Mid-day Update

S&P 500 1,080.04 -.57%
NASDAQ 1,831.54 -.93%

Leading Sectors
Telecom +1.31%
Insurance +.46%
Computer Services -.12%

Lagging Sectors
Internet -1.99%
Biotech -2.68%
Hospitals -3.20%

Other
Crude Oil 41.40 -.74%
Natural Gas 5.97 -2.59%
Gold 389.80 -.18%
Base Metals 109.14 +.89%
U.S. Dollar 89.02 -.27%
10-Yr. T-note Yield 4.47% +1.01%
VIX 17.63 +6.85%
Put/Call .73 -6.41%
NYSE Arms 1.36 -21.84%

Market Movers
ANDW -26.2% after beating 2Q estimates and lowering 3Q/4Q guidance.
CHKP -13.65% after slightly missing 2Q estimates and lowering 3Q forecast.
MYL -15.5% after agreeing to buy KG for $4 billion in stock to expand into heart treatments and add sales force to call on cardiologists. KG +25.2%.
IMCL -15.0% after Citi downgrade to Neutral, price target cut to $72.
OCR -31.0% after missing 2Q estimates and lowering 04 guidance.
BSX +4.88% after 2Q estimates mostly met expectations after stent recall.
AGYS +18.88% after beating 1Q estimates and raising 05 forecast.
MANT +11.1% after saying it received a four-year contract to provide the federal government with security clearance background investigations.
CTSH +11.8% after beating 2Q estimates and raising 3Q and 04 forecast.
CRS +7.2% after JP Morgan upgrade to Overweight.
BEC -8.4% after missing 2Q estimates and lowering 3Q forecast.
TASR -9.9% on news that CBS News will run a negative story on the company.

Economic Data
Existing Home Sales for June were 6.95M versus estimates of 6.65M and 6.81M in May.

Recommendations
CRS raised to Overweight at JP Morgan. IGT raised to Sector Outperform at CIBC, target $38. HCR raised to Buy at Legg Mason, target $38. UHS raised to Buy at Oppenheimer, target $52. NTLI raised to Overweight at JP Morgan. Goldman Sachs reiterated Outperform on AMT, VZ, XRX, SRE, NEM, PDG, ENH, BSX, AMLN, FS, IGT, GCI, HOT, PG, SLB and ITT. Goldman reiterated Underperform on CYT, SGP, PGL, CR and DJ. Citi SmithBarney reiterated Buy on HAL, target $37. Citi reiterated Sell on MYG, target $15. Citi reiterated Buy on WY, target $72. Citi reiterated Buy on ITT, target $92. Citi reiterated Buy on SSCC, target $23. Citi reiterated Buy on UTX, target $109. Citi thinks banks will outperform in second half, favorite is BAC. Citi said with semi-equipment shipment delays finally beginning, the final phase of the correction in those stocks has begun, Buy on weakness, favorite is LRCX. Citi reiterated Buy on ATH, target $90. Citi reiterated Buy on WLP, target $111.70.

Mid-day News
U.S. stocks are falling mid-day, led lower by healthcare-related companies, on concerns over negative political rhetoric, earnings shortfalls and rising interest rates. Iraqi Defense minister Hazima al-Shalan said Iran has sent spies into Iraq, infiltrated the country's new government and taken positions along Iraq's border, the Washington Post reported. Sun Micro plans to debut two computer system lines with microprocessors from Advanced Micro, the Wall Street Journal reported. Sprint will likely announce today it is offering local telephone service to business customers in 35 markets, the Wall Street Journal said. Shares of AO Yukos Oil, Russia's largest oil exporter, fell after Interfax reported a major shareholder was placed on a wanted list by a Moscow court on murder-related charges. An Alzheimer's drug called donepezil might slow the onset of the disease in high-risk patients by six months, the LA Times reported. Roche Holding and Chiron are competing for the lead in the market for tests that can screen donated blood for the West Nile virus, the LA Times reported. Career Education, which is being probed by the U.S. SEC, is also being investigated by federal law-enforcement officials, the Financial Times reported. Nokia may have its credit rating reduced by S&P on concern the company will continue to lose market share to competitors, Bloomberg reported. HCA, the biggest U.S. hospital chain, said second-quarter profit rose 47% as lower malpractice expenses compensated for an increase in unpaid bills, Bloomberg reported. Google plans to sell 24.6 million shares in its IPO for between $108-$135/share and the symbol will be GOOG, Bloomberg said. U.S. sales of previously owned houses rose more than expected in June to a record annual pace of 6.95 million, the National Assoc. of Realtors said. U.S. Treasuries fell in New York after home sales unexpectedly rose and speculation increased that other economic reports this week will add to evidence growth is accelerating, Bloomberg reported. Medicare proposed rules for its 2006 program to help the elderly pay for prescription drugs, including how the agency will work with pharmacy-benefit managers such as Express Scripts to get discounts on drugs, Bloomberg reported.

BOTTOM LINE: The Portfolio is unchanged today as my longs are falling more than my shorts. I have not traded today and the Portfolio is still 50% net short. It is good to see the VIX continue higher, however the Put/Call and Arms readings are falling. My short-term trading indicators are still giving sell signals. I expect U.S. stocks to fall modestly into the close.