Mid-day Update

S&P 500 1,122.03 -.26%
NASDAQ 1,976.15 -.65%

Leading Sectors
Broadcasting +.70%
Restaurants +.61%
Drugs +.58%

Lagging Sectors
Nanotechnology -1.60%
Semis -1.63%
Airlines -1.97%

Other
Crude Oil 38.75 -3.03%
Natural Gas 6.33 -2.90%
Gold 389.10 -.89%
Base Metals 108.12 -.29%
U.S. Dollar 89.05 +.24%
10-Yr. T-note Yield 4.71% -.42%
VIX 16.41 +2.05%
Put/Call 1.20 +27.66%
NYSE Arms 1.17 +4.46%

Market Movers
IPIX +37.5% after Tom Ridge commended the company for helping to make America more secure.
CVTX +19.38% after the company's plan to test its Ranexa heart drug for chronic chest pain was approved by the FDA.
CMVT +7.92% after beating 1Q estimates and raising 2Q and 05 forecasts.
GSL +13.28% on strong demand for its IPO.
TLB +8.77% after announcing May same-store-sales increase of 10% versus estimates of 2.3%.
ARO +7.36% after announcing May same-store-sales increase of 27% versus estimates of 13.4%.
PGTV -14.9% after saying two of its units filed for bankruptcy protection from creditors under Chapter 11.
FCEL -12.36% after missing 2Q estimates.
BRLI -10.39% after missing 2Q estimates.

Economic Data
Final Non-farm Productivity for 1Q was +3.8% versus estimates of +3.7% and +3.5% prior.
Final Unit Labor Costs for 1Q were +.8% versus +.4% estimates and +.5% prior.
Initial Jobless Claims last week came in at 339K versus 335K estimate and 345k prior week.
Continuing Claims came in at 3003K versus 2925K estimate and 2938K prior.
Factory Orders for April -1.7% versus -1.4% estimate and revised +5.0% in March.
ISM Non-Manufacturing for May was 65.2 versus estimates of 66.0 and 68.4 in April.

Recommendations
PD raised to Sector Outperform at CIBC, target $95. SFNT raised to Strong Buy at Raymond James, target $32. Goldman Sachs said there is no evidence in yesterday's auto numbers that high gas prices are impacting pick-up or SUV sales. Goldman reiterated Outperform on RSE, CCL, SRE, FD, BBY, RCL, FS, HOT, IGT, STN, GCI and CBL. Goldman reiterated Underperform on DJ, SKS, F and HRB. Goldman said to Buy retail-oriented REITS ahead of the annual National Assoc. of REITs Investor Forum in NY next week, favorite is DDR. Citi SmithBarney said to Buy MCD ahead of their comp report next Mon, target $34. Citi said to Buy GIS on weakness ahead of EPS report, target $51. Citi reiterated Buy ratings on HIG and ALL, price targets are $55 and $81, respectively. Citi reiterated Buy on FFIV, target $45. Citi reiterated Buy on ITT, target $92. Citi reiterated Buy on IR, target $83. Citi reiterated Buy on BJ, target $30. Citi reiterated Buy on NMGA, target $68. Citi reiterated Buy on WYE, target $47. Citi reiterated Buy on DTV, target $21.

Mid-day News
U.S. stocks are modestly lower mid-day as investor nervousness persists ahead of Intel's mid-quarter update, tomorrow's jobs report and Bush's trip to Rome. Symbol Technologies today will likely announce a settlement with the U.S. SEC, which has been investigating Symbol's business practices, the NY Times reported. Honeywell International is testing a prototype electronic system for large airlines that would prevent commercial aircraft from crashing into nuclear power and chemical plants, the Star-Ledger reported. China has halted loans made to fixed-asset investment projects that aren't approved by the government in a bid to help slow the pace of economic growth, Agence-France Presse reported. Dust on PCs may contain a flame retardant with a chemical known to cause brain damage in animals, the San Jose Mercury News reported. About 250 investors are attending a convention in Las Vegas on opportunities in Iraq, the Washington Post reported. Cendant plans to offer 37.5 million shares of its Jackson Hewitt tax preparation unit in an IPO, Bloomberg reported. Children's Place said its in talks with Disney for the purchase of the Disney Store chain in the U.S. and Canada. Wal-Mart said May U.S. sales rose 5.9%, at the high end of forecasts, as consumers bought more groceries and electronics, Bloomberg said. OPEC agreed to the biggest increase in oil quotas in more than 6 years, seeking to prevent near-record prices from slowing world economic growth, Bloomberg said. American’s risk of getting cancer or dying of the disease is on the decline, according to a government report, Bloomberg reported. Crude oil stockpiles in the U.S. rose by a larger-than-expected 2.8 million barrels last week, sending oil prices lower, Bloomberg reported. George Tenet resigned as director of the CIA for personal reasons, Bloomberg reported. A gauge of activity at U.S. service companies, which make up the largest share of the economy, reached the fourth highest on record in May as businesses increased hiring, Bloomberg reported.

BOTTOM LINE: The Portfolio is down slightly today as one of my retail longs is up substantially, mostly offsetting losses in my technology long positions. I have not traded today and the Portfolio is still 100% net long. I continue to believe worries over Intel's report are overdone. I also expect tomorrow's Non-farm payrolls to exceed estimates of 225K. U.S. markets should respond favorably tomorrow. Finally, I expect stocks to strengthen into the close. High Put/Call and ARMs readings should cushion any unexpected afternoon weakness. Some short-covering will likely occur as well.