Mid-day Update

S&P 500 1,111.24 +.19%
NASDAQ 1,941.47 +.32%

Leading Sectors
Disk Drives +2.20%
Software +1.62%
Semis +1.38%

Lagging Sectors
Computer Boxmakers -.41%
Utilities -.53%
Airlines -.76%

Other
Crude Oil 40.00 -.82%
Natural Gas 6.11 -1.13%
Gold 408.00 -.07%
Base Metals 113.17 +.73%
U.S. Dollar 87.51 -.03%
10-Yr. T-note Yield 4.46% -.18%
VIX 15.97 -1.42%
Put/Call .62 -30.34%
NYSE Arms .87 -56.06%

Market Movers
JBHT -8.4% after announcing that it had received from Burlington Northern and Santa Fe a notice of arbitration.
STK +10.3% after lowering 2Q estimates and increasing share buyback.
LI +12.7% after exceeding 3Q estimates.
FWHT +7.5% after announcing it would be added to S&P small-cap 600.
SAP +4.7% after raising 2Q guidance.
UIS -14.7% after cutting 2Q forecast.
CTMI -11.52% after cutting 3Q/4Q forecasts.
ACI -5.7% after cutting 2Q forecast.

Economic Data
Wholesale Inventories for May rose 1.2% versus estimates of a .5% rise and a .2% rise in April.

Recommendations
HOTT, ROST cut to Underweight at JP Morgan. MAXY raised to Overweight at JP Morgan. DRI raised to Buy at UBS. WFMI cut to Reduce at UBS, target $82. STZ raised to Buy at UBS, target $45. VRSN rated Buy at Deutsche Bank, target $24. WBSN rated Buy at Deutsche Bank, target $42. ISSX rated Buy at Deutsche Bank, target $19. SNDK rated Outperform at CSFB, target $35. LEXR rated Outperform at CSFB target $10. XXIA raised to Outperform at Thomas Weisel, target $12. IT rated Outperform at CSFB, target $18. CMC rated Overweight at JP Morgan. Goldman Sachs said Non-life Insurance stocks will surprise on the upside. Goldman reiterated Outperform on VZ, AIG, RE, FD, GE, SII and AGN. Citi SmithBarney reiterated Buy on BCII, target $30. Citi reiterated Buy on CEY, target $44. Citi reiterated Buy on AMGN, target $90.

Mid-day News
U.S. stocks are modestly higher mid-day on better-than-expected earnings reports from General Eelectric and SAP. Rail lines in Boston and New York, the sites of national political conventions, are vulnerable and easily accessible to terrorists for a possible attack, the Washington Times reported. FedEx plans to build a 218,000 square-foot distribution center in Carson, California, the LA Times said. Bear Stearns was removed as a co-manager of Chicago's $500 million bond sale because of the company's links to a state regulatory panel being investigated for steering work to associates, the Bond Buyer newspaper said. Amgen could lose sales of its best-selling Epogen drug if a new Medicare policy that calls for stricter review of reimbursement claims for the drug is adopted, the LA Times reported. Vail Resorts has hired an investment bank to help sell its assets, the Denver Post reported. Jeff Immelt, CEO of General Electric said, "This is the best economy we've seen in years," Bloomberg reported. New outbreaks of bird flu in China, Thailand and Vietnam show that the virus, which can spread to humans, is "still endemic" to the region, the United Nations' Food and Agriculture Organization said. Gilead Sciences said it will reduce the price of its HIV treatment Viread, the company's biggest drug, by 37% in Africa and 15 countries elsewhere that the United Nations classifies as "least developed," Bloomberg reported. Copper futures in New York rose to a one-month high and are headed for their biggest weekly gain since December on signs of improved demand in China, the world's biggest buyer, Bloomberg said.

BOTTOM LINE: The Portfolio is slightly lower today on weakness in my base metal longs and strength in my software and internet shorts. I have not traded today and the Portfolio is still 25% net short. Investor complacency is still too high as evidenced by the plunging Put/Call and Arms readings. The AAII % Bulls is still relatively high and the VIX is relatively low, as well. I expect U.S. stocks to fall modestly into the close on high oil energy prices, terrorism worries and earnings concerns.