Friday, June 25, 2004

Mid-day Update

S&P 500 1,141.17 +.05%
NASDAQ 2,026.89 +.56%

Leading Sectors
Airlines +1.66%
Networking +1.53%
Semis +1.20%

Lagging Sectors
Fashion -.77%
Drugs -.94%
Defense -1.22%

Crude Oil 37.20 -1.92%
Natural Gas 6.29 -2.93%
Gold 402.90 -.15%
Base Metals 109.49 -.52%
U.S. Dollar 89.0 +.34%
10-Yr. T-note Yield 4.66% +.25%
VIX 14.79 -.14%
Put/Call .63 -4.55%
NYSE Arms 1.0 -28.06%

Market Movers
TTN -21.6% after saying it wouldn't be able to settle a criminal probe by today's deadline and LMT won't extend its buyout offer again.
PAYX -6.3% after meeting 4Q estimates and lowering 05 guidance slightly.
CAB +32.5% on strong demand for IPO.
TASR +12.5% on continuing rumors of imminent deal to sell personal version of stun gun through Sharper Image stores and short squeeze.
SIMG +16.79% after raising 2Q guidance and Thomas Weisel upgrade to Outperform.
NKE +4.2% after beating 4Q estimates and announcing $1.5 billion share buy-back.
TEK +6.9% after beating 4Q estimates substantially and raising 1Q guidance.
MSA +7.9% on successful 2.63m share secondary.
REY -20.5% after lowering 3Q and 4Q forecasts.
SOL -12.68% after saying it is hiring consultants and adding staff members to address weakness in its internal accounting controls.
TTEK -12.9% after lowering 3Q and 4Q forecasts substantially and Robert Baird downgrade to Underperform.
ARB -6.1% after cutting 04 forecast.

Economic Data
Final 1Q GDP was +3.9% versus estimates of +4.4% and +4.4% prior.
Final 1Q personal Consumption was +3.8% versus estimates of +3.9% and 3.9% prior.
Final 1Q GDP Price Deflator was +2.9% versus 2.6% estimate and 2.6% prior.
Final U. of Mich. Consumer Confidence for June was 95.6 versus estimates of 95.0 and a reading of 95.2 prior.
Existing Home Sales for May were 6.80M versus estimates of 6.50M and 6.63M in April.

FTI rated Overweight at JP Morgan. CCUR cut to Sector Underperform at CIBC. HCA raised to Overweight at Morgan Stanley, target $49. ACH reiterated Overweight by Morgan Stanley. SIMG raised to Outperform at Thomas Weisel. DCN cut to Underweight at Prudential, target $15. JPM rated Outperform at Bear Stearns, target $45. FS raised to Outperform at Bear, target $71. DLM cut to Underperform at Bear. LYO raised to Buy at Merrill Lynch, target $20. Goldman Sachs reiterated Outperform on GCI, NKE, CLX, TYC, PAYX, MMP, N, AMGN and TRB. Goldman said to Buy INTC for potential upside to earnings estimates in second half. Goldman downgraded FRX to Underperform. ROH upgraded to Buy at Citi SmithBarney, target $47. Citi reiterated Buy on MAS, target $37. Citi reiterated Sell on BA, target $36. Citi reiterated Buy on ASD, target $46.

Mid-day News
U.S. stocks are slightly higher mid-day, led by technology, as energy prices fall and interest rates stabilize at lower levels. Iraqis, by a 2-to-1 margin, said they have confidence in the new interim government that will take over on June 30, citing a recent poll, the Washington Post reported. Pennsylvania soon might have more slot machines than New Jersey, cutting as much as 10% from Atlantic City's $4.5 billion gambling market, the Star-Ledger reported. New Jersey companies leased more office space in the second quarter than they vacated for the first time since the stock market bubble burst and economic growth plunged in 2000, the Star-Ledger reported. Celgene, which makes a drug aimed at lessening the severity of a blood cancer, could benefit from a pilot project by the U.S. government to reimburse patients for the cost of the drug, the Star-Ledger reported. Norway's government intervened for the second time in four years to end a labor strike that has threatened to halt all oil and gas production, Bloomberg reported. Pfizer will pay $620 million to acquire rights to Aventis SA's cancer drug, Bloomberg said. U.S. sales of previously owned homes rose to a record 6.8 million annual pace in May. The economy has created 1.2 million jobs so far this year and incomes are up 5.7% in 12 months, the most since 2000, which is underpinning housing demand as interest rates rise, Bloomberg reported. UN Secretary-General Annan said he and Colin Powell will demand that Sudan's government stop the killing in the Darfur region of the country, or face possible military intervention, Bloomberg reported. For the first time since former Federal Reserve Chairman Paul Volcker began his investigation into the Iraqi Oil-for-food program, the man charged with getting to the bottom of the scandal says he has uncovered "serious problems" with the program, Fox News reported.

BOTTOM LINE: The Portfolio up substantially today as my security, internet and telecom equipment longs are rising significantly. I have not traded today and the Portfolio is still 150% net long. Oil is headed for a test of its recent low of $36.80/bbl. I believe it will take out this low next week. U.S. stocks will likely remain mixed until the final hour. I then expect a modest rally as sellers finish ahead of a possible violent weekend in Iraq. The tone of the market is still very good, led by technology, as the advance/decline line continues to improve.

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