Mid-day Update

S&P 500 1,115.90 -.22%
NASDAQ 1,846.21 -1.45%

Leading Sectors
Oil Service +1.72%
Telecom +.73%
Restaurants +.67%

Lagging Sectors
Disk Drives -1.81%
Networking -2.10%
Semis -4.87%

Other
Crude Oil 44.0 -.14%
Natural Gas 4.67 -1.93%
Gold 402.50 -1.35%
Base Metals 105.57 -1.29%
U.S. Dollar 89.65 +.74%
10-Yr. T-note Yield 4.28% +1.75%
VIX 14.02 -1.82%
Put/Call 1.05 +12.90%
NYSE Arms .80 +73.91%

Market Movers
INTC -7.4% after lowering 3Q revenue, gross margin forecasts and multiple downgrades.
EFII -22.4% after lowering 3Q and 4Q outlook.
LNG +15.3% after saying it Sabine Pass unit will sell liquefied natural gas regasification capacity of 1 billion cubic feet a day for 20 years beginning no later than April 1, 2009, to a unit of Total SA.
MICC +11.8% after saying its Paktel subsidiary reached an agreement with PTA, a Pakistani regulator, that lets Paktel switch on its wireless network for $11.1 million, less than the $39 million originally expected.
ESL -12.6% after missing 3Q estimates and lowering 04 outlook.
*Semis and Semi-equipment down across-the-board on INTC report.

Economic Data
Unemployment Rate for August fell to 5.4% versus estimates of 5.5% and 5.5% in July.
Average Hourly Earnings for August rose .3% versus estimates of a .2% rise and an upwardly revised .4% increase in July.
Change in Non-farm payrolls for August was 144K versus estimates of 150K and an upwardly revised 73K in July.
Change in Manufacturing payrolls for August was 22K versus estimates of 15K and a downwardly revised 6K in July.
Average Weekly Hours was 33.8 versus estimates of 33.7 and 33.8 in July.
ISM Non-Manufacturing for August was 58.2 versus estimates of 62.0 and 64.8 in July.

Recommendations
Goldman Sachs reiterated Outperform on INTC, target $29. Goldman reiterated Outperform on AMD, FDC, GILD, BIIB, MDT. Citi SmithBarney reiterated Buy on INTC, target $25.50. Citi reiterated Buy on GPS, target $25.00. Goldman reiterated Outperform on PAYX, CEN, NKE and ADP.

Mid-day News
U.S. stocks are lower mid-day on weakness in technology shares after a disappointing mid-quarter report by Intel. Disney postponed its expansion of video-on-demand service to explore agreements that could include the feature in set-top boxes, computers and other devices, the AP said. Charter Communications, the cable tv operator controlled by Microsoft co-founder Paul Allen, may offer subscribers free premium services as part of a proposed settlement for a lawsuit accusing it of misleading customers, the AP reported. More than 98% of the acute-care hospitals in the U.S. are reporting health-care data on the treatment of heart attacks, heart failure and pneumonia, Reuters reported. Kelly Services President Camden told CNBC that today's August jobs report shows the proportion of new jobs that are temporary fell to 10% of the total from 20% a few months ago, Bloomberg reported. Puma AG plans to buy a license from Ferrari SpA that will allow it to use its brand, Frankfurter Allgemeine Zeitung reported. Pfizer agreed to pay $430 million to resolve claims against a subsidiary that sold products containing asbestos in the early 1970's, Bloomberg reported. U.S. employers added 144,000 workers to payrolls in August, the most since May and the first acceleration in five months, suggesting the economy is emerging from a mid-year lull, Bloomberg reported. The unemployment rate fell again in August to 5.4%, Bloomberg said. Crude oil futures are falling on reduced concern that shipments from Russia and Iraq will be disrupted, Bloomberg reported. President Bush has a "bold agenda" for streamlining the 3,000-page tax code, with no initiative ruled out, U.S. Treasury Secretary Snow said. The U.S. will ask China to agree to a voluntary limit on textile and clothing exports in a bid to head of petitions and complaints from U.S. textile makers, Bloomberg reported. IBM said it introduced new data-storage machines to take small-business sales from EMC and Dell, Bloomberg said. Hurricane Frances may cost insurers less than computer modelers predicted yesterday after the storm weakened and was steering clear of Florida's densely populated southern coast, Risk Management Solutions said. Former President Clinton has had a heart attack and will have quadruple-bypass surgery, the New York Times reported. Russian troops are fighting terrorists holding hostages in the country's south, after storming a school where at least 1,000 people had been held since Wednesday. More than 100 of the captives died, including children, Bloomberg reported.

BOTTOM LINE: The Portfolio is down modestly mid-day as my falling technology longs are more than offsetting my rising security, education and Russian ADR longs. I have not traded today and the Portfolio is still 125% net long. The damage today is mostly concentrated in the semiconductor sector, with many consumer-related stocks rising. Breadth has improved off the morning lows and many commodities are falling in price once again. I expect U.S. stocks to move modestly higher into the close on bargain-hunting in the tech sector and short-covering in anticipation of a rise next week as many investors return from vacation and conclude that fundamentals will improve during the fourth quarter.