Monday, September 20, 2004

Mid-day Update

S&P 500 1,123.12 -.48%
NASDAQ 1,908.91 -.06%


Leading Sectors
Semis +2.90%
Oil Service +.89%
Disk Drives +.88%

Lagging Sectors
Drugs -1.27%
Broadcasting -1.41%
Tobacco -1.54%

Other
Crude Oil 45.75 +.35%
Natural Gas 5.16 +1.12%
Gold 406.60 -.25%
Base Metals 111.05 +1.35%
U.S. Dollar 88.99 +.15%
10-Yr. T-note Yield 4.07% -.75%
VIX 14.44 +2.92%
Put/Call 1.02 +24.39%
NYSE Arms 1.03 +41.10%

Market Movers
UTSI -8.9% after lowering 3Q estimates significantly.
CL -10.5% after lowering 3Q/4Q forecasts.
OSIP +7.9% after saying that its experimental Tarceva drug combined with chemotherapy helped patients with pancreatic cancer live longer in a study.
SJH +7.4% after saying Fortress Investment Group agreed to acquire it for about $677 million in cash.
ACH +6.4% on speculation the Chinese economy would accelerate and the company is raising prices.
MOND +4.6% after saying it expects to raise $400 million to $500 million after taxes through sales of assets to focus on its premium labels.
WMGI -12.63% after it cut its 3Q/04 outlook, citing a recall on its metal acetabular hip cups.
ROG -12.2% after cutting 3Q forecast substantially.
TFX -8.7% after cutting 3Q and 04 outlook substantially.
UL -5.1% after reducing 04 forecast.

Economic Data
NAHB Housing Market Index fell to 68 in September versus estimates of 70 and a reading of 71 in August.

Recommendations
Goldman Sachs reiterated Underperform on CL, F and EK. Goldman reiterated Outperform on DNA, AMLN, ROH, ACS, CAN, PG, CTSH, IGT, SLR, FS and BAX. Citi SmithBarney reiterated Buy on CCL, target $54. Citi reiterated Buy on WMT, target $65. Citi rated ELOS Buy, target $21. AUDC cut to Reduce at UBS, target $10.50. PKY cut to Reduce at UBS, target $44. APOL cut to Reduce at UBS. CECO cut to Reduce at UBS, target $27. TRDO cut to Underweight at JP Morgan. NBP, MCIP, GGC, WLK rated Overweight at JP Morgan. ZMH raised to Outperform at Bear Stearns, target $93. WLK rated Buy at Bank of America, target $24.

Mid-day News
U.S. stocks are modestly lower mid-day on earnings worries and rising oil prices. America Online Vice Chairman Ted Leonsis told financial news network CNBC AOL might enhance its Web site to add to advertising sales, Bloomberg said. Reality tv producer Mark Burnett has discussed making changes with Martha Stewart about her tv show once her prison time and home confinement are completed, the NY Daily News reported. Google must expand outside the U.S. to succeed, particularly in Asia, where the potential for growth is the greatest, the San Francisco Chronicle reported. Nike said first-quarter earnings surged 25% as demand for Shox running shoes and Converse sneakers fueled the fastest U.S. sales gain in more than a year, Bloomberg reported. Iraq should go ahead with plans for an election in January to hand a "big defeat" to terrorists, who are trying to undermine the country's stability, Prime Minister Allawi told the U.K.'s GMTV. A U.S. judge struck down more than 12 of the government's current political fund-raising rules, because she said the regulations improperly weaken campaign finance law, the AP reported. Viacom's CBS said the tv network can't prove the authenticity of documents it had used to raise questions about President Bush's National Guard service and that using them was a "mistake", Bloomberg reported. Crude oil is rising to a four-week high after OAO Yukos Oil said it will halt shipments to China's biggest oil company because its bank accounts have been frozen by the Russian government, Bloomberg said.

BOTTOM LINE: The Portfolio is lower mid-day on declines in my security, education and homebuilding longs. I took profits in a few internet and education longs this morning, thus leaving the Portfolio 75% net long. While most stocks are lower today, it is a positive to see strength in technology shares and specifically the semiconductor sector. As well, measures of investor anxiety are climbing towards more healthy levels. I continue to expect stocks to consolidate recent gains through mid-October, setting the stage for a very good fourth quarter. I expect U.S. stocks to trade mixed into the afternoon.

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