Mid-day Update

S&P 500 1,088.04 -.96%
NASDAQ 1,834.66 -1.10%

Leading Sectors
Homebuilders +1.19%
Gaming +.16%
HMO's -.33%

Lagging Sectors
Defense -1.84%
Retail -2.42%
Airlines -2.70%

Other
Crude Oil 44.10 +2.85%
Natural Gas 5.72 +1.04%
Gold 394.10 -.15%
Base Metals 110.01 -.52%
U.S. Dollar 89.70 +.02%
10-Yr. T-note Yield 4.38% -.75%
VIX 17.13 +5.37%
Put/Call .78 -13.33%
NYSE Arms 1.55 +19.53%

Market Movers
GPS -6.6% after lowering 2Q guidance.
XMSR +4.6% after meeting 2Q estimates and boosting yearly subscriber forecast.
UNTD -20.4% after missing 2Q estimates and lowering 3Q outlook.
IST -23.6% on strong 2Q results.
KOSP +22.3% after beating 2Q estimates substantially and raising 3Q/04 outlook.
CUB +14.6% after reporting good 3Q results and raising dividend.
HANS +15.3% on strong 2Q results.
KIND +11.0% after substantially beating 2Q estimates and raising 04 outlook.
UVN +11.4% after beating 2Q estimates, reaffirming 3Q guidance and Merrill Lynch upgrade to Buy.
KYPH +12.0% after beating 2Q estimates and raising 04 outlook.
JOSB +7.8% on strong July same-store-sales report.
IPMT +7.2% after beating 2Q forecast and raising 04 guidance.
SHRP -19.6% after cutting 2Q/04 forecasts.
BWS -15.8% after cutting 2Q forecast.
EASI -11.8% after announcing retirement of CEO and Thomas Weisel downgrade to Peerperform.
WGR -8.5% on profit-taking after 2Q report.
ANN -10.1% after boosting 2Q guidance, but lowering 05 estimates.
TSO -11.6% on profit-taking after beating 2Q estimates and Oppenheimer downgrade to neutral.
TLB -7.8% after lowering 2Q outlook.
KWK -7.0% after missing 2Q estimates and multiple downgrades.

Economic Data
Initial Jobless Claims for last week were 336K versus an estimate of 340K and 347K prior week.
Continuing Claims were 2911K versus estimates of 2920K and 2946K prior.

Recommendations
Goldman Sachs reiterated Outperform on STA and CLX. INCY raised to Buy at UBS, target $9. RHAT rated Sector Underperform at CIBC. BBBB rated Outperform at CSFB. BRW rated Buy at Legg Mason, target $24. CINF rated Buy at Legg Mason, target $46. PGR rated Buy at Legg Mason, target $95. RL raised to Overweight at Prudential, target $40. CHE rated Buy at Legg Mason, target $60. TDW cut to Underperform at CSFB, target $32. WFMI rated Sell at Bank of America, target $70. UVN raised to Buy at Merrill, target $35. DOW rated Overweight at Morgan Stanley, target $48. GGC rated Underweight at Morgan Stanley. LYO rated Overweight at Morgan Stanley, target $24.

Mid-day News
U.S. stocks are lower mid-day on terror worries, violence in Iraq and rising oil prices. Steel Dynamics said a Michigan judge dismissed a lawsuit filed by General Motors, the Wall Street Journal reported. KeySpan CEO Catell told CNBC that more customers are switching to natural gas from oil primarily drove second-quarter profit, Bloomberg said. Two men were arrested early today during a raid on a mosque in Albany, NY, on suspicions that they were planning to buy shoulder-launched surface-to-air missiles, CBS reported. Comcast plans to announce it and Electronic Arts agreed to offer fantasy football to Comcast's Internet subscribers, the Philadelphia Inquirer said. Eight out of 10 Germans would choose Senator Kerry over President Bush if they were voting in the U.S. election, a poll for ARD tv found. Walt Disney is introducing a personal computer geared toward children because market research shows parents want computers with content protection against inappropriate Web sites, COO Iger told CNBC. Senator Kerry, in an advertisement run by a group of Vietnam veterans, is accused of lying about his Vietnam War record, the NY Times reported. Shiite Muslim cleric Moqtada al-Sadr called for a national uprising against the U.S. and allied military forces as a two-month cease-fire between the two sides collapsed, the NY Times said. Persian Gulf oil tanker rates to Asia fell for the eight day in 10, close to a three-month low, as an increasing supply of ships competing for cargo forced owners to lower prices, Bloomberg said. Wal-Mart said July sales at U.S. stores open at least a year rose 3.2%, below estimates of 4.0%, Bloomberg reported. President Bush signed legislation that approves spending $416 billion for U.S. defense in the next fiscal year, Bloomberg said. Crude oil futures in New York and London rose to records on concern spare production capacity isn't available to substitute for a possible disruption of shipments for OAO Yukos Oil, Russia's biggest exporter, Bloomberg reported.

BOTTOM LINE: The Portfolio is slightly higher today as my Russian ADR and software shorts are falling more than my medical and gaming longs. A few of my longs hit stop-losses this morning and I exited the positions, thus leaving the Portfolio 25% net short. Another ugly day for the Bulls as the advance/decline line is poor and almost all sectors are lower. Oil, terror and war continue to weigh on investors' minds. It is good to see the VIX, Arms and % Bulls showing less complacency, however the Put/Call ratio is falling. Investor anxiety will likely accelerate next week as Google's IPO will be a negative and the Fed hikes rates, notwithstanding worries over slowing economic growth. I expect U.S. stocks to weaken on tomorrow's jobs report even if it meets or exceeds expectations.