Mid-day Update

S&P 500 1,129.03 +.29%
NASDAQ 1,917.02 +.35%

Leading Sectors
Internet +1.44%
Restaurants +1.18%
Biotech +.77%

Lagging Sectors
Fashion -.30%
Iron/Steel -.31%
Disk Drives -.40%

Other
Crude Oil 44.55 +1.55%
Natural Gas 4.96 +2.27%
Gold 408.00 +.49%
Base Metals 108.11 -.05%
U.S. Dollar 88.38 -.18%
10-Yr. T-note Yield 4.14% +.05%
VIX 13.64 +3.57%
Put/Call .80 +19.40%
NYSE Arms .81 -4.71%

Market Movers
CAH +4.22% on bargain-hunting after saying it will restate three years of financial results and delay its report for the fiscal quarter by an additional 15 days.
ERES +9.1% after saying that it had been awarded approximately $4.1 million in cardiac safety monitoring and services from an emerging West Coast pharmaceutical organization.
PGR +6.0% after saying it plans to buy back as many as 17.1 million shares. The purchase will be structured like a Dutch auction in which shareholders can tender their shares at any price between $78 and $88 a share.
KMRT +4.92% after UBS raised price target to $101 from $85.
VOL +7.7% after beating 3Q estimates substantially.
AOS -12.8% after lowering 3Q/04 estimates on high steel prices.
MGLN -5.0% after disappointing 05 outlook.
OS -8.9% after announcing a 7.5 million share common stock offering.

Economic Data
2Q Current Account Balance -$166.2B versus estimates of -$158.3B and -$147.2B prior.
Advance Retail Sales for August fell .3% versus estimates of a .1% decline and a .8% rise in July.
Retail Sales Less Autos for August rose .2% versus estimates of a .2% increase and a .3% rise in July.

Recommendations
HET and MUR raised to Overweight at JP Morgan. MBG lowered to Underweight at JP Morgan. FLEX raised to Buy at CSFB, target $16. UTHR raised to Buy at Deutsche Bank, target $40. TMO rated Buy at Deutsche Bank, target $32. TYC rated Buy at Deutsche Bank, target $37. ROK rated Buy at Deutsche Bank, target $45. CPB raised to Overweight at JP Morgan. EMR rated Buy at Deutsche Bank, target $80. HON rated Buy at Deutsche Bank, target $42. DHR rated Buy at Deutsche Bank, target $60. VIP rated Outperform at Bear Stearns. PFGC raised to Buy at UBS, target $28. Goldman reiterated Outperform on MDT, EBAY, CCL, RCL, BBY, FD, GDT. Goldman reiterated Underperform on HC, LSI and KZL. Goldman upgraded RIG and DO to Outperform. Citi SmithBarney riterated Buy on AFC, target $36. Citi reiterated Buy on ACS, target $70. Citi reiterated Buy on ITT, target $92. Goldman reiterated Outperform on MUR and SBC.

Mid-day News
U.S. stocks are modestly higher mid-day as the broad market consolidates after recent gains. The U.S. Congress is expected to recommend tougher laws to stop marketing practices that allow hospitals to overcharge for medical supplies, the NY Times reported. Ericsson AB is starting to benefit from its spending on 3G equipment which allows cell phones to carry video pictures and other multimedia, the Wall Street Journal reported. The Bush administration is proposing to cancel billions of dollars in debt owed by poor nations, the Washington Post reported. A federal appeals court in NY is reviewing a decision that may lead to the largest-ever ruling of punitive damages against the tobacco industry, the NY Times reported. The U.S. Nuclear Regulatory Commission has concluded a terrorist attack that crashes a jetliner into a nuclear plant probably wouldn't release significant amounts of radiation, the AP reported. Three French paparazzi who took pictures of Princess Diana and Dodi Fayed the night they died in a Paris car crash in August 1997 were acquitted of invasion of privacy, Agence France-Presse reported. The U.S.'s global plan to fight AIDS has helped at least 25,000 people with the disease receive antiretroviral therapy since a program began distributing money to 15 countries in February, the Washington Post reported. Yahoo! said it plans to buy closely held Musicmatch for $160 million to add online music services, Bloomberg said. Global fund managers' optimism about earning growth gained this month for the first time in 2004, a Merrill Lynch survey showed. Iraqi President al-Yawar said 55,000 members of a planned 80,000-strong Iraqi security force have already been recruited, Bloomberg reported. U.S. retail sales excluding autos rose for a fourth month in August, suggesting consumer spending will help the economy expand this quarter, Bloomberg said. McDonald's raised its annual dividend 38% to 55 cents a share from 40 cents, Bloomberg reported. Crude oil rose for a second day on concern that Hurricane Ivan will slash U.S. offshore production in the Gulf of Mexico by the biggest amount in two years, Bloomberg reported. The European Union said the U.S. would have to cut subsides to Boeing to win a reduction in aid to Airbus SAS as both sides prepared for talks this week on revising aircraft-support restrictions, Bloomberg said.

BOTTOM LINE: The Portfolio is slightly higher mid-day as my declining consumer-oriented shorts are more than offsetting my falling steel longs. I have not traded today and the Portfolio is still 75% net long. The market's resilience in the face of Hurricane Ivan, rising energy prices and a few earnings shortfalls is impressive. I expect U.S. stocks to trade mixed into the close as short-covering offsets the market's overbought technical condition.