Tuesday, July 06, 2004

Mid-day Update

S&P 500 1,115.72 -.86%
NASDAQ 1,965.28 -2.06%


Leading Sectors
Iron/Steel +.98%
Energy +.36%
Foods unch.

Lagging Sectors
Semis -4.12%
Software -4.81%
Computer Boxmakers -5.20%

Other
Crude Oil 39.55 +3.0%
Natural Gas 6.43 +4.51%
Gold 392.60 -1.56%
Base Metals 110.71 +.70%
U.S. Dollar 88.14 -.10%
10-Yr. T-note Yield 4.47% +.43%
VIX 16.58 +10.08%
Put/Call 1.17 +44.44%
NYSE Arms 2.35 -19.34%

Market Movers
VRTS -36.0% after cutting 2Q estimates and JP Morgan downgrade to Neutral.
BRCM -8.83% on CNXT shortfall.
NNI +14.2% on CSFB upgrade to Outperform, target $26.
KVHI -19.0% after lowering 2Q estimates.
ESPD -10.45% on continued fall after announcing disappointing 2Q.
UNFI -10.0% after lowering 05 forecast.

Economic Data
ISM Non-Manufacturing for June came in at 59.9 versus expectations of 63.0 and 65.2 in May.

Recommendations
Goldman Sachs reiterated Outperform on VOD, KO, IACI, YHOO, EBAY, NFP, BSX, INTC, AMD, AMX, SAP, FS and IGT. Goldman reiterated Underperform on UNM. Citi SmithBarney reiterated Buy on IGT, target $50. Citi reiterated Buy on INFA, target $10.50. BOBJ cut to Underweight at JP Morgan. KTO raised to Overweight and JP Morgan. GENZ raised to Outperform at CSFB, target $58. NNI raised to Outperform at CSFB, target $26. GNW rated Buy at UBS. STLD raised to Overweight at Morgan Stanley, target $40. VRC raised to Overweight at Morgan Stanley, target $29. GT raised to Overweight at JP Morgan. VRNT cut to Reduce at UBS, target $31.50. IFS rated Overweight at Lehman, target $17.

Mid-day News
U.S. stocks are lower mid-day on earnings shortfalls, political worries and higher energy prices. Senator Kerry has chosen North Carolina Senator John Edwards as his vice-presidential running mate, NBC News reported. Tradesports.com is showing the chances of President Bush being re-elected falling 3 points to 54%. As well, Bush's chances of winning Edward's home state of North Carolina are falling 14 points to 62%. Iraqi oil exports, cut by half since Saturday because of damage to a pipeline in the south of the country, will return to normal tomorrow after repairs are completed, Al Arabiya tv news reported. General Motors may produce a hybrid gas-electric sport utility vehicle in China to compete with Japanese rivals, the Detroit News reported. Jeff Schwartz, CEO of Autobytel, told CNBC that a recent round of consumer surveys show sales of sports-utility vehicles have dropped 20-30% while smaller, fuel-efficient vehicles, particularly hybrids, are up 20-30%, Bloomberg reported.

BOTTOM LINE: The Portfolio is lower today on weakness in my technology longs. I took profits in a number of long positions and added a few new shorts this morning, bringing the Portfolio's market exposure to 50% net long. One of my new shorts is SWIR and I am using a $38.25 stop-loss on the position. The market is falling today on concerns over technology sector earnings, future anti-business political rhetoric and rising oil prices. While it does appear that the fundamentals in the tech sector have deteriorated a bit recently, I continue to expect a pick-up later this quarter. Anti-business political rhetoric will likely accelerate as the party conventions approach. Finally, I expect oil to begin to decline before week's end. Overall, it now appears the recent trading range will continue to hold until later in the year.

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