Mid-day Update

S&P 500 1,080.39 -1.37%
NASDAQ 1,888.27 -2.23%

Leading Sectors
Iron/Steel +1.96%
Oil Service +.26%
Energy +.15%

Lagging Sectors
Networking -2.97%
Tobacco -3.23%
Semis -3.67%

Other
Crude Oil 40.58 +1.27%
Natural Gas 6.45 +1.08%
Gold 380.50 +.87%
Base Metals 102.73 +1.37%
U.S. Dollar 91.24 -.45%
10-Yr. Long-Bond Yield 4.78% +.75%
VIX 19.97 +7.54%
Put/Call .79 -36.25%
NYSE Arms 2.38 +126.67%

Market Movers
SEM -22.8% on investor concern that a new admissions limit Medicare proposed for extended hospital stays will reduce earnings and multiple downgrades.
KMX -11.2% after cutting 1Q guidance.
BRCM -5.8% on worries over inventory increases at CSCO.
PFG +5.35% after saying that Citigroup agreed to buy its residential-mortgage business for $1.26 billion.

Economic Data
Trade Balance for March came in at -$46.0B versus -$43.0B estimate and -$42.1B in February.
Import Price Index for April rose .2% versus expectations of a .4% rise and a .8% rise in March.

Recommendations
ANF raised to Overweight at JP Morgan. TRW rated Buy at Deutsche Bank, target $23. COF raised to Overweight at Morgan Stanley, target $71. CEY raised to Overweight at Morgan Stanley, target $40. BAC raised to Overweight at Prudential, target $86. SFA raised to Buy at Oppenheimer, target $38. LPX cut to Underweight at Lehman, target $24. Goldman reiterated Outperform on TIF, KO, DTV, CLS, SLR, FD and KRB. Goldman made favorable comments on communications semis after CSCO call, favorites are MRVL and AGR/A.

Mid-day News
U.S. stocks are falling mid-day on rising energy prices, a widening trade-deficit and an adverse reaction by investors to Cisco's better-than-expected earnings report. Wal-Mart's growing power and the wages and benefits given its workers will be discussed at a meeting of union leaders, academics and community activists in Washington today, the NY Times said. Cisco Systems is adding more jobs in the U.S., CEO Chambers told CNBC. Qualcomm is raising prices on its chips as demand increases, CEO Jacobs told CNBC. China's out-of-control economy, led by a runaway housing market, could be headed for a bust much like that of the U.S. dot-com industry four years ago, the LA Times reported. World oil demand this year will rise the most since 1988 as economic growth accelerates and consumption surges in the U.S. and China, the IEA said. Saudi Arabia, the world's largest oil exporter, stands ready to boost production after it holds talks with OPEC colleagues next week, a senior OPEC delegate said.

BOTTOM LINE: The Portfolio down today as my technology longs and market-exposure are hurting performance. The market's adverse reaction to Cisco's better-than-expected earnings report and raised guidance leads me to believe that tech still has more downside. Investor psychology is exceptionally bad as the negative is accentuated and the positive is ignored. I do not want to take the chance of giving back my profits for the year, thus I sold many longs this morning bringing the Portfolio's market exposure back to market neutral. The S&P 500's 04 P/E is now 16.8 and falling as the market's multiple contraction phase continues.