Mid-day Update

S&P 500 1,071.13 -.73%
NASDAQ 1,771.70 -2.05%

Leading Sectors
Biotech +1.73%
Airlines +1.19%
Drugs +.95%

Lagging Sectors
Internet -4.45%
Networking -4.96%
Semis -6.28%

Other
Crude Oil 44.45 -.25%
Natural Gas 5.64 -2.61%
Gold 397.90 -1.09%
Base Metals 109.37 +.82%
U.S. Dollar 88.72 -.07%
10-Yr. T-note Yield 4.27% -.41%
VIX 18.33 +4.92%
Put/Call .85 -17.48%
NYSE Arms 1.45 +200.0%

Market Movers
CSCO -9.8% after beating 4Q estimates, giving cautious outlook and multiple downgrades.
NSM -14.9% after cutting revenues estimates for 1Q and multiple downgrades.
UTSI -13.1% after requesting a five-day extension with respect to the filing of its quarterly report and Oppenheimer downgrade to Sell.
RSTI +18.0% after beating 3Q forecasts.
ELK +9.4% after missing 4Q estimates, lowering 1Q guidance and raising 05 outlook.
CYD -20.1% after disappointing 2Q results.
ANF -11.3% after meeting 2Q estimates, lowering 3Q forecast and multiple downgrades.
EAT -7.8% after meeting 4Q estimates, lowering 1Q forecast and Legg Mason downgrade to Hold.
OSIP +5.9% on bargain-hunting after missing 3Q estimates.
*Semis and Networkers down across the board on CSCO/NSM reports.

Economic Data
None of note.

Recommendations
Goldman Sachs reiterated Underperform on CL. Goldman reiterated Outperform on CSCO, DIS, COH, FD, NSM and SYMC. Citi SmithBarney cut NSM to Sell before earnings report, target $35. Citi reiterated Buy on CSCO, target $30. Citi reiterated Buy on AAP, target $50. Citi reiterated Buy on DIS, target $30. Merrill Lynch named MTD Focus 1 stock of the week. MCIP cut to Underperform at CSFB, target $11. WCG rated Buy at UBS, target $22. LSTR raised to Outperform at CSFB, target $60. UTSI cut to Sell at Oppenheimer.

Mid-day News
U.S. stocks are lower mid-day on weakness in the technology sector after disappointing comments from Cisco Systems. The U.K. approved the use of human cloning for medical research, allowing university scientists to clone embryos, Agence France-Presse reported. Donald Trump, who is seeking Chapter 11 bankruptcy protection for his hotel and casino company, wants to run gambling operations in Pennsylvania, the Philadelphia Inquirer reported. Motorola said it may have to pay an extra $500 million in tax after the U.S. IRS examined the company's payments between 1996 and 2000, Bloomberg reported. OAO Yukos Oil may soon have to cut output because cash is dangerously short after Russia froze bank accounts at the parent company over a $3.4 billion tax claim, Bloomberg said. Toys "R" Us is exploring the possible sale of its global toy business and spin-off of its Babies "R" Us chain, Bloomberg reported. The U.S.-led military coalition in Iraq said it was readying for "major assaults" on fighters backing the renegade Shiite cleric al-Sadr in the holy city of Najaf, Bloomberg said. Gold Fields, the world's fourth-largest gold producer, agreed to buy Iamgold Corp in a stock swap valued at about $2.1 billion, fending off a competing bid from Golden Star Resources to expand outside South Africa, Bloomberg reported.

BOTTOM LINE: The Portfolio is lower today as my technology longs are falling more than my Chinese and Russian ADR shorts. I exited a few semiconductor longs as they hit stop-losses and added some new Chinese ADR shorts, thus leaving the Portfolio with 50% net long market exposure. One of my new shorts is PKX and I am using a stop-loss of $36.75 on the position. While today is definitely a bad day for the Bulls, it could be worse. Most of the damage is concentrated in the technology sector. As I anticipated a few weeks ago, the CRB Index(a broad measure of commodity prices) is finally breaking down through its 200-day moving-average. Rising commodity prices have been the main source of recent inflation fears. This is a very positive development and the mainstream press is completely ignoring it in favor of negative stories on high oil prices. I continue to believe oil will break down within the next 6 weeks and head back towards $35/bbl. I expect U.S. stocks to rise modestly into the close.