Tuesday, June 01, 2004

Mid-day Update

S&P 500 1,116.21 -.40%
NASDAQ 1,977.02 -.51%

Leading Sectors
Hospitals +1.38%
Energy +1.02%
HMO's +.84%

Lagging Sectors
I- Banks -1.50%
Disk Drives -2.56%
Airlines -2.58%

Crude Oil 41.91 +5.09%
Natural Gas 6.68 +3.69%
Gold 395.50 +.15%
Base Metals 110.42 +1.48%
U.S. Dollar 88.81 -.10%
10-Yr. T-note Yield 4.71% +1.36%
VIX 16.80 +8.39%
Put/Call 1.05 +.96%
NYSE Arms 1.39 +21.93%

Market Movers
BHAG +15.53% after saying GE Energy will acquire it for $260 million.
NILE +8.65% on continued strength from IPO.
OSG +7.34% after JP Moran upgrade to Overweight on increased tanker rates and business from Saudi Arabia.
SRX +8.53% on speculation that it won part of the $10 billion homeland security IT contract.
CME -5.2% after Merrill downgrade to Neutral on potential share sales when limits on selling by members end on Friday.

Economic Data
Construction Spending for April rose 1.3% versus estimates of a .4% increase and a revised 2.4% rise in March.
ISM Manufacturing for May came in at 62.8 versus estimates of 61.5 and 62.4 in April.
ISM Prices Paid for May fell to 86.0 versus estimates of 89.3 and 88.0 in April.

Goldman Sachs reiterated Outperform on AMGN, ENH, VIA/B and MDT. Citi SmithBarney reiterated Buy on MTB, target $102. Citi reiterated Buy on NSM, target $24. Citi thinks TLAB won a sizable contract from Verizon and will announce it at Supercomm in late June, reiterated Buy, target $11. OSG raised to Overweight at JP Morgan. SJH cut to Underweight at JP Morgan. MDP raised to Buy at UBS, target $63. GMTN rated new Buy at Bank of America, target $28. USFC raised to Outperform at Bear Stearns, target $38. BE rated Overweight at JP Morgan.

Mid-day News
U.S. stocks are modestly lower mid-day as another strong economic report and violence in Saudi Arabia over the weekend push energy prices and interest rates higher. Merrill Lynch lowered its second-quarter earnings forecast for Intel to .26 and its revenue forecast to less than $8 billion, CNBC reported. The Chinese government's efforts to slow investment in industries such as steel, aluminum and cement are working, state-owned CCTV said. California Governor Schwarzenegger and four Indian tribes reached a tentative agreement on a plan to share casino revenue with the state, LA Daily News reported. Boston Scientific agreed to buy closely held Advanced Bionics for about $740 million in cash to add products that treat neurological disorders, Bloomberg reported. U.S. construction spending rose 1.3% in April to a record annual pace of $970.4 billion, led by work on housing and highways, Bloomberg said. Drugmakers including Eli Lilly, Merck and Novartis are competing to offer the elderly discounts of 12% to 50% on prescriptions under a U.S. government-sponsored Medicare plan that began today, Bloomberg reported. A group led by Accenture won a contract worth up to $10 billion over 10 years to develop a system for tracking visitors to the U.S., the Dept. of Homeland Security said. Crude oil futures surges to a record in New York after the killing of 22 people in a key Saudi Arabian oil-producing region Saturday raised concern that attacks might disrupt shipments, Bloomberg reported. A gauge of U.S. manufacturing unexpectedly rose last month to the highest in almost two decades as increased demand prompted more factories to hire than at any time in 31 years, Bloomberg reported.

BOTTOM LINE: The Portfolio is up slightly today and I have not traded. Thus, market exposure is still 125% net long. It is disappointing that oil is having such an adverse reaction to the weekend's violence. However, stocks are relatively strong considering the rise in oil and interest rates. Small-caps are actually up on the day. As well, the continued significant improvement in manufacturing and creation of jobs are very positive developments. I expect U.S. shares to strengthen into the close on afternoon short-covering, leaving the major indices down modestly on the day.

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