Mid-day Update

S&P 500 1,127.01 -.17%
NASDAQ 2,007.68 -.39%

Leading Sectors
Homebuilders +2.24%
Utilities +1.01%
Oil Service +.51%

Lagging Sectors
Software -1.12%
Disk Drives -1.25%
Semis -1.87%

Other
Crude Oil 38.40 -.75%
Natural Gas 6.15 -1.0%
Gold 398.70 +.58%
Base Metals 109.94 +.06%
U.S. Dollar 87.97 -.93%
10-Yr. T-note Yield 4.45% -2.32%
VIX 14.98 -1.38%
Put/Call .88 -5.38%
NYSE Arms 2.37 -15.66%

Market Movers
AAPL -4.6% after saying the next version of its iMac computer will be about two months late.
CMX -5.4% after saying the attorney general of Washington sate has demanded information about business practices in the company and its recently acquired AdvancePCS unit.
JUNO +10.8% after announcing its board has declared a one-time cash dividend of $60 million payable to the holders of its common and preferred stock.
DLI +12.44% after saying it would be acquired by Church & Dewight and Kelso & Co. for $385 million in cash.
*Homebuilders + across the board on interest rate decline.
ESPD -25.4% after lowering 2Q estimates and multiple downgrades.
MAMA -12.3% after Billionaire Mark Cuban sold his stake.
NFLX -9.8% as strong subscriber growth did not meet optimistic expectations.
SY -11.83% after cutting 2Q forecast.
PPP -10.77% after deeming its Hungarian development well "disappointing."

Economic Data
Unemployment Rate for June came in at 5.6% versus estimates of 5.6% and 5.6% in May.
Average Hourly Earnings for June rose .1% versus estimates of a .3% rise and a .3% rise in May.
Change in Non-farm Payrolls for June was 112k versus estimates of 250K and a downwardly revised 235K in May.
Change in Manufacturing Payrolls for June was -11K versus an estimate of 30K and a downwardly revised 24K in May.
Average Weekly Hours for June came in at 33.6 versus an estimate of 33.8 and 33.8 in May.
Factory Orders for May fell .3% versus estimates of a .7% decline and an upwardly revised 1.1% fall in April.

Recommendations
SLGN rated Overweight at JP Morgan. GGC cut to Reduce at UBS. Citi SmithBarney raised AAPL to Buy. Citi said to Buy BWA and sell SUP. Citi reiterated Sell on STX, target $10. Citi reiterated Sell on GDT, target $51. Citi said favorite metal stocks are AA, NEM and FCX. Goldman Sachs reiterated Outperform on GDT, IGT, ADP, CEN, PAYX, VZ, INTC, AMD and CAL. Goldman reiterated Underperform on BPL. Goldman said Semi Industry Assoc. data were very good overall, possible weakness at NSM and TXN.

Mid-day News
U.S. stocks are modestly lower mid-day as a report showed U.S. unemployment held steady at 5.6% and 112,000 jobs were created, below expectations. Interest rates plunged on the news, with the 10-yr T-note now yielding 4.45%, down almost 50 basis points from its recent high. The U.S. economy has now generated 1.3 million new jobs since the beginning of the year, the best 6 months of job creation since the stock market bubble burst in 2000, Bloomberg reported. The Fed's increase in interest rates, which theoretically should reduce home sales, may actually spur home buying and raise prices, the NY Times reported. The Los Angeles and Long Beach, California, twin ports had record international cargo for the third year in a row, fueled by increased trade, labor shortages and new security regulations, the LA Times reported. U.S. travel during the summer season is forecast to surpass the record pace of 2000, according to the Travel Industry Association of America. Republican incumbent Senator Lisa Murkowski and former Democratic Governor Tony Knowles of Alaska both support increased oil drilling in Alaska, as do most Alaskans, the AP reported. Pennsylvania's Senate approved a bill to legalize as many as 61,000 slot machines in the state in a bid to cut property tax bills by about 20% and borrow billions of dollars for public works, the AP said. Starbucks is the subject of efforts to form a union at a company location in New York City, the Philadelphia Inquirer reported. OAO Yukos, Russia's biggest oil exporter, said production may stop at some fields as early as next week after its bank accounts were frozen because of a $3.4 billion tax claim. Boston Scientific said it's voluntarily recalling 200 of its drug-coated Taxus devices after one person died and 16 were injured because of possible defects in the delivery system, Bloomberg reported. HealthSouth founder Scrushy enlisted company employees to work on his $3 million lake house and also used HealthSouth planes, helicopters and automobiles for personal purposes, Bloomberg reported.

BOTTOM LINE: The Portfolio is unchanged today as my gaming, homebuilding and security longs are rising, offsetting losses in my internet and telecom equipment longs. I have not traded and the Portfolio is still 75% net long. After growing at its fastest rate in 20 years, fueling inflation fears, the U.S. economy appears to be downshifting to a more sustainable and less inflationary rate of growth. As interest rates plunge, the bears will likely shift their main argument away from inflation and back to a significantly weakening economy, which will prove to be another mistake. Historically, U.S. stocks perform their best when investor expectations are for moderate growth and inflation rather than runaway growth and high inflation. I expect stocks to rally on Tuesday, barring a major terrorist attack over the weekend.