Mid-day Update

S&P 500 1,126.51 -1.25%
NASDAQ 2,014.60 -1.62%

Leading Sectors
Defense +1.11%
Nanotechnology +1.07%
Restaurants +.64%

Lagging Sectors
Networking -3.45%
Disk Drives -3.67%
Semis -4.08%

Other
Crude Oil 38.70 +4.59%
Natural Gas 6.24 +1.38%
Gold 396.20 +.84%
Base Metals 109.87 +.50%
U.S. Dollar 88.84%
10-Yr. T-note Yield 4.60% +.43%
VIX 15.39 +7.25%
Put/Call 1.0 +28.21%
NYSE Arms 2.58 +142.99%

Market Movers
CAH -24.7% after saying 2004 profit missed forecasts and U.S. attorneys are probing its accounting.
YHOO -5.2% after Citi SmithBarney cut to Hold from Buy.
RIMM +3.6% on a continuation of yesterday's strong move after better-than-expected earnings report and forecast.
ELX -18.1% after cutting 4Q and 1Q forecasts, multiple downgrades.
DRS +22.69% after LLL offered to buy the company for $1.1 billion in cash.
IRGI +16.5% after CRL agreed to buy it for about $1.5 billion in cash and stock.
BNNY +10.77% after saying it may put itself up for sale.
SYPR -26.7% after lowering 2Q estimates, but raising 04/05 sales guidance.
ISIL -10.5% after Schwab SoundView cut rating to Neutral, saying it experienced a slowdown in business at the end of the second quarter.
WMAR -8.2% after lowering 2Q forecast.

Economic Data
Initial Jobless Claims for last week came in at 351K versus estimates of 342K and 350K prior week.
Continuing Claims came in at 2966K versus estimates of 2937K and 2953K prior.
Construction Spending for May rose .3% versus expectations of a .7% rise and an increase of 1.2% in April.
ISM Manufacturing for June came in at 61.1 versus estimates of 61.0 and 62.8 in May.
ISM Prices Paid for June came in at 81.0 versus estimates of 82.0 and 86.0 in May.

Recommendations
Goldman Sachs reiterated Outperform on MCK, MON, IGT, MSFT, STZ, GCI, HOT, AMGN, DNA and FS. Goldman reiterated Underperform on DJ. Citi SmithBarney initiated PNR with a Buy, target $40. Citi reiterated Buy on FON, target $22. Citi reiterated Buy on APCS, target $11. Citi reiterated Buy on SBUX, target $46. NUE rated Sector Underperform at CIBC. LOW rated Overweight and HD rated Underweight at JP Morgan. FRO ratied Overweight at JP Morgan. AMSG, DVA rated Overweight at JP Morgan.

Mid-day News
U.S. stocks are lower mid-day on rising energy prices and weakness in technology shares. Ousted Iraqi dictator Saddam Hussein refused to sign a legal document in court today, insisted on being called President and defended his country's invasion in 1990 of Kuwait, saying "Kuwait is an Iraqi territory. It was not an invasion," Agence France-Presse reported. The ISM Manufacturing Index held close to a 20-year high in June and construction spending increased for a fourth straight month, Bloomberg reported. Senator John Kerry may make his running-mate selection as early as Tuesday, the Boston Globe reported. Delta Air plans to use RFID tags to monitor all bags it handles at domestic airports, the NY Times reported. United Airlines is trying to reassure its 40 million frequent fliers that the U.S. government's loan rejection won't hurt service, the Washington Post reported. Information-technology companies such as Internet jewelry retailer Blue Nile were among 29 venture-backed companies that went public in the second quarter as venture capitalists began to recoup on investments, the Wall Street Journal said. Members of al-Qaeda led by al-Zarqawi in Iraq are targeting females U.S. military personnel, the Washington Times reported. The Houston Police will buy as much as $3.6 million worth of Taser stun guns during the next five years, Bloomberg said. Copper futures rose in New York for a second day on concern a strike in Chile, the world's largest producer, would reduce supplies from a mine owned by Falconbridge and AngloAmerican, Bloomberg said. Crude oil is rising for a second day on concerns that a terrorist attack could limit supplies over the three-day weekend, Bloomberg reported. Ford Motor said U.S. sales of cars and trucks fell 7.7% in June from a year earlier, however DaimlerChrysler's sales rose 5.2%, Bloomberg said. Shares of U.S. REITS may rise as job growth boosts office and apartment occupancies for the first time since 2000, helping landlords weather higher rates, Bloomberg reported.

BOTTOM LINE: The Portfolio is lower today on weakness in my technology longs. I took profits in a few long positions this morning, leaving the Portfolio with 100% net long market exposure. The market's manic behavior of late is frustrating, but quite profitable for nimble investors. A couple of weeks ago, inflation was the worry on rising commodity prices and a 20-year high in U.S. economic growth. Commodity prices have fallen over the last 2 weeks and a few economic reports have come off their highs, thus resulting in concerns the economy is slowing too much. U.S. growth is likely slowing from its torrid pace to more sustainable levels, which should alleviate some concerns over inflation. I continue to believe technology shares will outperform in the second half of the year, notwithstanding today's weakness. A significant rally is unlikely today, ahead of tomorrow's jobs report and the three-day weekend. However, with soaring ARMS index and Put/Call readings, a substantial fall in the afternoon is unlikely as well. The rise in oil today is of concern, but likely a countertrend move that will reverse next week.