Thursday, July 08, 2004

Mid-day Update

S&P 500 1,111.17 -.64%
NASDAQ 1,942.11 -1.22%

Leading Sectors
Drugs +.69%
Semis +.41%
Fashion +.21%

Lagging Sectors
Software -3.02%
Airlines -3.09%
Homebuilders -4.66%

Crude Oil 40.0 +2.33%
Natural Gas 6.19 -2.75%
Gold 408.40 +.05%
Base Metals 112.35 -.35%
U.S. Dollar 87.51 -.15%
10-Yr. T-note Yield 4.47% -.09%
VIX 15.75 -.38%
Put/Call .90 -8.16%
NYSE Arms 1.62 +44.64%

Market Movers
YHOO -5.5% after meeting 2Q estimates and guiding lower for 3Q.
SEBL -12.1% after cutting 2Q forecast and multiple downgrades.
TUES +14.4% after raising 2Q forecast and Friedman Billings upgrade to Outperform.
CKFR +9.8% after announcing it signed a five-year contract extension with Wachovia to provide fully outsourced electronic billing and payment services to its customers.
JCP +4.3% after raising 2Q forecast.
PLCE -16.1% after lowering 2Q guidance.
BWS -16.2% after cutting 2Q forecast.
BMC -12.5% after cutting 1Q estimates.
TLB -11.5% after lowering 2Q forecast and Prudential downgrade to Neutral.
CAO -16.6% after lowering 2Q forecast and Raymond James downgrade to Market Perform.
STGS -7.8% after lowering 2Q guidance.
SCHN -9.66% after beating 3Q estimates and giving weaker 4Q forecast.

Economic Data
Initial Jobless Claims for last week were 310K versus estimates of 341K and a downwardly revised 349K prior week.
Continuing Claims came in at 2872K versus estimates of 2950K and a downwardly revised 2957K prior.

MRO raised to Overweight at JP Morgan. BAC rated Overweight at JP Morgan. ARDI cut to Reduce at UBS, target $6. BRKS rated Buy at Deutsche Bank, target $22. MOT raised to Outperform at Thomas Weisel. PIR raised to Strong Buy at Raymond James, target $28. DISH rated Sector Underperform at CIBC. BK rated Buy at Bank of America, target $37. MEL rated Buy at Bank of America, target $36. R rated Outperform at CSFB, target $45. QLTY rated Outperform at CSFB, target $13. FWRD rated Outperform at CSFB, target $50. STT rated Buy at Bank of America, target $58. NTRS rated Buy at Bank of America, target $52. CHRW rated Outperform at CSFB, target $52. CNF rated Underperform at CSFB, target $35. WERN rated Outperform at CSFB, target $23. SWFT rated Outperform at CSFB, target $21. JBHT rated Outperform at CSFB, target $45. Goldman Sachs reiterated Outperform on YHOO, IGT, AA, HOT, FS, ABK, CFC, AXP, DNA, MDT, AET, TYC, FDC, JNPR and AIG. PGN cut to Sell at Citi SmithBarney, target $38.50. Citi reiterated Buy on CKFR, target $39. Citi reiterated Buy on MOT, target $25. Citi reiterated Buy on SEBL, target $11.

Mid-day News
U.S. stocks are lower mid-day on weakness in software, homebuilding and airline shares. The U.S. Defense Department is beginning long-range planning on how to cut the number of U.S. soldiers in Iraq now that an interim government is established, the NY Times said. Israeli Prime Minister Sharon is ready to discuss making the Middle East a nuclear-free zone as part of future peace talks in the region, the AP reported. The Pentagon's top official for personnel and readiness told Congress that the military has no plans to reinstate a draft to support operations in Iraq and Afghanistan, the Washington Post reported. Two EBay customers have filed suit against the world's largest Internet auction company, questioning the company's billing practices, the San Francisco Chronicle reported. About 200 pounds of explosives and bomb-making equipment, stolen last weekend in California from a storage locker used by two public safety agencies, were found in a stolen van yesterday, the AP reported. Former Enron Chairman Ken Lay, charged yesterday in a sealed indictment in connection with the collapse of the former energy giant in 2001, surrendered to federal authorities in Houston this morning, Bloomberg reported. The ruble fell the most against the dollar in a month after Moody's Investors Service said it may reduce the credit ratings of 18 Russian lenders, adding to concern about the stability of the country's banks, Bloomberg said. The number of U.S. workers filing new claims for jobless benefits plunged by 39,000 last week to 310, 000, the lowest since October 2000, Bloomberg reported. DaimlerChrysler and Ford agreed to invest another $100 million in Ballard Power Systems, giving the money-losing maker of automotive fuel cells cash as the U.S. steps up programs to develop cars run by fuel cells, Bloomberg said. China bowed to pressure from Bush administration trade officials and agreed to drop a tax break that U.S. semiconductor makers said put them at a disadvantage, Bloomberg reported. Nextel will be required to pay about $3.2 billion to exchange some airwaves, $1 billion more than it had offered, Bloomberg said.

BOTTOM LINE: The Portfolio is slightly lower today as weakness in my internet, homebuilding and Chinese ADR longs is offsetting declines in my internet and retail shorts. I added a few new shorts this morning, thus bringing the Portfolio to market neutral(shorts-longs=0). One of my new shorts is ANF and I am using a stop-loss of $37.25 on this position. I expect stocks to remain weaker to neutral into the close on terrorism concerns, weakening technology shares and rising oil prices.

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