Mid-day Update

S&P 500 1,132.45 +.04%
NASDAQ 1,993.81 -.08%

Leading Sectors
Oil Service +2.35%
Energy +1.68%
Defense +.68%

Lagging Sectors
Software -.60%
Papers -.72%
Semis -.74%

Other
Crude Oil 37.60 +.48%
Natural Gas 6.42 +1.84%
Gold 385.20 -.90%
Base Metals 104.80 -.13%
U.S. Dollar 90.04 +1.07%
10-Yr. T-note Yield 4.72% +.98%
VIX 14.63 -2.79%
Put/Call .60 -20.0%
NYSE Arms 1.01 +8.60%

Market Movers
CYBX +62.1% after FDA panel surprised investors by recommending approval of the company's brain-stimulation device for severe depression.
ELY -19.88% after lowering 2Q and 04 guidance.
IGT +5.0% after reiterating guidance and saying it was buying back all its senior notes due in May 09.
GMAI +25.0% after boosting 4Q and 04 forecast substantially.
SNTS +24.23% after saying the FDA approved its Rapinex heartburn drug for sale in the U.S.
SMTS +12.23% after beating 2Q estimates and raising 04 guidance.
NRD +9.9% on speculation it will be acquired by Cia. Vale do Rio Doce for $4.7 billion.
HLR -9.68% after saying it overstated the circulation at the Chicago Sun-Times for several years.
HEW -8.93% after agreeing to buy Exult for about $6.30/share.

Economic Data
Housing Starts for May came in at 1967K versus estimates of 1950K and an upwardly revised 1981K in April.
Building Permits for May came in at 2077K versus estimates of 1970K and 2006K in April.
Industrial Production for May rose 1.1% versus estimates of a .8% rise and a .8% rise in April.
Capacity Utilization for May came in at 77.8% versus estimates of 77.5% and 77.1% in April.

Recommendations
Goldman Sachs remains cautious on REITS. Goldman upgraded CRE to Outperform. Goldman reiterated Outperform on KRI, BBY, GLW, IGT, FON and SLB. Goldman reiterated Underperform on SCS. Citi SmithBarney reiterated Buy on JNPR ahead of quarter, target $32.50. Citi said to Buy COGN ahead of quarter, target $39. Citi's recent Corporate Travel Managers Survey shows a solid recovery in business travel demand as 57% surveyed expect 05 travel spending to exceed 04. Citi reiterated Buy on IGT, target $50. COX raised to Sector Outperform at CIBC, target $36. KMI rated Buy at Banc of America, target $66.50. STR rated Buy at Banc of America, target $42. SRE rated Buy at Banc of America, target $36.50. ATG rated Buy at Banc of America, target $32.50. WMB rated Sell at Banc of America, target $8. PGL rated Sell at Banc of America, target $35. Q added to Focus List at JP Morgan, target $6.

Mid-day News
U.S. stocks are slightly lower today on a rise in interest rates after a report showed the fastest U.S. industrial production in 6 years. The percentage of commercial real-estate owners with terrorism insurance rose in the first quarter to the highest level since the U.S. Congress passed the Terrorism Risk Insurance Act in 02, the Wall Street Journal reported. Lennar Corp. CEO Miller told CNBC that interest rates would have to increase 200-300 basis points before the homebuilding industry would be concerned. A World Health Organization panel concluded that formaldehyde, which is used in adhesives and binders for wood, causes cancer, the LA Times reported. UN employees don't know how to report internal corruption relating to the scandal-ridden Iraqi oil-for-food program or fear reprisals if they do, the NY Times reported. U.S. gasoline prices should fall throughout the summer on increased production from OPEC and lower crude oil prices, Reuters said. Oil futures are barely rising even after the Energy Dept. reported that U.S. oil inventories increased less than expected and violence in Iraq halted production, Bloomberg reported. British scientists have applied for the first license in Europe to undertake research that would involve cloning human embryos and using the stem cells to treat diabetes, Bloomberg reported. Microsoft lost a contract for programs to run 14,000 PCs for the Munich city government to the free Linux software, Bloomberg said. U.S. Treasury notes are falling as reports showed builders broke ground on more houses than forecast in May and industrial production rose at the fastest pace in 6 years, Bloomberg reported.

BOTTOM LINE: The Portfolio is slightly lower today as my industrial and software longs are falling more than my Chinese ADR and semiconductor shorts. I exited a couple of longs this morning as they hit stop-losses, thus bringing the Portfolio's market exposure to 50% net long. I expect stocks to rise modestly into the afternoon as interest rates stabilize and investors focus on the very strong economic reports.