Mid-day Update

S&P 500 1,076.38 +1.12%
NASDAQ 1,780.74 +1.34%

Leading Sectors
Airlines +4.60%
Biotech +2.70%
I-Banks +2.68%

Lagging Sectors
Restaurants +.42%
Hospitals +.14%
Foods -.29%

Other
Crude Oil 45.90 -.28%
Natural Gas 5.43 -1.95%
Gold 404.50 +.82%
Base Metals 112.48 +1.27%
U.S. Dollar 88.07 +.19%
10-Yr. T-note Yield 4.28% +1.24%
VIX 17.77 -1.17%
Put/Call .87 -17.14%
NYSE Arms .40 -66.67%

Market Movers
PRV +39.2% after saying LPNT agreed to buy it for $1.13 billion in cash and stock, LPNT -17.3%.
KMRT +13.8% on better-than-expected 2Q results.
LOW +6.1% after missing 2Q estimates and raising 3Q outlook.
SYY -7.8% after missing 4Q estimates and BB&T downgrade to Hold.

Economic Data
Empire Manufacturing for August came in at 12.57 versus estimates of 32.30 and a reading of 35.75 in July.

Recommendations
BRL rated Buy at Bank of America, target $46. JTX rated Buy at Bank of America, target $21. BLT rated Overweight at JP Morgan. BRO raised to Overweight at JP Morgan, target $50. EL raised to Buy at Oppenheimer, target $51. IPXL rated Buy at Bank of America, target $17. LPNT cut to Underweight at JP Morgan. Goldman Sachs raised KSS to Outperform. Goldman reiterated Outperform on AET, AMGN, KRB, FS, IGT. Goldman rated HEP Outperform. Citi SmithBarney downgraded LF to Sell, target $17. Citi upgraded DOW to Buy, target $46. Citi upgraded LYO to Buy, target $21. Citi reiterated Buy on NCX, target $30.37. Citi reiterated Buy on HAS, target $24. Citi upgraded MAT to Buy, target $21. Citi reiterated Buy on HCA, target $48. Citi reiterated Buy on SBUX, target $54.

Mid-day News
U.S. stocks are higher mid-day on short-covering and bargain-hunting after recent weakness. Micrel Inc., a Silicon Valley semiconductor maker, denied accusations of improper conduct made by an IRS auditor, the NY Times said. Gateway Inc. said CompUSA will begin selling its desktop computers this week, Bloomberg said. Panasonic and other high-definition tv makers are hoping the Olympics gives consumers a reason to try digital TV, the LA Times reported. Lowe's said second-quarter earnings rose 18%, helped by new stores in metro areas and record U.S. home sales, Bloomberg reported. Venezuelan President Chavez overcame a referendum to remove him from office two years before his term expires, Bloomberg said. Crude oil futures fell after Chavez's victory eased concerns that shipments from the country would be disrupted, Bloomberg said. The first two days of full competition in Athens were marked by near-empty stadiums in many sports, Bloomberg reported. International investors purchased a net $71.8 billion of U.S. Treasuries, stocks, corporate bonds and other securities in June, up from $65.2 billion in May, Bloomberg reported. The $53 billion U.S. missile defense shield being developed by Boeing, Lockheed Martin and Northrop Grumman may be derailed by a John Kerry presidency, Bloomberg said. Bank of America and Wachovia are among the banks doing business in Florida that stand to benefit from a rise in deposits and loans following Hurricane Charley, Bloomberg reported. Goldman Sachs economists call higher oil prices "excuses" in explaining the deceleration in U.S. consumer spending this year as the real culprit is the withdrawal of fiscal and monetary stimulus from the economy, Bloomberg reported.

BOTTOM LINE: The Portfolio is slightly higher mid-day as strength in my retail and internet longs is offsetting losses in my steel and Russian ADR shorts. I added a few technology longs this morning, bringing the Portfolio's market exposure to 50% net long. One of my new longs is CYMI and I am using a stop-loss of $24.30 on the position. The tone of the market is better today, but it appears to be mostly short-covering and a lack of sellers. However, the rally could gain legs on a further drop in energy prices and better earnings reports over the next couple of days. The odds of a major terrorist attack this year are diminishing with each passing day.