Thursday, October 07, 2004

Mid-day Update

S&P 500 1,132.74 -.82%
NASDAQ 1,954.32 -.84%

Leading Sectors
Retail +.48%
Hospitals +.03%
Restaurants +.01%

Lagging Sectors
Airlines -2.66%
Homebuilders -3.0%
Drugs -3.12%

Crude Oil 52.33 +.60%
Natural Gas 7.13 +1.21%
Gold 419.70 -.07%
Base Metals 122.83 -.06%
U.S. Dollar 88.33 -.17%
10-Yr. T-note Yield 4.24% +.42%
VIX 13.89 +4.59%
Put/Call .83 +7.79%
NYSE Arms 1.23 +68.49%

Market Movers
PFE -5.9% after a doctor said in the New England Journal of Medicine that drugmakers must prove that medications such as Pfizer's Celebrex don't carry the same risk of heart problems as Merck's Vioxx.
ATYT +5.3% after beating 4Q estimates and raising 1Q outlook.
DNA -4.6% after beating 3Q estimates and giving disappointing guidance.
COST +4.3% after beating 4Q estimates and giving positive outlook.
HOTT +13.5% after better-than-expected same-store-sales, announcing 1M share buyback and Bank of America upgrade to Buy.
ANF +9.0% after substantially beating same-store-sales estimates.
CHS +6.7% after beating same-store-sales estimates.
JWN +5.7% after beating same-store-sales estimates.
OSTK +4.4% on short-covering.
ARO +5.8% after beating same-store-sales estimate.
BEBE +6.3% after substantially beating same-store-sales estimate and boosting 1Q guidance.
LZB -11.1% after JP Morgan downgrade to Underperform.
MBI -7.5% after missing 3Q estimates and giving negative outlook.
MSTR -6.7% on profit-taking and Jeffries downgrade to Hold.
BRL -4.6% on Bank of America downgrade to Neutral.
MIK -5.4% after missing same-store-sales estimate and lowering 3Q/4Q outlooks.

Economic Data
Initial Jobless Claims for last week were 335K versus estimates of 355K and 372K the prior week.
Continuing Claims were 2864K versus estimated of 2875K and 2865K prior.

Goldman Sachs reiterated Outperform on GCI, DNA, CLX, RIG, DDR, PFE, FD and SAP. Goldman reiterated Underperform on RAI and UIS. Citi SmithBarney said to Buy MCD ahead of Sept. Comp Sales release, target $34. Citi also said to Sell DAL into strength as chap.11 filing is imminent, target $1. Citi reiterated Buy on ETR, target $65. Citi reiterated Buy on VIAM, target $50. Citi reiterated Buy on JNPR, target $32.50. Citi reiterated Buy on FFIV, target $45. Citi reiterated Buy on EXTR, target $11. Citi reiterated Buy on FDRY, target $15. Citi reiterated Sell on ISIL, target $14. Citi reiterated Buy on DNA, target $87.50. JP Morgan reiterated Overweight on MOT. Bank of America rated C Buy, target $52. HOTT raised to Buy at Bank of America, target $23. XRTX raised to Buy at Bank of America, target $15.75. TRMS cut to Sell at Legg Mason. CBG rated Overweight at JP Morgan, target $32. LZB cut to Underperform at JP Morgan.

Mid-day News
U.S. stocks are lower mid-day on continuing fears over higher energy prices and declines in pharmaceutical stocks. The bacteria that forced the closure of Chiron's U.K. flu vaccine factory is a common one that lives in water, soil and animals, and can colonize medical equipment, the Wall Street Journal reported. The FCC will restart funding for a program that provides U.S. public libraries and schools with high-speed Internet and telephone service, the Wall Street Journal reported. Afghanistan's Oct. 9 election marks the first time in the nation's 5,000 year history that people will choose their president, the Wall Street Journal reported. Shares of AIG may decline further as the word's largest insurer refused to compromise in a dispute with U.S. regulators over transactions the government suspects were fraudulent, the NY Times reported, citing analysts. Students in NYC and across the state scored higher on a standardized math test for the third year in a row, suggesting that increased classroom time on the subject and programs including the use of special math coaches are having a positive effect, the NY Times said. Bill Miller, CEO of Legg Mason Capital Management, wants Barry Diller's IAC/InterActiveCorp to use its more than $1 billion in cash to buy back stock, the NY Post said. Boeing is in talks to sell airliners to Libya after the U.S. lifted almost two decades of economic sanctions, enabling Africa's biggest holder of oil reserves to buy U.S.-made equipment, Bloomberg reported. The number of Americans filing initial claims for unemployment benefits plunged last week to the lowest level in a month, suggesting the labor market is improving as the economy gains momentum, Bloomberg said. Oil-tanker rates from the Middle East and West Africa surged to the highest in three decades, boosting earnings for Frontline and Teekay Shipping, Bloomberg reported. The last employment report Americans will see before November's election may show hurricanes blew away as many as 100,000 jobs last month, Bloomberg said. Parmalat Chairman Bondi sued Bank of America in a U.S. court, seeking more than $10 billion in damages for what he says was the U.S. bank's role in the Italian foodmaker's bankruptcy, Bloomberg reported. Crude oil in NY rose to $53/bbl. a gain of more than $10 since Hurricane Ivan began to shut Gulf of Mexico oil production on Sept. 13, Bloomberg reported.

BOTTOM LINE: The Portfolio is slightly lower mid-day as weakness in my Chinese ADR and software longs is more than offsetting the strength in my Internet and alternative energy longs. I exited a few longs this morning as they hit stop-losses, leaving the Portfolio 100% net long. The negative affects of the record-setting hurricanes on the U.S. labor market appear to be dissipating, however tomorrow's jobs report will be negatively affected by the storms. I will be pleasantly surprised if the change in non-farm payrolls exceeds the 150K estimates. Going forward, an accelerating U.S. economy and the rebuilding efforts in Florida should boost employment opportunities. I expect stocks to remain mixed into the close on energy fears and short-covering.

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