Mid-day Update

S&P 500 1,132.58 -.09%
NASDAQ 1,986.83 -.57%

Leading Sectors
Homebuilders +1.90%
Commodity +1.34%
Oil Service +.83%

Lagging Sectors
Internet -1.1%%
Networking -1.53%
Semis -2.99%

Other
Crude Oil 38.42 +2.05%
Natural Gas 6.50 +.25%
Gold 388.20 +.78%
Base Metals 106.79 +1.36%
U.S. Dollar 89.62 -.47%
10-Yr. T-note Yield 4.70% -.46%
VIX 15.25 +3.11%
Put/Call .75 +13.64%
NYSE Arms .97 +1.04%

Market Movers
ACN +5.3% after saying it sees consulting pricing recovery, growth of 10-15%, considering modest dividend and 05 revenue in the bag.
JBL -15.79% after meeting 3Q estimates and lowering 4Q forecast.
CYBX +10.97% on continued optimism over FDA approval of its brain-stimulation device and rumors of BSX takeover.
WGO +13.19% after beating 3Q estimates substantially.
LEG +10.25% after boosting 2Q/04 forecast.
MBT +10.0% after strong 1Q earnings and upgrade to Buy at Aton, target $148.
SYNA +6.47% after CSFB Outperform rating, target $25.
LSS +8.2% after raising 2Q forecast substantially.
NTY -23.83% after announcing disappointing April and May sales.

Economic Data
Producer Price Index for May +.8% versus expectations of +.6% and +.7% in April.
PPI Ex Food & Energy +.3% versus expectations of +.2% and +.2% in April.
Initial Jobless Claims for last week fell to 336K versus estimates of 340K and 351K prior week.
Continuing Claims were 2895K versus a downwardly revised 2864K prior.
Leading Indicators for May +.5% versus estimates of +.4% and +.1% in April.
Philly Fed for June came in at 28.9 versus estimates of 25.3 and 23.8 in May.

Recommendations
Bank of America thinks yen will drop to 115/dollar in 4th quarter on slowing Chinese growth. NTLI rated Overweight at Morgan Stanley, target $80. CZN raised to Overweight at Lehman, target $14.50. Goldman reiterated Outperform on BBY, CAN, KR, GCI, FS, HOT, RE, PFE, AMGN, BIIB and SYMC. Goldman reiterated Underperform on DJ and F. Goldman upgraded CYTC to Outperform, target $30. Citi SmithBarney reiterated Buy on HIG, target $81. Citi reiterated Buy on JBL, target $32. Citi reiterated Buy on UNH, ATH and WLP. Citi reiterated Buy on FON, target $22.

Mid-day News
U.S. stocks are slightly lower today on worries over violence in Iraq and rising oil prices. Accenture plans to hire 8,000 people in the U.S. this year, Bloomberg reported. U.S. Senator McCain will introduce President Bush at a campaign rally tomorrow in Nevada, which may represent a rebuilding of relations strained by the bitter 2000 Republican primary, the Washington Post reported. SpectraSite is considering share buybacks and paying recurring dividends as it moves to buy more of the land under its wireless towers, said CEO Clark. MGM Mirage plans to build a casino in Atlantic City next to the new $1.1 billion Borgata, the Star-Ledger reported. Marriott Intl. plans to spin off a publicly traded REIT, the Washington Post reported. Marvel Enterprises told CNBC it may pay a dividend or offer to buy back stock. A Queens, NY man was arrested by FBI agents over allegations he helped a group of eight men who U.K. authorities believe were planning to blow up train stations, pubs and restaurants in England, the NY Times reported. Iraq will resume exporting oil tomorrow after repairing most of the damage to southern pipelines sabotaged on Monday and Tuesday, Al Arabiya reported. At least 35 Iraqis were killed and 138 injured when a car bomb exploded near an Iraqi army recruitment building in Baghdad, Bloomberg reported. Saudi Arabia yesterday reopened its border with Iraq to commercial traffic for the first time in 14 years, Bloomberg reported. Cisco will probably generate $1 billion in annual sales from VoIP equipment, CEO Chambers told Bloomberg. Intel today will unveil a set of chips it hopes will spur sales by wooing computer buyers with advanced graphics and theater-quality sound, Bloomberg reported. Over half of the Philadelphia region's factories said they were operating at 80% of capacity or higher compared with 29% six months ago, Bloomberg said.

BOTTOM LINE: The Portfolio is slightly higher today as my Chinese ADR and financial shorts are falling more than my technology longs. I took profits in a few homebuilding shorts and added a couple of Russian ADRs this morning, leaving the Portfolio with 50% net long market exposure. One of my new longs is MICC and I am using a stop-loss of $21 on this new position. While the PPI came in higher-than-expected, the Philly Fed Prices Paid Index fell and investors seem to be anticipating an intermediate-term peak in inflation. This is a very positive change in investor psychology with respect to inflation expectations. Just a couple of weeks ago worries that the Fed was behind the curve were rampant. Greenspan has reiterated forcefully numerous times that inflation was not a problem for the foreseeable future, but just recently have investors listened. This has been the market's chief source of anxiety. With the bond market rallying in the face of such strong economic numbers, I am now leaning more towards believing the Fed will raise rates by 25 basis points on June 30th, notwithstanding my belief that 50 would be more appropriate. I continue to believe any market weakness over the next couple of weeks should be used by long-term investors to accumulate shares in favorite long positions.