield 4.47% +1.94%
VIX 16.29 +8.10%
Put/Call .87 +22.54%
NYSE Arms 1.90 +62.39%

After-hours Movers
MACR +20.21% after beating 4Q estimates and raising 1Q guidance.
PHTN +6.13% after missing 2Q estimates, but raising 3Q guidance.
TWX +4.18% after beating 1Q estimates and raising 04 guidance.
JDSU -7.51% after meeting 3Q estimates and lowering 4Q guidance slightly
SWKS -7.75% on profit-taking after beating 2Q estimates and raising 3Q guidance.

Recommendations
Goldman Sachs reiterated Underperform on AKS, BMY, ACAI and Outperform on SYMC, ATI, FOX. GS says to Buy ROV on weakness. The Street.com has a positive column on PD, saying now is a good long-term entry point.

After-hours News
U.S. stocks finished sharply lower Wednesday on Nortel's ongoing scandal, higher interest rates and concerns about the health of the Chinese economy. After the close, Time Warner's CEO Richard Parsons told CNN that business is stabilizing and that "there's a lot more value there than we're getting credit for." Caterpillar forecast its China sales will grow 35% to $1 billion this year, the China Daily reported. The U.S. House voted to make permanent a tax cut for married couples that expires next year after retooling the legislation to allow more low-income Americans to claim a tax credit for working.

BOTTOM LINE: The Portfolio fell slightly today and I did not make any changes in the afternoon, leaving market exposure at 25% net long. Interest rates rose in anticipation of tomorrow's strong GDP report. Economists are expecting 1st quarter U.S. economic growth of 5.0%. I am expecting a number closer to 6.0%. Commodities continued their fall today on rising U.S. interest rates, a rising U.S. dollar and Chinese economic concerns.

Mid-day Update

S&P 500 1,126.34 -1.03%
NASDAQ 2,001.72 -1.52%

Leading Sectors
Restaurants +.77%
Utilities +.03%
Semis -.15%

Lagging Sectors
Biotech -2.33%
Nanotechnology -2.75%
Papers -2.83%

Other
Crude Oil 37.83 +.80%
Natural Gas 5.86 -.24%
Gold 386.00 -3.31%
Base Metals 102.86 -4.18%
U.S. Dollar 91.15 +.83%
10-Yr. Long-Bond Yield 4.45% +1.71%
VIX 16.15 +7.17%
Put/Call .86 +21.13%
NYSE Arms 1.87 +59.83%

Market Movers
NT -26.0% after saying it fired its CEO, former CFO an controller, all for cause. Also said it would restate three year's worth of financial results covering 2000-2003 and delay 1Q results.
SINA -13.0% on Chinese economic concerns after beating 1Q estimate and raising 2Q guidance.
FLEX -7.0% on NT concerns after beating 1Q estimate and raising 04 forecast.
NET -11.60% after missing 1Q estimates and lowering 2Q forecast substantially.
OSIP -10.0% on profit-taking.
CELG -11.16% after stopping a test of its Revlimid medicine after early results failed to show it helped skin-cancer patients live longer.
FTFC +22.69% after announcing it will be acquired by ASBC for $26.79/share.
ECLP +16.65% after meeting 1Q estimates.
GTRC +12.29% after beating 1Q estimate and raising 2Q forecast.
PLT +17.02% after beating 4Q estimate and raising 1Q forecast.
KSWS -20.14% after beating 1Q estimates and substantially lowering 2Q/04 forecast.
MAGS -20.4% after disappointing 1Q results.
INTL -16.14% after missing 1Q estimates.
COCO -12.0% after beating 3Q estimate and lowering 4Q guidance.

Economic Data
None of note.

Recommendations
Goldman Sachs reiterated Outperform on AGR/A, CBL, NEM, CCE, AMLN, AHC, BSX, AL, STLD, PDG, X, HD, PETC, BHI and WON. GS raised NUE to Outperform. GS reiterated Underperform on F, BMY, HMT, ASH and RKY. Citi SmithBarney downgraded MU from Buy to Sell. Citi said to Buy APCC ahead of quarterly report, target $31. Citi upgraded MHP from Sell to Buy, target $90. Citi reiterated Buy on RCI, raised earning and target to $61. Citi reiterated Buy on BC, target $49. Citi rated AXL Buy, target $48. Citi rated BWA Buy, target $108. Citi rated MGA Buy, target $105. Citi rated SUP Sell, target $30. QLTI cut to Reduce at UBS. CIT raised to Buy at Legg Mason, target $44. ELX raised to Buy, target $20.50. CMCSA raised to Buy at Merrill, target $46. COL raised to Overweight at Morgan Stanley. CSGS raised to Raymond James, target $21. AXCA and Q removed from Focus List at JP Morgan. ETN raised to Outperform at Bear Stearns.

Mid-day News
U.S. stocks are sharply lower mid-day on concerns over the Chinese economy, rising interest rates and the continuing scandal at Nortel. VaxGen said it submitted a plan to the U.S. government to make 75 million doses of an experimental anthrax vaccine for a national stockpile. President Bush has approved measures to enhance the country's defenses against a biological weapons attack, including the creation of a surveillance system to track threats, the NY Times reported. IBM announced today it plans to build new server computers that act more like mainframes, the NY Times reported. Viacom's CBS was sued by Mohamed al-Fayed, the father of the man killed with Princess Diana in a 97 crash, for airing pictures of a dying Diana, Reuters reported. Comcast withdrew its $54.1 billion unsolicited bid for Walt Disney, Bloomberg reported. Boeing boosted its 2004-2005 profit forecasts because of better margins and higher-than-expected commercial-aircraft deliveries next year. Hilton Hotels first-quarter profit rose 400% because of increased business travel, Bloomberg reported. Copper futures fell to a 12-week low as some Chinese banks halted new loans in a government bid to slow the economy, signaling an erosion in demand for metal used in buildings, appliances and automobiles, Bloomberg reported.

BOTTOM LINE: The Portfolio is down slightly today on declines in technology and energy-related long positions. I trimmed a few more longs, leaving the Portfolio with 25% net long market exposure. Interest rates are increasing in anticipation of tomorrow's GDP report. If rates make new near-term lows tomorrow U.S. stocks will likely continue their recent sell-off. However, if rates fall on tomorrow's strong economic report, it may provide the catalyst for another upward thrust. There are two positives I see from today's mostly negative action. In a little over a month the CRB Index has now fallen over 5% as China's government continues to make comments about trying to slow recent torrid growth. Most of the Bear's inflation arguments revolve around rising commodity prices. A rising dollar and decelerating Chinese demand should continue to pressure commodity prices in the near-term. As well, it is positive that semiconductors are mostly unchanged today as the rest of tech is falling. Semis usually lead tech and this may be a sign that tech is trying to find a bottom. I expect stocks to remain under pressure in the afternoon as investors worry about the bond market's reaction to tomorrow's GDP report.

Wednesday Watch

Earnings Announcements
Company/Estimate
AFCI/.08
BMY/.39
CMCSA/.06
EL/.35
FEIC/.08
HAL/.30
HLT/.06
INSP/.16
MGAM/.26
NEM/.34
PD/1.81
QLGC/.36
SOHU/.27
SWKS/.04
SYMC/.34
TWX/.09
ZBRA/.52

Splits
None of note.

Economic Data
None of note.

Recommendations
Goldman Sachs reiterated Outperform on BHI, BSX, MUR, MMP and AFL. GS says to Buy ROH ahead of quarterly report.

Late-Night News
Asian indices are mixed on strength in Hong Kong/Australia and weakness in Taiwan/Korea. The European Central Bank signaled yesterday that the 10 countries which are about to join the European Union may have to wait years before they can adopt the euro, the Wall Street Journal reported. Sony fell as much as 3.3% after the company said it may post a weaker-than-expected 13% rise in net income this year. China's efforts to cool expansion in its steel, cement and other heavy industries are working, a central bank official said, suggesting interest rates may remain where they are unless inflation accelerates, Bloomberg reported.

Late-Night Trading
Asian Indices -1.25% to +.50%.
S&P 500 indicated -.06%.
NASDAQ indicated -.13%.

BOTTOM LINE: I expect U.S. stocks to remain mixed to lower tomorrow ahead of Thursday's 1st Quarter GDP report. My short-term trading indicators are giving conflicting signals and the tone of the market has not been good the last couple of days. The Portfolio is 50% net long heading into trading tomorrow.

Tuesday Close

S&P 500 1,138.15 +.23%
NASDAQ 2,032.53 -.21%

Leading Sectors
Oil Service +3.17%
Homebuilders +2.14%
Energy +1.86%

Lagging Sectors
Semis -1.35%
Networking -1.58%
Nanotechnology -2.59%

Other
Crude Oil 37.54 +.03%
Natural Gas 5.86 -.15%
Gold 399.80 +.18%
Base Metals 107.35 -.14%
U.S. Dollar 90.40 -.24%
10-Yr. Long-Bond Yield 4.39% -.82%
VIX 15.07 +2.03%
Put/Call .71 +9.23%
NYSE Arms 1.17 +10.38%

After-hours Movers
SNCI +13.59% after beating 1Q estimates.
MSTR +8.91% after beating 1Q estimates, lowering 2Q guidance, maintaining 04 forecast.
GTRC +6.49% after beating 1Q estimates and raising 2Q forecast.
ACLS +6.32% after beating 1Q estimates and raising 2Q forecast.
PLT +6.22% after beating 4Q estimates and raising 1Q guidance.
LPNT +4.29% after beating 1Q estimates.
NET -8.84% after missing 1Q estimates and lowering 2Q forecast.
NTIQ -7.87% after beating 3Q estimates and lowering 4Q guidance.
ZRAN -7.8% after beating 1Q estimates, lowering 2Q guidance and raising 04 forecast.
QSFT -7.65% after beating 1Q estimates and lowering 2Q forecast.
MNST -6.06% after beating 1Q estimates and leaving 2Q forecast unchanged.

Recommendations
Goldman Sachs reiterated Outperform on HD and BC.

After-hours News
U.S. stocks finished mixed Tuesday as better-than-expected economic numbers, falling interest rates and violence in the Middle East created above average volatility. After the close, Gillette said it may sign a $71.6 million advertising deal with Real Madrid and England soccer player David Beckham, the London-based Times said. The leaders of an interim government in Iraq, chosen by Iraqis, should be name by the end of May, and should use the time before they assume control of the government June 30 to define their relationship with U.S. military forces, said Brahimi, the United Nations' top envoy to Iraq. China Life Insurance said it received an "informal inquiry" from the SEC, Bloomberg reported.

BOTTOM LINE: The Portfolio fell slightly today and I exited some technology positions in the afternoon, bringing the Portfolio's market exposure to 50% net long. Today's breadth was disappointing, as well as the performance of the technology sector. However, the bond market's reaction to better-than-expected economic reports was a positive. If the GDP report Thur. is as strong as I expect(near 6%) and bonds don't fall much or rally, it could provide the catalyst for another upward thrust in stocks. A move substantially lower in bonds on a very strong number would likely signal that the major U.S. indices are still stuck in their recent trading range.

Mid-day Update

S&P 500 1,144.40 +.78%
NASDAQ 2,042.87 +.30%

Leading Sectors
Oil Service +3.79%
Energy +2.36%
Homebuilders +2.43%

Lagging Sectors
Networking -.68%
Nanotechnology -1.24%
Iron/Steel -1.43%

Other
Crude Oil 37.50 +1.38%
Natural Gas 5.83 +1.23%
Gold 399.20 +.66%
Base Metals 107.35 -.14%
U.S. Dollar 90.58 -.06%
10-Yr. Long-Bond Yield 4.43% -.09%
VIX 14.55 -1.49%
Put/Call .61 -6.15%
NYSE Arms .72 -32.08%

Market Movers
OSTK +11.0% on short-squeeze, optimism over Google IPO.
NGPS +38.77% after beating 1Q estimate and raising 04 forecast substantially.
VANS +28.27% after announcing purchase by VFC for $20.55/share.
BLUD +25.6% after FDA cleared its Galileo product for use in the U.S.
ISPH +19.8% after reporting positive results from Cystic Fibrosis Drug Study.
CVNS +22.5% after announcing purchase by FNF of 29% stake for $131M.
KRON +15.9% after beating 2Q estimates and raising 3Q guidance.
RNT +13.12% after beating 1Q estimates and raising 2Q forecast.
GLBC -22.4% after saying it is conducting a review of previous financial statements for 02 and 03 and expects to restate some results.
PIR -12.22% after saying April sales were below expectations.
CAMP -27.0% after beating 1Q estimates, but announcing it was being served with complaint alleging certain violations of California's labor code.

Economic Data
Consumer Confidence for April 92.9 versus expectations of 88.5 and 88.5 in March.
Existing Home Sales for March 6.48M versus expectations of 6.20M and 6.13M in April.

Recommendations
Goldman Sachs reiterated Underperform on EDS and RKY. GS reiterated Outperform on EMC, BC, ENH, AXP, X, MET, ADP, CEN, PAYX, LEA, ATYT and PETC. Citi SmithBarney says to swap out of EMN and into NCX. Citi rated CMLS Buy, target $27. Citi added CKFR to Small/Mid-Cap Focus List, replacing FIC. CVS and WAG rated Buy at Deutsche Bank, targets $47 and $37 repectively. NRMX rated Sector Outperform at CIBC, target $33. RTEC cut to Underperform at CIBC. TSA rated Buy at Merrill, target $48. MEE raised to Outperform at CSFB, target $32. CB and WRI raised to Buy at Legg Mason. R cut to Underperform at Bear Stearns. Jim Cramer, of TheStreet.com, thinks UNH purchase of OHP is very good strategic move, target $100 on UNH. TheStreet.com has a positive column on MSFT, target mid-30's.

Mid-day News
U.S. stocks are higher mid-day on a better-than-expected Consumer Confidence report, falling interest rates and strong corporate earnings. Yum! Brands's KFC will start selling oven-roasted chicken, part of an attempt to attract more health-conscious consumers wary of the fast-food chain's fried food, USA Today reported. Interpublic Group won an advertising contract to help promote Verizon Wireless, the Wall Street Journal reported. OPEC may boost its target crude price by 30%, Bloomberg reported. Janus Capital may pay about $200M, including fee reductions, to settle allegations that it allowed clients to engage in improper mutual-fund trading, Bloomberg reported. "Housing sales are likely to remain very strong, even with higher rates, because of a strong economy and a rebounding labor market," said Steven Wood, chief economist at Insight Economics. Confidence in the U.S. economy rose more than expected this month as strong job growth boosted sentiment about current conditions to the highest in almost 2 years, Bloomberg reported. General Motors, Ford, DaimlerChrysler and more than 100 companies and universities will get a share of $350M in grants to design autos that run on hydrogen, U.S. Energy Secretary Spencer Abraham said.

BOTTOM LINE: The Portfolio is down slightly today as one of my biotech longs is falling and other longs are mixed. I am disappointed in the breadth of today's rally and continued relative weakness in technology shares. However, the bond market's reaction to very positive economic reports the last 2 days is a big positive. I took profits in a few long positions this morning, bringing the Portfolio's market exposure to 75% net long.

Tuesday Watch

Earnings Announcements
Company/Estimate
ABGX/-.50
AGR/A/.01
AMT/-.16
ABI/.21
AGI/.48
AV/.07
BHI/.25
BJS/.41
COHR/.06
FLEX/.10
IMCL/.16
LLL/.64
LMT/.53
MXIM/.31
MNST/.10
MSTR/.29
NET/.11
RFMD/.04
SINA/.27
SONS/.01
VZ/.57
UTSI/.39

Splits
ARO 3-for-2
BKST 3-for-2

Economic Data
Consumer Confidence for April estimated at 88.5 versus 88.3 in March.
Existing Home Sales for March estimated at 6.2M versus 6.12M in February.

Recommendations
Goldman Sachs reiterated Underperform on SMP, VRTX and T. GS reiterated Outperform on ENH, DNA and SBC.

Late-Night News
Asian indices are mixed as strength in Hong Kong is being offset by weakness in Taiwan. Starbucks Chairman Howard Schultz said the largest U.S. coffee-shop chain by market value doesn't plan to increase drink prices even as the cost of coffee and milk rises, CNBC reported. China may take more steps to try to curb Shanghai's real estate prices by forcing developers to keep prices stable for large lots of property put up for sale, the Financial Times reported. A foiled chemical attack in Jordan, linked to al-Qaeda, could have killed 80,000. The chemical explosives were 20 times more powerful than the bomb used in Oklahoma City, ABC News reported.

Late-Night Trading
Asian Indices -1.25% to +1.25%.
S&P 500 indicated +.04%.
NASDAQ indicated unch.

BOTTOM LINE: I expect U.S. stocks to open higher tomorrow on a better-than-expected Consumer Confidence report and strong corporate earnings reports. The Portfolio is 100% net long and I will look to add select tech long positions on any unexpected morning weakness.

Monday Close

S&P 500 1,135.53 -.44%
NASDAQ 2,036.77 -.63%

Leading Sectors
Biotechnology +3.25%
Utilities +1.01%
Energy +.55%

Lagging Sectors
Iron/Steel -1.43%
Networking -1.49%
Semis -2.71%

Other
Crude Oil 36.94 -.08%
Natural Gas 5.75 -.24%
Gold 396.90 +.08%
Base Metals 107.50 +.14%
U.S. Dollar 90.62 -.51%
10-Yr. Long-Bond Yield 4.43% -.54%
VIX 14.77 +5.42%
Put/Call .65 -2.99%
NYSE Arms 1.06 +32.50%

After-hours Movers
FWHT +20.1% after beating 1Q estimates and raising 2Q/04 guidance.
BLUD +10.4% after announcing that the FDA has cleared Galileo for marketing in the U.S.
PHM +3.5% after beating 1Q estimates and raising 04 forecast.
SLAB -4.86% on profit-taking after beating 1Q estimates and raising 2Q guidance.
CAMP-29.9% after beating 1Q estimates, but announcing it was being served with complaint alleging certain violations of California's labor code.
CNXT -3.29% after beating 2Q estimates and lowering 3Q guidance.

Recommendations
Goldman Sachs reiterated Underperform on GBTVK and Outperform on PMMAY.

After-hours News
U.S. stocks finished lower Monday as weak technology shares overshadowed soaring biotechnology stocks. After the close, the Wall Street Journal reported that UnitedHealth Group(UNH) is purchasing Oxford Health Plans(OHP) for about $4.9B. Oxford stockholders will receive .6357 UnitedHealth shares and $16.17 in cash for each share they own or about $56.79/share. Verizon probably added 1.1M subscribers in the first quarter after winning business from AT&T Wireless and local carriers including its parent, Bloomberg reported. Iraq's Governing Council, the U.S. and the U.N. will set up an electoral commission before the end of May to organize national elections that art to be held in Iraq by Jan. 31, 2005, Bloomberg reported. At least $1.1 billion in "commissions" were paid directly into U.N. coffers, supposedly to cover the cost of administering the $67 billion Iraqi oil for food scheme, while Saddam diverted funds intended for the poor and sick of Iraq to bribe foreign governments and prominent overseas supporters of his regime, London's Telegraph reported.

BOTTOM LINE: The Portfolio rose slightly today and I did not make any changes on the close, thus leaving market exposure at 100% net long. The Biotechnology Index confirmed its March 5 breakout today on good volume. The BBH, Biotech HOLDRs Trust, is a good way to play the long side of this risky sector without the volatility associated with an individual stock, as one of our readers mentioned earlier in the day. I think one of the main things weighing on U.S. shares today was China. Chinese ADRs fell across the board on concerns that the economy is in for a hard landing and that SARS may become a problem again. I do not believe either of these views will prove to be correct, however I am closely monitoring the situation.

Mid-day Update

S&P 500 1,135.28 -.47%
NASDAQ 2,035.91 -.67%

Leading Sectors
Biotech +3.32%
Oil Service +.96%
Energy +.82%

Lagging Sectors
Networking -1.55%
HMO's -2.25%
Semis -2.93%

Other
Crude Oil 36.92 +1.26%
Natural Gas 5.75 +3.3%
Gold 396.60 +.23%
Base Metals 107.50 +.14%
U.S. Dollar 90.76 -.35%
10-Yr. Long-Bond Yield 4.43% -.63%
VIX 14.99 +7.0%
Put/Call .64 -4.48%
NYSE Arms 1.06 +32.50%

Market Movers
OSIP +127.0% after saying their experimental Tarceva drug improved survival for lung-cancer patients.
IGT -4.8% on profit-taking and concerns over slowing growth.
ABGX +19.0% as investors anticipate positive results on its cancer drug.
TXU +13.09% after agreeing to sell its Australian unit to Sinapore Power for $3.72B.
VALU +24.4% after saying it will pay a special, one-time dividend of $17.50 a share from retained earnings.
ONXX +16.4% as investors anticipate positive results on its cancer drug.
DNA +12.2% on partnership with OSIP.
SCSC +13.2% on continued rise after strong 3Q results and 4Q guidance.
FHCC -13.5% after cutting 1Q/04 guidance.

Economic Data
New Home Sales for March 1228K versus estimates of 1173K and 1128K prior month.

Recommendations
Jim Cramer, of TheStreet.com, had a positive column on cable stocks, favorites are CMCS/A, TWX and CHTR. Goldman Sachs think AMIS will report at high end of guidance. GS reiterated Outperform on DNA, AMR, SII, ADP, WMT, ALK, PFE, HD, BBY, SPLS, PETC, EBAY, KO and UTX. GS reiterated Underperform on PGL, FHCC, FISV, CR and HUM. GS upgraded gold industry to Outperform, sees 30% upside, favorites are NEM and PDG. GS upgraded PXD and XRX to Outperform. Citi SmithBarney reiterated view of Buying homebuilders on weakness. Citi reiterated Buy on CAT, target raised to $106. NSM and AKS rated Underperform at JP Morgan. MXIM, ISG, SIR and ADI rated Overweight at JP Morgan. HLT, LHO and HOT raised to Buy 2 at UBS. WC rated Outperform at CSFB, target $49. PPS cut to Sell at Bank of America. GM raised to Overweight at Lehman. HSY raised to Buy at Merrill, target $97. MTLG raised to Strong Buy at Raymond James, target $28.

Mid-day News
U.S. stocks are lower mid-day as weakness in Semiconductors and HMO's is more than offsetting the very strong Biotechnology sector. Comcast is considering a shareholder dividend and may offer to buy back stock, the New York Post reported. Roche Holding, Genentech and OSI Pharmaceuticals said their experimental Tarceva medicine extended the lives of lung-cancer patients who no longer responded to other treatments in trials. "This is the first time that any drug in this class has shown a survival benefit," Bill Burns, head of Roche's drug division, said in an interview. U.S. sales of new homes rose to a record 1.228 million annual rate in March, exceeding forecasts, as cheap financing and an improving job market persuaded Americans to invest in real estate, Bloomberg reported. A "dangerous situation" is developing in the Iraqi city of Najaf, where insurgents are stockpiling weapons in schools and mosques, reported Bloomberg. President Bush urged Congress to pass measures that would help provide every community high-speed Internet access, give Americans online access to their medical records with 10 years and expand federal efforts to develop hydrogen as an alternative fuel source, Bloomberg reported.

BOTTOM LINE: The Portfolio is up slightly today as one of my long biotechnology positions is up substantially, offsetting losses in other longs. I rotated out of a few semiconductor long positions and into a couple of new biotech positions, leaving the Portfolio with 100% net long market exposure. While it is positive that the bond market is rising on the exceptionally strong housing report, it is negative that semis are breaking down again. I expect stocks to stabilize shortly and begin moving higher into the close. However, if the major indices weaken on the close, I will likely cut market exposure to 75% net long.

Monday Watch

Earnings Announcements
Company/Estimate
ABC/1.20
CNXT/.03
EDS/.01
FWHT/.13
HUM/.41
PBI/.56
VECO/.08
ZMH/.51

Splits
CALM 2-for-1

Economic Data
New Home Sales for March estimated at 1173K versus 1163K in April.

Weekend Recommendations
Forbes on Fox had guests that were positive on PD, FCX, MOT, ZBRA, CVC, COX, CMCSA, VZ, FON, WM and mixed on PTV, MRK and UNH. Bulls and Bears had guests that were positive on PVX, KKD, GM, THC, LUV, MDT, mixed on HPQ, MSFT, CC, XRX, GS and negative on TASR. Cashin' In had guests that were positive on TRB, VIA/B, VIP, MBT and mixed on LEND and GENZ. Louis Rukeyser's Wall Street had guests that were positive on MMC, RD, UNP, COH, BR, PGR, CFC, COF, CAT, CNX, BTU, MEE, ACI, NFX and negative on financials, homebuilders and metals. Wall St. Week w/Fortune had guests that were positive on AMR, ALK, UTX, GR, HON, ABXA, BA, RHAT, MWAY, SII, HL, IWM, GE, AIG, PEP, MSFT, PFE and negative on JBLU. Barron's had positive columns on HAL, LGF and negative columns on the Nikkei and China.

Weekend News
Interest rates are creating a wall of worry for the markets, Bloomberg reported. Analysts' expectations for semiconductor industry growth this year continue to edge upward, with In-Stat/MDR predicting a 29 percent rise this year. Last month the Semiconductor Industry Association forecast a 19.4 percent growth year for the industry. California, Arizona, Montana and other Western U.S. states are at above-average risk for wildfires in 04, the Washington Post reported. 71% of Chinese workers earn between $96-$300/month, Xinhua News Agency reported. Cingular and other U.S. mobile-phone operators are increasingly marketing handsets and services to teens, who are more likely than adults to use features that cost extra such as text messages, cameras and games, the Washington Post reported. GM's sales to China rose 70% in the first quarter, Xinhua News reported. Google may have a market value of as much as $25 billion by the end of its first day of trading, the New York Times said. Google has picked CSFB and Morgan Stanley to lead the IPO, the Wall Street Journal reported. Apple Computer may be developing a line of digital mobile phones that use the Internet for transmitting calls, the New York Times said. Caterpillar workers represented by the UAW rejected the company's contract proposal, Reuters reported. Libya, a day after the U.S. lifted sanctions, said it brokered its first sale to an American oil company since 1986 -- a shipment of 2 million barrels of oil worth about $73 million, Bloomberg reported. Samsung raised its forecast for 04 industry wide handset sales for the second time this month, citing rising consumer demand for new models, Bloomberg reported. Crude oil futures rose in NY and London after attacks on Iraq's offshore oil export terminals over the weekend heightened concern about possible disruptions to supplies from the Middle East's third-largest crude producer, Bloomberg reported. Shares of Asian airlines are falling after China reported 4 new suspected SARS cases in Beijing, renewing concerns the disease may crimp leisure and business travel, Bloomberg said.

Late-Night Trading
Asian indices are mostly lower, -1.75% to +.25% on average.
S&P 500 indicated -.10%.
NASDAQ indicated -.17%.

BOTTOM LINE: The Portfolio is 125% net long heading into the week. U.S. stocks may open lower Monday morning on weakness in Asia from rising oil prices, SARS concerns and U.S. interest rate worries. I expect shares to rally later in the day on strong fundamentals and improving technicals.

Weekly Outlook

There are number of economic reports scheduled for release this week. As well, another heavy week of corporate earnings reports is on tap. Scheduled economic reports include New Home Sales, Consumer Confidence, Existing Home Sales, GDP, Employment Cost Index, Initial Jobless Claims, Help Wanted Index, Personal Income/Spending and Chicago Purchasing Manager. Consumer Confidence and GDP are the most important reports scheduled for release.

Zimmer Holdings(ZMH), BP(BP), Du Pont(DD), Imclone(IMCL), U.S. Steel(X), Verizon(VZ), Flextronics(FLEX), McDonald's(MCD), Monster Worldwide(MNST), Boeing(BA), Bristol-Myers Squibb(BMY), Comcast(CMCSA), Hilton Hotels(HLT), Electronic Arts(ERTS) and Ingram Micro(IM) are some of the more important companies that release quarterly earnings this week. There are also a few other events that have market-moving potential. The Fed's Moskow and ECB's Issing speak at a Fed Conference Monday. Finally, on Tuesday CIBC has its Biotech Conference and Greenspan speaks at the Washington Energy Conference.

BOTTOM LINE: It was good to see investor complacency drop last week with the AAII Bullish % falling 21.57% to 50.0%. The CRB breaking down through its 6-month uptrend line was positive as well. I would like to see the NASDAQ move through 2,060 on good volume to confirm last week's move. This should strengthen the broad market and set the indices up for a test of the recent highs. The stock market will once again key off the bond market. I expect both Consumer Confidence reports to exceed expectations and a blow-out GDP report on Thursday. I expect U.S. GDP growth for the first quarter to come in around 6.0%. This is significantly higher than the recently upwardly revised 5.0% estimate. The bond market's reaction to these very positive data points will likely direct stock prices throughout the week. It is probable the major indices will rise through mid-week, then decline as interest rates rise on the blow-out GDP report.

Chart of the Week

CRB Index 6-month Chart



Bottom Line: The CRB Index, a measure of commodity prices, broke its 6-month uptrend last week. Commodity prices have been the main source of investor concern regarding inflation. Higher U.S. interest rates, the Chinese government's attempts to slow its scorching economy and a rising U.S. dollar should continue to pressure commodity prices in the short-term.

Market Week in Review

S&P 500 1,140.60 +.53% for the week.

U.S. stocks finished higher on the week led by technology shares as numerous quarterly reports exceeded investor expectations. General Motors(GM), Motorola(MOT), Ford(F), Qualcomm(QCOM), Juniper(JNPR), eBay(EBAY), American International Group(AIG), United Parcel Service(UPS), Caterpillar(CAT), American Express(AXP), Microsoft(MSFT), Broadcom(BRCM), 3M(MMM), Altria(MO), Eli Lilly(LLY), Wells Fargo(WFC), Coca-Cola(KO), Amgen(AMGN), Cummins(CMI), Honeywell(HON) and Corning(GLW) are some of the major U.S. companies that reported stellar results. Bloomberg reported that with more than half of the S&P 500 having reported quarterly results, 78% have exceeded expectations and only 11% have missed estimates. The average earnings increase so far is 26% versus estimates of 13% when the period began, Thomson Financial reported. Doug Cote, who helps manage $40 billion at ING Investment Management, said, "Earnings will continue to surprise on the upside and that will trump inflation scares every time."

Last week was characterized by a tug-of-war between strong corporate/economic reports and rising interest rates. The Wireless and Software sectors, led by Motorola and Microsoft respectively, were the stand-outs for the week. Interest rates rose again last week on the strongest Durable Goods report since the early 80's, great corporate earnings reports and continued inflation worries. Commodity-related sectors continued their recent downtrends as the U.S. dollar rose and China talked of slowing its scorching economy. The CRB Index, a measure of commodity prices, broke down through its six-month uptrend line last week.

BOTTOM LINE: I believe the major U.S. indices are preparing for an assault on their recent highs. I would like to see the NASDAQ break 2,060 on good volume to confirm last week's move. I can't emphasize enough how important Microsoft's report is to the overall market. This company has been a drag on the performance of the major indices during this entire bull-run. I think its performance will only improve throughout the year as corporate hiring and spending accelerate. The fall in the CRB Index is a very positive development as well. Commodity prices have been the main source of investor concerns over inflation. The S&P 500 current P/E of 22.1 is below where it was in 1992 and 1987 before major bull moves. However, most pundits and analysts harp on excessive valuations. The P/E on 04 estimates is 18 and falling as numerous companies are significantly beating expectations. While I do not view the market as cheap, I hardly find its valuation excessive given corporate profits are at all-time highs, American's net worth is at all-time highs, inflation and interest rates are relatively low, U.S. and world economic growth is the strongest since the early 80's, job growth is accelerating and productivity is near record levels. U.S. stocks deserve a premium multiple based on these characteristics.

Economic Week in Review

ECRI Weekly Leading Index 134.60 +.30%

The Index of Leading Economic Indicators rose .3% in March, meeting expectations and up from an unchanged reading last month. This was the largest year-over-year gain since 1984 and shows the U.S. economy is gaining momentum. Companies taking longer to fill orders on increasing demand, falling jobless claims, rising building permits and tax refunds putting more money in the hands of consumers, all contributed to the rise, Bloomberg reported. Taxpayers received $142.5 billion in refunds through April 2, compared with $131.4 billion at the same time last year. Finally, the increase suggests that economists may need to reconsider their projections of 4.3% growth for the second quarter.

The Producer Price Index for March rose .5% versus expectations of a .4% rise and a .1% increase in February. The PPI Ex Food and Energy rose .2% versus expectations of a .1% increase and a .1% gain the prior month. Exceptional economic growth in the U.S. and China is increasing demand for commodities, thus leading to price increases. "These are not alarming increases, but they are higher than they have been in a few years," said Christopher Low, chief economist at FTN Financial.

U.S. Federal Reserve Chairman Alan Greenspan said most U.S. banks are well positioned to adjust their balance sheets to higher interest rates. "Many banks indicate that they now either are interest rate neutral or are positioned to benefit from rising rates," Greenspan said. Bank asset quality is improving as U.S. banks charged off .75% of total loans as non-performing assets in the final quarter of 03, the lowest rate since the stock market bubble burst in 2000, Bloomberg reported. Alan Greenspan also said, "The threat of deflation is no longer an issue for the U.S. and companies appear to have a greater ability to raise prices." Greenspan dismissed rising commodity prices as an inflation threat, saying that they're a small part of total costs for companies. Moreover, Greenspan said, "Inflation pressures are reasonably contained as labor productivity helps hold down prices because firms can produce more goods in an hour." Labor costs, which account for 70% of inflation, are still declining. Non-farm unit labor costs fell .4% in the 4th quarter after a 5.6% decline in the prior three months, Bloomberg reported. Greenspan proceeded to say, "The U.S. economy is in a vigorous expansion that has not produced broad-based inflation pressures." "A rapid pace of growth is leading companies to add to payrolls, and once signs of accelerating inflation appear, the central bank will raise interest rates," Greenspan told the Joint Economic Committee of Congress.

Initial Jobless Claims fell to 353K last week versus expectations of 340K and 362K the prior week. Continuing Claims rose to 3019K versus expectations of 2988K and 2967K the prior week. "Job creation is still going at a healthy clip, but not at a rate that's appreciably stronger than what we say in the first quarter," said Richard DeKaser, chief economist at National City. DeKaser expects 170,000 jobs were added in April, a month after the biggest gain in almost 4 years, Bloomberg reported.

Durable Good Orders for March rose 3.4% versus expectations of a .7% rise and a 3.8% rise in February. "The manufacturing sector is on fire," said Anthony Chan, chief economist at Banc One Investment Advisors. The jump in orders makes it more likely companies will boost work hours and hiring, Lehman Brothers economist Drew Matus said. The report also suggests business investment exceeded 10% for a third straight quarter, said Steven Wieting, an economist at Citigroup Global Markets. Kenneth Goldstein, chief economist of the Conference Board, said "We're seeing the beginning of a turnaround for the national labor market with the volume of help-wanted ads rising after 3 years of declines." Gannett Co., the biggest U.S. newspaper publisher, said last week its help-wanted ads soared 23% in March. Help-wanted ads are a tremendous indicator because companies don't advertise for employees unless they intend to hire in the next month or two. The fact that it's gotten a lot better in February and March suggests that the pace of economic activity is really improving, Bloomberg reported.

BOTTOM LINE: There are several key takeaways for the week. I now believe that the U.S. economy grew nearly 6% in the first quarter versus economist's estimates of 4.6% growth. I also think second quarter economic growth will be stronger than current expectations of 4.3%. While inflation is not currently a problem, the Fed is preparing the markets for a rate hike in the near future. Unit labor costs, which are 70% of inflation, remain subdued. As well, a stronger dollar and slowing Chinese economy are already contributing to lower commodity prices. The Fed Funds rate, however, is at emergency levels and these levels are unwarranted in the current economic environment. I continue to expect the first rate hike to occur at the June 29-30 meeting, while market expectations are for a raise at the August 10 meeting. Finally, while job creation will temporarily slow from last month's strong pace, the large increase in help-wanted ads and exceptionally strong durable goods report bodes well for another large jobs number in the near future.

Weekly Scoreboard

Indices
S&P 500 1,140.60 +.53%
Dow 10,472.84 +.20%
NASDAQ 2,049.77 +2.71%
Russell 2000 590.71 +1.26%
Wilshire 5000 11,150.42 +.65%
Volatility(VIX) 14.01 -6.23%
AAII Bullish % 50.0% -21.57%
US Dollar 91.08 +1.30%
CRB 270.12 -2.67%

Futures Spot Prices
Gold 395.70 -1.40%
Crude Oil 36.46 -1.33%
Natural Gas 5.57 -.43%
Base Metals 107.35 -4.94%
10-year US Treasury Yield 4.45% +2.53%
Average 30-year Mortgage Rate 5.94% +.85%

Leading Sectors
Wireless +5.27%
Software +4.44%
Hospitals +4.23%

Lagging Sectors
Energy -1.29%
Drugs -1.34%
Commodity -1.95%

*% Gain or loss for the week

Friday Close

S&P 500 1,140.60 +.06%
NASDAQ 2,049.77 +.83%

Leading Sectors
Iron/Steel +4.13%
Internet +3.90%
Papers +3.88%

Lagging Sectors
Semis +.36%
Fashion -.03%
Disk Drives -.80%

Other
Crude Oil 36.46 -.68%
Natural Gas 5.57 -.92%
Gold 395.70 +.46%
Base Metals 107.35 +.14%
U.S. Dollar 91.08 +.29%
10-Yr. Long-Bond Yield 4.45% +1.67%
VIX 14.01 -4.11%
Put/Call .67 +6.35%
NYSE Arms .80 +9.59%

After-hours Movers
None of note.

Recommendations
Goldman Sachs reiterated Outperform on SAP, IGT, KO, CCE, PEP, SUN, BAX, GDT, PHCC, CSCO and MSFT. GS reiterated Underperform on CYT and POT.

After-hours News
U.S. stocks finished higher Friday as strong corporate earnings and economic reports outweighed rising interest rates. After the close, Bloomberg reported that with more than half of the S&P 500 having reported quarterly results, 78% have exceeded expectations and only 11% have missed estimates. The average earnings increase so far is 26% versus estimates of 13% when the period began, Thomson Financial reported. Fannie Mae recently added Ernst & Young to a list of consultants advising it over its accounting practices, even though the SEC barred the firm from taking on new clients, Dow Jones reported. President Bush cautioned Israeli Prime Minister Sharon against harming Palestinian leader Yasser Arafat after the Israeli leader said he was no longer bound by a promise to spare Arafat from attack, the AP reported. With the U.S. lifting most economic sanctions on Libya in exchange for Qaddafi's agreement to give up weapons of mass destruction, Libyan businesses and government officials are expecting a boom. Africa's biggest holder of known oil reserves can now bring in U.S. companies to modernize its equipment and explore for new deposits. Libya's oil industry is pumping half as much oil as it did 35 years ago when Qaddafi took power. The country holds at least 36 billion barrels of proven oil reserves, worth more than $1 trillion at current prices. Exxon Mobil, ChevronTexaco, ConocoPhillips, Occidental Petroleum and Amerada Hess are all interested in returning to Libya, Bloomberg reported. Chinese President Hu Jintao vowed controls to keep the economy on a steady footing, amid overheating in some industries that has led to shortages of oil, coal, power and choked the transportation system, Bloomberg reported.

Bottom LINE: The Portfolio was unchanged today as more U.S. stocks declined than advanced, notwithstanding the performance of the major indices. I did not trade in the afternoon and the Portfolio is still 125% net long. Taking into account yesterday's large gains and today's interest rate/Iraq fears, I thought the major indices performed pretty well today. I would like to see a follow-through gap up on good volume in the near future to confirm yesterday's move.

Mid-day Update

S&P 500 1,139.02 -.08%
NASDAQ 2,043.26 +.56%

Leading Sectors
Fashion +1.32%
Semis +1.17%
Broadband +.84%

Lagging Sectors
Iron/Steel -1.78%
Tobacco -2.06%
Airlines -2.07%

Other
Crude Oil 36.27 -1.20%
Natural Gas 5.56 -1.12%
Gold 394.80 +.23%
Base Metals 107.35 +.14%
U.S. Dollar 91.13 +.34%
10-Yr. Long-Bond Yield 4.42% +1.07%
VIX 14.10 -3.42%
Put/Call .63 unch.
NYSE Arms .72 -1.37%

Market Movers
MSFT +6.01% after beating 3Q estimates, raising 05 earnings and lowering 05 sales forecasts.
GLW +16.8% after beating 1Q estimates and raising 2Q guidance.
MCRL +14.1% after beating 1Q estimates and raising 2Q guidance.
MCHP +14.30% after beating 4Q estimates, raising 1Q forecast and announcing 2.5M buyback.
TESS +19.62% on better-than-expected 4Q and raised 05 guidance.
SYNA +20.64% after beating 3Q estimates and raising 4Q guidance.
CLS +16.6% after beating 1Q estimates and raising 2Q forecast.
PKTR +16.56% after beating 1Q estimates.
BWLD +15.38% after beating 1Q estimates, raising 2Q guidance and RBC upgrade to Outperform.
MTLG -19.2% after beating 1Q estimate, but lower 2Q guidance.
ABTL -23.83% after missing 1Q estimates and lowering 04 forecast.
PLCM -13.15% after beating 1Q estimate, but gave disappointing guidance.
STE -12.43% after meeting 4Q estimate, lowering 1Q and 04 guidance.
RSYS -11.11% after meeting 1Q estimate and lowering 2Q guidance.

Economic Data
Durable Goods Orders for March +3.4% versus +.7% estimate and +3.8% prior month.
Durable Goods Oders Less Transportation +3.3% versus +1.4% estimate and +1.1% prior month.

Recommendations
KSS raised to Buy at Deutsche Bank, target $52. PGR and PH cut to Reduce at UBS. AT and WC raised to Overweight at JP Morgan. CLS raised to Sector Outperform at CIBC, target $26. CELG raised to Outperform at Thomas Weisel, target $70.00. NUE cut to Underweight at Prudential. HOT raised to Buy at Merrill, target $46. MCHP raised to Buy at Legg Mason, target $36. GBP rated Underperform at CSFB. ASN rated Outperform at CSFB, target $30. CNX raised to Outperform at Bear Stearns. BRCM rated Outperform by Raymond James, target $50. RYL raised to Strong Buy at Raymond James, target $135. Goldman Sachs reiterated Outperform on MERQ, AA, GLW, BAX, PHCC, GDT, IGT, AMGN, GILD, AXP, TPX, and reiterated Underperform on EW, VRSN and T. Citi Smith Barney said to Buy NCX, target $32. Citi reiterated Buy on UPS, raised estimates, target $80. Citi reiterated Buy on MSFT, raised estimates and target to $34. Citi said AMGN is top biotech pick. Citi reiterated Buy on AXP, target $57. Citi upgraded FISV to Buy, target $46. Citi reiterated Buy on DOX, target $34. Citi reiterated Buy on OHP, $70 target. TheStreet.com has a column saying Chinese ADRs are good for a long trade here.

Mid-day News
U.S. stocks are mixed mid-day as a much better-than-expected Durable Goods Report sent interest rates higher, the U.S. dollar higher and crude oil lower. The U.S. FDA is seeking reports of any problems encountered with Boston Scientific's Taxus stent, the NY Times said. Merrill Lynch ousted Deutsche Bank last quarter as the most accurate forecaster of foreign exchange rates, Bloomberg reported. U.S. Durable Goods Orders rose 3.4% in March, significantly beating estimates, as corporate spending accelerated on machinery, metals and computers. "Spending on software and equipment appears to be increasing quite strongly," Fed Vice Chairman Roger Ferguson said. "Today's report suggests business investment exceeded 10% for a third straight quarter," said Steven Wieting, an economist at Citi Smith Barney said. U.S. Brigadier General Mark Kimmitt today said a U.S. offensive on the city of Fallujah may resume shortly if the heavy weapons of foreign fighters aren't handed over to U.S.-led forces soon, Bloomberg reported.

BOTTOM LINE: The Portfolio is down slightly today, as most stocks are lower and my 125% market exposure is hurting performance. I have not traded as of yet and the Portfolio is still 125% net long. I expect stocks to improve this afternoon as investors anticipate the positive collateral effects from the recent good news by numerous bell-weather companies. Bears are selling on interest rate and Iraq fears, both of which are widely known.

Friday Watch

Earnings Announcements
Company/Estimate
AWE/.01
HGSI/.41
SLB/.47
STE/.43
SII/.42
WY/.56

Splits
None of note.

Economic Data
Durable Goods Orders for March estimated +.7% vs. +2.5% last month.
Durable Goods Less Transportation estimated +1.4% vs. -.3% prior month.

Recommendations
Goldman Sachs reiterated Underperform on TSG, SIAL, PYX and CR. GS reiterated Outperform on VIAB, ITT, AMGN, DHR and FORM.

Late-Night News
Asian indices are mostly higher on strength in U.S. stocks and strong corporate earnings reports. Shares of Doral Financial(DRL), the fourth largest Puerto Rican bank by assets, are worth buying amid a housing shortage on the island that is boosting mortgage demand, Business Week said. Walt Disney is in talks with China's Central Television and media companies in Beijing and Shanghai on a production venture for a network in the mainland, the South China Morning Post reported. China plans to scrap the ceiling on bank lending rates in its latest attempt to curb credit growth and excess investments that are fueling inflation. "We're seeing the beginning of a turnaround for the national market," with the volume of help-wanted advertising rising after 3 years of decline, said Kenneth Goldstein, chief economist of the Conference Board, a New York research group.

Late-Night Trading
Asian Indices -.75% to +1.0%.
S&P 500 indicated +.31%.
NASDAQ indicated +.77%.

BOTTOM LINE: U.S. stocks should extend recent gains tomorrow on strong corporate earnings reports after the close today. Rising Asian shares, declining interest rates and falling crude prices should also boost stocks on the open. The Portfolio is 125% net long heading into trading tomorrow.

Thursday Close

S&P 500 1,139.93 +1.41%
NASDAQ 2,032.91 +1.87%

Leading Sectors
Iron/Steel +4.13%
Internet +3.90%
Papers +3.88%

Lagging Sectors
Semis +.36%
Fashion -.03%
Disk Drives -.80%

Other
Crude Oil 36.79 +.22%
Natural Gas 5.62 -.05%
Gold 394.40 +.13%
Base Metals 107.20 -1.03%
U.S. Dollar 90.71 -.44%
10-Yr. Long-Bond Yield 4.38% -.91%
VIX 14.61 -6.35%
Put/Call .63 -10.0%
NYSE Arms .73 +40.38%

After-hours Movers
MSFT +4.89% after beating 3Q estimates, raising 05 earnings and lowering 05 sales forecasts.
BRCM +5.39% after beating 1Q estimates and raising 3Q guidance.
GLW +9.07% after beating 1Q estimates and raising 2Q guidance.
CLS +10.75% after beating 1Q estimates and raising 2Q forecast.
MCHP +6.60% after beating 4Q estimates, raising 1Q forecast and announcing 2.5M buyback.
GILD +7.23% after significantly beating 1Q forecast.
OHP -9.32% after WC ended talks to purchase the company.
ELX -6.79% after meeting 3Q estimates and lowering 4Q guidance.
PLCM -4.31% on profit-taking after beating 1Q estimates.

Recommendations
Goldman Sachs reiterated Outperform on MERQ, MSFT, AMGN, CAH, UPS,ACS and Underperform on VRSN, SGP and RKY.

After-hours News
U.S. stocks finished sharply higher Wednesday as numerous corporate earnings reports were better-than-expected, CEO's made positive comments regarding their company's outlook and interest rates fell. After the close, Microsoft CFO Connors said, "Overall corporate IT spending continues to improve and we expect to see healthy demand through the end of the year." Microsoft reported a 17% increase in fiscal third-quarter revenue, beating analyst estimates for both the top and bottom lines, Bloomberg reported. Corning CFO Flaws said they hired 500 workers in the first quarter, the first hiring increase since the stock market bubble burst in 2000, Bloomberg reported. Shares of Mohawk(MHK) will rise as demand for ceramic tile grows, Business Week said in its Inside Wall Street column. Imation Corp.(IMN) is selling more tapes and disks used to store computer data, boosted by the popularity of downloading music from the Internet, Business Week reported.

BOTTOM LINE: The Portfolio fell slightly today as I took losses in a few shorts early in the morning. I added a few more longs in the afternoon and the Portfolio is now 125% net long. After the close, Microsoft, Broadcom, Corning, Microchip Tech, Gilead Sciences and Amazon all beat estimates handily which should provide the catalyst for another positive day tomorrow.

Mid-day Update

S&P 500 1,141.49 +1.56%
NASDAQ 2,033.59 +1.90%

Leading Sectors
Iron/Steel +4.32%
Internet +3.90%
Airlines +3.86%

Lagging Sectors
Nanotechnolgoy +.56%
Fashion -.03%
Disk Drives -.13%

Other
Crude Oil 36.90 +3.27%
Natural Gas 5.64 +.95%
Gold 393.80 +.61%
Base Metals 107.20 -1.03%
U.S. Dollar 91.07 -.05%
10-Yr. Long-Bond Yield 4.38% -.96%
VIX 14.12 -9.49%
Put/Call .64 -8.57%
NYSE Arms .69 +32.69%

Market Movers
KLAC -6.71% after beating 3Q estimates, but disappointing 4Q guidance and First Albany downgrade to neutral.
EBAY +7.13% after beating 1Q estimates and raising 2Q/04 guidance.
LSCP +23.7% after beating 1Q estimates substantially and raising 04 guidance significantly.
KVHI +19.8% after beating 1Q estimates and positive comments.
EYE +16.78% after beating 1Q estimates, lowering 2Q sales forecast and raising 04 guidance.
ESI +11.65% after beating 1Q estimates.
ROG +9.87% after beating 1Q estimates and raising 2Q guidance.
ASCL -19.31% after missing 1Q estimates substantially, lowering 2Q guidance and Needham downgrade to hold.
GTI -16.9% after missing 1Q estimates and lowering 2Q/04 guidance.
PLXS -12.6% on profit-taking after meeting 2Q estimates and raising 3Q guidance.
CCMP -10.4% after missing 2Q estimates and WR Hambrecht downgrade to Hold.
SSTI -6.97% on profit-taking after beating 1Q estimates and raising 2Q guidance.

Economic Data
Producer Price Index for March +.5% versus +.4% estimate and +.1% prior month.
PPI Ex Food & Energy for March +.2% versus +.1% estimate and +.1% prior month.
Initial Jobless Claims last week were 353K versus 340K estimate and 362K prior week.
Continuing Claims were 3019K versus 2988K estimate and 2967K prior week.

Recommendations
JP Morgan raised TK to Overweight. Deutsche Bank raised CB to Buy, target $82. Oppenheimer raised TRI to Buy, target $40. CIBC raised ADS to Sector Outperform, target $46. Legg Mason raised UOPX to Buy, target $108. Legg Mason raised KNGT to Buy, target $30. Lehman raised CTX to Overweight, target $64. Raymond James raised UPS to Outperform, target $80. Raymond James raised WEBX to Strong Buy, target $30. Goldman Sachs reiterated Underperform on FISV, CMI, RKY and F. GS upgraded GLK to Outperform. GS rated JNPR Outperform. GS reiterated Outperform on VOD, UPS, WEN, FDC, AIG, ADP, GDT, GLW, SBC, AIG, PHCC, CIT, BAX, CAH, IGT, TRI, FE, KLAC and KRB. Citi Smith Barney raised JNPR to 1S from 2S, target $32.50. Citi reiterated Buy on FFIV, target $45. Citi reiterated Buy on ATH, raised estimates and price target to $134. Citi believes NOC, LMT and LLL will beat estimates. Citi reiterated Buy on VIAB, target $54. Citi reiterated Buy on HOT, target $47. Citi reiterated Buy on RCL, target $50. Citi reiterated Buy on SBUX, raised earning and target to $46. Citi reiterated Buy on TEX after weak quarter. Citi reiterated Buy on CTX, target $88. TheStreet.com has a positive column on HDI.

Mid-day News
U.S. stocks are sharply higher mid-day on a slew of positive earnings reports, positive CEO comments and falling interest rates. The U.S. will be involved in the Middle East for many years, and needs to demonstrate its resolve or risk "losing face" in the region and elsewhere in the world, James Schlesinger wrote in the Wall Street Journal. Abbey Joseph Cohen, of Goldman Sachs, made bullish comments on the economy and U.S. stock market on CNBC. AIG, the world's largest insurance company, said first-quarter profit rose 36%, Bloomberg reported. UPS, the largest package-shipping company, said first-quarter profit rose 24%, Bloomberg said. American Express said first-quarter profit rose 15% as rising consumer confidence and tax cuts encouraged more spending on credit cards and travel, Bloomberg reported. Caterpillar, the world's largest maker of earthmoving equipment, said first–quarter profit rose more than 300% on strong sales. Jim Owens, CEO of Caterpillar, said "It appears the world economy will have one of the strongest, broadest recoveries in years." He also said, "We anticipate that keeping pace with volume growth will require additional hiring through the remainder of the year." As many as 3,000 people were killed or injured in North Korea today as two fuel-laden trains collided and exploded, Reuters reported.

BOTTOM LINE: The Portfolio is down slightly today as my shorts hurt performance early in the morning. I covered several of these positions as they hit stop losses. I also added a number of new long positions in a variety of sectors, thus bringing the Portfolio's market exposure to 100% net long. One of my new long positions is INTC. I put a stop-loss of $26.25 on this trade. I think the market is signaling the beginning of the next up-leg in the current bull-run. Psychology appears to have shifted from concentrating on the few negatives to focusing on the many positives. American net worth is at all-time highs, the U.S. and world economies are growing at the fastest pace since the early 80's, inflation and interest rates are relatively low, corporate profits are at all-time highs/executives are making very positive comments about the future, stock valuations are falling as earnings significantly exceed expectations, the job market is accelerating and there has not been any new significant terrorist attacks on U.S. soil. These huge positives are more than outweighing the tougher-than-expected road to democracy in Iraq and high energy prices. I continue to expect the major U.S. indices to experience another double-digit gain this year on top of last year's large increase.

Thursday Watch

Earnings Announcements
Company/Estimate
AMZN/.19
AXP/.62
AIG/1.06
AMGN/.56
APA/1.05
ABX/.07
BRCM/.27
CAH/.99
CAT/.70
GLW/.05
GDT/.55
HCA/.70
IGT/.32
MSFT/.29
PSFT/.18

Splits
None of note.

Economic Data
Producer Price Index for March estimated +.4% vs. +.1% in February.
PPI Ex Food & Energy for March estimated +.1% vs. +.1% in February.
Initial Jobless Claims last week estimated at 340K vs. 360K prior week.
Continuing Claims estimated at 2998K vs. 2980K the prior week.

Recommendations
Goldman Sachs reiterated Outperform on AGI, FE, X, KLAC, CDL, AMR, TLAB, KMI, KMR, CVD and Underperform on EK and AZR.

Late-Night News
Asian indices are quietly mixed as strength in Japan is offset by a falling Taiwanese market. China will allow the yuan to fluctuate in a wider range against a basket of currencies, the Financial Times reported. Scotch whisky exports rose to a six-year high last year, boosted by sales to the U.S., the Financial Times said. Spending on advertising may increase 5.5% in the U.S. this year, the most in over three years, the FT said. SAP AG, the world's largest maker of business-management software, said profit increased 23% in the first quarter as license revenue rose for the first time in almost 3 years, boosted by U.S. spending. SAP's CEO Kagermann said orders in the U.S. look very good compared with last year.

Late-Night Trading
Asian Indices -1.25% to +.50%.
S&P 500 indicated -.09%.
NASDAQ indicated +.03%.

BOTTOM LINE: The bond market's reaction to the PPI and Initial Jobless Claims reports tomorrow will likely dictate the direction of the stock market. Corporate earnings are coming in significantly above expectations once again, however many stocks are selling off on good news, thus the P/E on the S&P 500 is contracting further. Tech stocks appear as though they are headed lower in the short-run, however I would use any weakness over the next couple of months to build long positions as I think tech will outperform in the second half of the year. I also continue to believe 04 will be a good year for stocks. Double-digit gains should be expected in the major U.S. indices, on top of last year's strong performances.

Wednesday Close

S&P 500 1,124.09 +.53%
NASDAQ 1,995.63 +.86%

Leading Sectors
Wireless +3.38%
Hospitals +2.69%
Airlines +2.46%

Lagging Sectors
Fashion -1.32%
Papers -1.43%
Nanotechnology -1.54%

Other
Crude Oil 35.82 +.25%
Natural Gas 5.61 +.41%
Gold 391.70 +.08%
Base Metals 108.32 -5.30%
U.S. Dollar 91.08 -.04%
10-Yr. Long-Bond Yield 4.42% -.72%
VIX 15.60 -6.42%
Put/Call .70 -12.50%
NYSE Arms .52 -57.02%

After-hours Movers
JNPR -7.08% on profit-taking after beating 1Q estimates and raising 2Q guidance.
KLAC -8.51% after beating 3Q estimates, but disappointing 4Q guidance.
ERES +4.35% after beating 1Q estimates, announcing 3-for-2 stock split, 500,000 share buyback and raising 2Q/04 forecast.
EYE +4.88% after beating 1Q estimates and raising 04 guidance.
ASCL -17.57% after missing 1Q estimates substantially and lowering 2Q guidance.
SSTI -7.72% on profit-taking after beating 1Q estimates and raising 2Q guidance.
PLXS -10.97% on profit-taking after meeting 2Q estimates and raising 3Q guidance.
CTXS -11.95% after beating 1Q estimates, raising 2Q sales estimate, but lowering 2Q profit forecast.
AFCO -5.71% after missing 3Q estimates and weak guidance.

Recommendations
Goldman Sachs reiterated Outperform on UTX, SKYW, KO, RCL and Underperform on PLXS and OMI.

After-hours News
U.S. stocks finished higher Wednesday as Fed Chairman Greenspan said the U.S. economy is vigorous and broad-based inflation was not a problem as unit labor costs remain subdued. After the close, The Street.Com reported that Sony is in advance talks to join two buyout firms in a $5B acquisition of movie studio Metro-Goldwyn-Mayer. eBay said first-quarter earning surged 92% as more people listed items for sale and used its PayPal e-mail payment service. eBay also raised 04 profit and revenue forecasts, Bloomberg reported. Qualcomm said second-quarter profit more than quadrupled on surging demand for phones based on CDMA technology, Bloomberg reported. China conceded to U.S. demands to crackdown on the piracy of software and movies and abandon a standard for wireless encryption opposed by Intel and other chip companies, Bloomberg reported.

BOTTOM LINE: The Portfolio rose slightly today as one of my shorts fell substantially in afternoon trading, offsetting small loses elsewhere. I added to a couple of short positions in the afternoon and took profits in a few longs, bringing the Portfolio to a market neutral position(longs-shorts=0). I still feel that the market, specifically technology stocks, may have more work to do on the downside in the short-run. Complacency by investors is still too high. On a more positive note, China's talking down its economy and threatening to raise interest rates seems to be working. China's insatiable demand for raw materials has been one of the key drivers of commodity price increases. Commodity prices, as measured by the CRB Index, broke down through their 6-month uptrend line today. A rising U.S. dollar also pressures commodity prices. This should help the U.S. economy later in the year as investors begin to realize that a substantial rise in inflation is not in the cards for the foreseeable future.

Mid-day Update

S&P 500 1,121.69 +.32%
NASDAQ 1,986.04 +.38%

Leading Sectors
Wireless +3.15%
Hospitals +2.65%
Airlines +2.08%

Lagging Sectors
Nanotechnology -1.42%
Papers -1.53%
Iron/Steel -2.28%

Other
Crude Oil 35.99 -1.40%
Natural Gas 5.58 +.58%
Gold 394.50 -.95%
Base Metals 108.32 -5.30%
U.S. Dollar 90.93 +.49%
10-Yr. Long-Bond Yield 4.43% -.63%
VIX 16.01 -3.96%
Put/Call .75 -6.25%
NYSE Arms .57 -52.89%

Market Movers
MOT +18.55% after significantly beating 1Q estimates, raising 2Q guidance substantially and multiple upgrades.
F +10.12% after significantly beating 1Q estimates, raising 2Q and 04 guidance substantially and multiple upgrades.
SANM +14.7% after beating 2Q estimates and multiple upgrades.
FLIR +14.4% after beating 2Q estimates and raising 04 forecast.
Education Stocks up across the board on strong earnings from CECO and COCO.
POWI +9.12% on American Technology upgrade to Buy.
UTEK -21.05% after missing 1Q estimates.
WEBX -21.59% after meeting 1Q estimates, but lowering 2Q and 04 forecast.
DV -14.02% after missing 2Q estimates and CSFB downgrade to Underperform.
ISSX -14.84% after missing 1Q estimates and lowering 2Q and 04 forecast.
ACS -8.6% after missing 3Q forecast and lowering guidance.
SCSS -12.27% after meeting 1Q estimates, lowering 2Q guidance and raising 04 forecast.

Economic Data
None of note.

Recommendations
MOT raised to Sector Outperform at CIBC, target $25. GPI, CAO and PBY rated Outperform at Thomas Weisel. STX cut to Sell at Thomas Weisel. WSH raised to Overweight at Prudential, target $45. MXIM raised to Overweight at Prudential, target $58. MRVL, AGR/A and STM cut to Underweight at Prudential. NCI rated Outperform at CSFB, target $23. DV cut to Underperform at CSFB. GDW raised to Outperform at Bear Stearns, target $122. BCR raised to Outperform at Bear, target $115. SANM raised to Outperform at Bear, target $16. Goldman Sachs reiterated Outperform on MO, WMT, CFC, VIAB, ACS, DTV, CCU, VIAB, CDL, WON, CTSH and STA. Goldman reiterated Underperform on IPC, AMCC and SLG. Goldman downgraded OSI to Underperform. Citi Smith Barney said to Buy HLT based on belief they will materially increase dividend within next couple of quarters. Citi reiterated view that risk to oil prices is on the downside. Citi reiterated Sell on STX, target $7. Citi raised estimates and target to $25 on MOT. Citi Strongly reiterated Buy on WFC, target $67. Citi reiterated Buy on CKFR, target $39.

Mid-day News
U.S. stocks are mostly higher mid-day as Fed Chairman Greenspan said the U.S. economy is growing vigorously without any signs of broad-based inflation as unit labor costs remain subdued. Ask Jeeves CEO told CNBC that his company is big enough to avoid being bought after it agreed last month to acquire Interactive Search Holdings. A car bomb exploded today in the center of Saudi Arabia's capital, Riyadh, killing one. Five other bombs were defused, Saudi tv reported. Time Warner's AOL unit plans to widen its Internet audience and boost advertising sales by making some content free and more accessible to subscribers, the Wall Street Journal reported. Syria has given weapons to opposition forces in Iraq and has helped them cross the border, the Washington Times reported. The U.S. economy is in a "vigorous expansion" that has not yet produced "broad-based" inflation pressures, Fed Chairman Greenspan said. He said that while unit labor costs, which account for 70% of inflation, no longer seem to be falling rapidly, those costs have yet to post a decisive upturn. He also said, "As I have noted previously, the fed funds rate must rise at some point to prevent pressures on price inflation from eventually emerging." Separately, the Fed's Parry said, "The Fed will have to raise rates significantly at some point to prevent growth from triggering inflation."

BOTTOM LINE: The Portfolio is down slightly today as one of my longs is falling on its earnings report and my shorts are mostly higher. Greenspan and Parry's comments taken together lead me to conclude that the Fed will move sooner rather than later and they are in the initial stages of preparing the markets for this. I still expect the first rate hike at the June 28-30 meeting, barring several weaker-than-expected jobs reports. I have not traded today and the Portfolio is still 25% net long.

Wednesday Watch

Earnings Announcements
Company/Estimate
AFFX/-.08
AGI/.27
ALTR/.13
AMR/-1.04
CDN/.10
EBAY/.26
ERES/.18
FFIV/.14
F/.44
GD/1.19
HET/.66
JPM/.87
JNPR/.08
PFCB/.27
QCOM/.48
SIRI/-.10
SBUX/.17
TDW/.18

Splits
MTLM 2-for-1

Economic Data
Fed's Beige Book

Recommendations
Goldman Sachs reiterated Outperform on BSX, CAKE, ZION, TRMS, USB, COH, AHC, MUR. GS reiterated Underperform on INFA, DO and FSS.

Late-Night News
Asian indices are mixed on strength in Korea and weakness in Hong Kong. Hynix Semi will be able to survive alone because of a stronger semiconductor industry, JoonAng Ilbo reported. Carlyle Group, a U.S. private equity company, plans to invest as much as $1B in China during the next 18 months, the Asian Wall Street Journal reported. PricewaterhouseCoopers is willing to certify that Bank of China's bad loans are just one percentage point higher than the level estimated by the bank, the Financial Times reported.

Late-Night Trading
Asian Indices -1.0% to +1.0%.
S&P 500 indicated +.18%.
NASDAQ indicated +.63%.

BOTTOM LINE: Tech stocks are trading higher late-night on the heels of Motorola's exceptionally strong report. I expect Greenspan to begin hinting at an impending rate hike tomorrow. The markets took his positive comments today very poorly. I expect we have further downside in the short-run as there is still too much investor complacency as evidenced by the Put/Call, Arms, Bullish % and VIX readings. The Portfolio is 25% net long and I will likely initiate new shorts on any significant strength in the short-run.

Tuesday Close

S&P 500 1,118.15 -1.56%
NASDAQ 1,978.63 -2.07%

Leading Sectors
Fashion +.80%
Hospitals +.74%
Airlines +.16%

Lagging Sectors
Homebuilders -2.82%
Networking -3.52%
Semis -3.56%

Other
Crude Oil 36.20 -.82%
Natural Gas 5.55 -.14%
Gold 394.00 -1.08%
Base Metals 114.38 -.60%
U.S. Dollar 90.49 +.77%
10-Yr. Long-Bond Yield 4.41% +.60%
VIX 16.67 +8.11%
Put/Call .80 +21.21%
NYSE Arms 1.21 +24.74%

After-hours Movers
MOT +21.1% after beating 1Q estimates substantially and raising 2Q guidance substantially.
CVTX +6.95% after saying data from a recent study on its Ranexa drug shows positive results.
CACS +15.2% after beating 1Q estimates.
MKSI +9.07% after beating 1Q estimates substantially and raising 2Q guidance.
EZPW +14.95% after beating 2Q estimates and boosting 04 forecast.
SCSS -11.01% after meeting 1Q estimate, but lowering 2Q guidance.
WEBX -10.02% after meeting 1Q estimate, but lowering 04 forecast.
ISSX -7.81% after missing 1Q estimate.
ACS -7.32% after missing 3Q estimates, maintaining forecast.
SNTO -9.71% exceeding 4Q estimates, but disappointing guidance.
CALM -6.48% after announcing a 5M share secondary.

Recommendations
Goldman Sachs reiterated Outperform on TRI, CTSH, ALL, PFE, TRMS and STN.

After-hours News
U.S. stocks finished solidly lower today after bonds fell in response to comments by Alan Greenspan about the strength of the economy. After the close, General Electric's NBC said it has received FTC approval to acquire Vivendi Universal's U.S. entertainment assets, CNBC reported. U.S. venture capital funds are outpacing their European counterparts, raising almost 8 times more money in the first-quarter of 04 than a year ealier, the Financial Times said. California Governor Schwarzenegger signed an executive order calling for a network of 200 hydrogen fuel stations to be built along major highways in California by the end of the decade as a way to encourage consumers to buy clean air vehicles, Bloomberg reported. Motorola(MOT) said first-quarter profit tripled to the highest since at least 1990 as handset sales surged 67%, Bloomberg reported.

BOTTOM LINE: The Portfolio fell slightly today as my shorts could not offset losses in long positions. I added a few more shorts and exited a couple of winning longs in the afternoon, leaving the Portfolio with 25% net long market exposure. The weakness I expected in the tech sector came to fruition late in the afternoon, as traders used rising interest rates as an excuse to sell shares. Greenspan basically said the economy is doing very well, will continue to do well and that companies are slowly regaining some pricing power. These very obvious observations resulted in the large afternoon sell-off. I expect the Fed will broadly telegraph its first rate hike, which should occur at the June 28-30 meeting. Once the timing is certain, the U.S. equity markets can start working higher and eventually resume their bull run after it becomes clear that destructive inflation is not a problem. Until this time, I expect tech and interest-rate sensitive sectors to continue to underperform and the broad market to remain slightly negative to neutral.

Technical Difficulties

Blogger, the host of this site, is experiencing problems with their servers. Thus, some of my links and graphs are temporarily missing. Sorry for the inconvenience.

Mid-day Update

S&P 500 1,134.74 -.10%
NASDAQ 2,019.45 -.05%

Leading Sectors
Nanotechnology +2.17%
Airlines +1.70%
Hospitals +1.70%

Lagging Sectors
Oil Service -1.25%
Commodity -1.26%
Broadband -1.69%

Other
Crude Oil 37.25 -.45%
Natural Gas 5.53 +.38%
Gold 398.40 -.70%
Base Metals 114.38 -.60%
U.S. Dollar 90.43 +.70%
10-Yr. Long-Bond Yield 4.39% +.19%
VIX 15.12 -2.08%
Put/Call .73 +10.61%
NYSE Arms 1.08 +11.34%

Market Movers
TASR -19.0% on profit-taking after beating 1Q estimates by "only" .02.
CHKP +9.7% after beating 1Q estimates.
GM +5.0% after substantially beating 1Q estimates and raising 2Q and 04 guidance.
JCOM +16.0% after beating 1Q estimates and raising 2Q guidance.
SPRT +11.33% after beating 1Q estimates and raising 2Q guidance.
HUG +8.95% after raising 1Q/2Q and 04 forecast.
LNCR +7.93% after beating 1Q estimates.
COH +7.19% after beating 3Q forecast and raising 04 guidance.
NFI -17.6% after saying it was notified by the SEC about an informal inquiry into some of its business practices.
NDC -13.19% after missing 3Q estimates and lowering 04 guidance.

Economic Data
None of note.

Recommendations
Goldman Sachs reiterated Outperform on INTC, FON, PCS, BSX, PFE, MSFT, BC, KMI, KMR, CBL, DDR, UDR, VNO, ASN and SRE. Goldman reiterated Underperform on PPS, SLG, AKS and AVB. GS raised TPX to Outperform and lowered VRSN to Underperform. Citi Smith Barney said to Buy G on weakness, target $42. Citi reiterated Buy on MATK, target $90. Citi reiterated Buy on BC, target $49. ASH rated Overweight at JP Morgan. EMC raised to Buy 1 at UBS. PNRA raised to Outperform at Thomas Weisel, target $50. WOOF rated Buy at Bank of America, target $43. SMI rated Sell at Bank of America. CNF raised to Buy at Merrill Lynch, target $40.

Mid-day News
U.S. stocks are mixed mid-day as strength in a multitude of companies reporting better-than-expected earnings is being offset by weakness in commodity-related stocks. The Bush Administration thinks al-Qaeda will try to strike the U.S. before the election in November because of its success in changing the outcome of the Spanish election last month, the Washington Post reported, citing National Security Adviser Condoleezza Rice. California Governor plans steps to boost business in the state by balancing the budget and increasing energy supplies, the LA Times reported. Coca-Cola debuted tv ads last month for Powerade sports drink, part of its new strategy to focus on non-carbonated beverages to invigorate sales. Janus Capital said CEO Whiston is stepping down as the U.S. mutual fund company struggles to settle allegations that it permitted improper trading that hurt investors, Bloomberg reported. With 101 companies in the S&P 500 having reported 1st quarter results, earnings have jumped 19% and beat estimates by 6.8% on average, according to Thomson Financial. The semiconductor book-to-bill ratio came in at 1.10 versus expectations of 1.17, Bloomberg reported.

BOTTOM LINE: The Portfolio is up today as the majority of my longs are up and shorts are down. I added a few new homebuilding shorts this morning on their recent bounce. Sky-high ply-wood and copper prices, coupled with rising rates, should continue to pressure this group in the intermediate-term. The Portfolio is now 50% net long.

Tuesday Watch

Earnings Announcements
Company/Estimate
MO/1.13
ASKJ/.18
AMCC/-.01
ONE/.81
BDK/.92
BSX/.22
CECO/.32
CTX/1.74
COH/.26
FRX/.38
GM/1.79
IR/.87
LU/.02
MOT/.07
PFE/.51
TASR/.22
WFC/.97

Splits
UNFI 2-for 1

Economic Data
None of note.

Recommendations
Goldman Sachs recommends Selling DQE and Buying AYE and RRI. GS reiterated Outperform on RE, MSFT, PKG, NSIT, BAX, BC and UDR. Goldman reiterated Underperform on MXT.

Late-Night News
Asian indices are rising as Japanese technology stocks climb in anticipation of strong earnings reports. China's leaders are planning steps to try to cool the nation's booming economic growth, including a possible increase in interest rates, the Financial Times reported. The 10 suspected terrorists arrested yesterday in England were planning a suicide bombing attack at the Old Trafford soccer stadium during the Premiership match between Manchester United and Liverpool on Saturday, the Sun reported. DirectTV is near an agreement to sell its 81% stake in PanAmSat for $23.50/share to Kohlberg Kravis Roberts, the Wall Street Journal Reported.

Late-Night Trading
Asian Indices -.50% to +2.50%.
S&P 500 indicated +.05%.
NASDAQ indicated +.07%.

BOTTOM LINE: U.S. stocks should open higher tomorrow on strength in Asian technology shares. However, numerous corporate earnings reports will likely dictate the market's direction for the day. I will closely monitor the market's reaction to these reports and then decide whether or not to add or cut exposure. The Portfolio is 75% net long heading into tomorrow.

Monday Close

S&P 500 1,135.82 +.11%
NASDAQ 2,020.43 +1.24%

Leading Sectors
Broadband +2.11%
Wireless +2.10%
Biotech +1.93%

Lagging Sectors
Hospitals -1.11%
Airlines -1.26%
Homebuilders -1.34%

Other
Crude Oil 37.42 unch.
Natural Gas 5.51 -.02%
Gold 400.90 -.07%
Base Metals 115.07 +1.89%
U.S. Dollar 89.80 -.16%
10-Yr. Long-Bond Yield 4.37% +.83%
VIX 15.42 +3.21%
Put/Call .66 -14.29%
NYSE Arms .97 -32.64%

After-hours Movers
JCOM +10.34% after beating 1Q estimates and raising 2Q and 04 forecast.
SPRT +9.36% after beating 1Q estimates and raising 2Q and 04 forecast.
PXLW +6.80% after beating 1Q estimates and raising 2Q forecast.
MGAM +5.65% after announcing it will replace Pacific Sunwear in S&P 600.
NTPA -41.32% after missing 2Q forecast substantially.

Recommendations
Goldman Sachs reiterated Outperform on KO, CCE, CEN and PEP. APH raised to Buy 2 at UBS.

After-hours News
U.S. stocks finished mostly higher as the 1990-2000 support level held on the NASDAQ, providing the catalyst for tech and biotech stocks to strengthen throughout the day. After the close, Saudi Arabia said it was determined to stamp out terrorist groups, the country's leader Crown Prince Abdullah said, Reuters reported. The U.S. will lift economic sanctions on Libya this week after the country agreed to dismantle its nuclear weapons program, the Financial Times reported. The Index of Leading Economic Indicators showed a year-over-year gain of 4.4%, the most since 1984.

BOTTOM LINE: The Portfolio fell slightly today as I took some losses on a few shorts early in the morning. The unexpected and sustained strength in technology today led me to add a few new long positions in the afternoon. The Portfolio is now 75% net long. The 4.4% gain in the Leading Indicator Index is just another in a string of economic reports that show the best U.S. economic growth since the early 80's. The Federal Reserve has interest rates at emergency levels to combat the aftermath of the bursting stock market bubble, the ensuing recession, multiple corporate scandals, September 11th attacks and what appeared to be the beginnings of a deflationary spiral. Now that it is apparent that the U.S. economy has worked through most of these issues the Fed will likely raise rates from their current emergency levels at the June 28-30 meeting. This does not mean they are necessarily worried about inflation; rather rates should not be at emergency levels in the current vigorous economic climate. The quicker the Fed acts, the sooner stocks will resume their current bull run as it will sooth the concerns of investors that are overly concerned about an imminent and drastic rise in inflation.