Wednesday, October 13, 2004

Mid-day Update

S&P 500 1,111.12 -.96%
NASDAQ 1,917.8 -.43%

Leading Sectors
Airlines +1.85%
Restaurants +1.38%
Semis +1.28%

Lagging Sectors
Homebuilders -2.64%
Commodity -3.24%
Iron/Steel -5.44%

Crude Oil 52.68 +.36%
Natural Gas 6.77 +2.02%
Gold 414.10 -.60%
Base Metals 113.43 -8.06%
U.S. Dollar 88.25 +.26%
10-Yr. T-note Yield 4.07% -.61%
VIX 15.44 +2.59%
Put/Call .96 -3.03%
NYSE Arms 1.27 -27.43%

Market Movers
YHOO +3.3% after beating 3Q estimates and raising 4Q guidance.
MCD +3.4% after raising 3Q estimates.
ACN -11.5% after missing 4Q estimates, lowering 1Q/05 outlook and downgrade to Hold at Deutsche Bank.
ASKJ +6.0% on strong YHOO report.
LNCR +15.4% after a U.S. government agency recommend higher-than-expected payments for services to Medicare patients and UBS upgrade to Buy.
HURN +22.2% on strong demand for its IPO.
JUPM +12.4% on strong YHOO report.
ENER +12.4% after positive article in the Wall Street Journal.
ITRI +15.9% after boosting 3Q estimates substantially.
SONC +6.9% after beating 4Q estimates and raising 1Q guidance.
MSTR +4.2% after FBI said it would use its business intelligence platform to support the Bureau's Investigative Data Warehouse.
MMSI -14.0% after lowering 3Q forecast.
POT -4.7% on Scotia Capital downgrade to Sector Underperform.
JNY -7.4% after lowering 3Q, 4Q and 05 guidance.
*Base Metals down across the board on profit-taking and fears that supply will exceed demand in 05.

Economic Data
None of note.

N cut to Underweight at Prudential, target $30. ZQK rated Overweight at Prudential, target $30. EPD raised to Outperform at Raymond James, target $26. CREO raised to Sector Outperform at CIBC. Goldman Sachs reiterated Outperform on MERQ, MSFT, YHOO, PETC, INTC, PFE, CSCO, NFX and ACN. Goldman cut DE to Underperform and reiterated Underperform on AG, CNH, HMT. Citi SmithBarney rated SEPR Sell, target $40. Citi rated ENDP, target $25. Citi reiterated Buy on FITB, target $58. Citi reiterated Buy on INTC, target $25.50. Citi reiterated Buy on MER, target $73. Citi reiterated Buy on LRCX, target $33. Citi reiterated Buy on CSCO, target $30. Citi reiterated Buy on PETC, target $42. Citi reiterated Buy on LLTC, target $44. Goldman reiterated Attractive view of steel sector, favorites are STLD, ISG, NUE and X.

Mid-day News
U.S. stocks are lower mid-day on worries over future economic growth and higher oil prices. A Virginia high school has spent $1.4 million to issue laptop computers to its 2,100 students, one of a growing number of schools trying to make sure all its students have equal access to technology, the Washington Post reported. The IRS has new powers to crack down on questionable tax shelters, transactions meant to help people avoid taxes, in legislation approved by the Senate this week and expected to be signed by President Bush, the Wall Street Journal reported. Iraq's interim Prime Minister Allawi demanded that the insurgent-held city of Fallujah turn over suspected al-Qaeda associate al-Zarqawi or be invaded, Agence France-Presse reported. The median home price in LA country was $407,000 in September, up 21.1% from a year earlier, Bloomberg said. Harvard University's Stem Cell Institute scientists asked the university's ethical review board for approval to clone embryos for use in stem-cell research, the Boston Globe reported. Shaw's Supermarkets plans to start selling groceries over the Internet, and its parent company, Albertson's, will spend $500 million on new global positioning and wireless systems to prepare for the future, Bloomberg reported. NBC attracted its smallest audience in at least five years during the first three weeks of the tv season, Bloomberg said. JP Morgan Chase President Dimon said the second-largest U.S. bank may make acquisitions to boost its consumer and commercial-banking franchises abroad and in the domestic market, Bloomberg reported. Merck said short-term studies show the company's planned successor to Vioxx, Arcoxia, doesn't carry the same risks, Bloomberg said. The U.S. Financial Accounting Standards Board delayed until next June a rule that will force companies to make worker stock options an expense, saying firms need more time to comply with other regulations, Bloomberg said. Shares of Alcoa, U.S. Steel, Phelps Dodge and other metal producers fell amid speculation increases in supply will more than offset demand next year, Bloomberg reported. The New York Yankees' victory over the Boston Red Sox last night attracted the highest tv ratings in the biggest U.S. markets since 1993 for the opening game of the American League Championship Series, Bloomberg reported.

BOTTOM LINE: The Portfolio is slightly lower mid-day as declines in my steel and shipping longs are more than offsetting gains in my internet and telecom equipment longs. I have not traded today and the Portfolio is still 100% net long. The declines in base metal stocks are significant. However, it is unclear at this point whether this is just a correction after substantial gains or the beginning of a downtrend. I suspect the former. I have taken profits in most of my base metal long positions over the last few weeks leaving just a few small longs in steel. The overall tone of the market is negative today, however tech is outperforming. I expect U.S. stocks to rise modestly from current levels into the close on short-covering ahead of the Presidential debate and numerous economic reports.

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