Tuesday, October 26, 2004

Mid-day Update

S&P 500 1,106.80 +1.09%
NASDAQ 1,921.38 +.38%

Leading Sectors
HMOs +4.4%
Insurance +4.25%
Airlines +3.60%

Lagging Sectors
Hospitals -.25%
Broadcasting -.32%
Disk Drives -.67%

Crude Oil 54.55 +.02%
Natural Gas 8.16 +3.49%
Gold 426.40 -.81%
Base Metals 111.19 +.15%
U.S. Dollar 85.29 +.38%
10-Yr. T-note Yield 3.98% +.34%
VIX 16.07 -3.08%
Put/Call .73 unch.
NYSE Arms .61 -47.41%

Market Movers
DAL +27.2% after saying American Express agreed to provide as much as $600 million in financing, including $500 million to prepay for the airline's frequent-flier points.
FLEX -9.3% after missing 2Q estimates, lowering 3Q/4Q guidance and multiple downgrades.
QCOM -5.3% on Morgan Stanley downgrade to Underweight.
NVDA +12.7% after boosting 3Q sales estimate.
LCAV +15.0% after beating 3Q estimates substantially and raising 04/05 guidance.
HZO +16.2% after beating 4Q estimates substantially and reiterating 05 outlook.
SHOP +57.9% on strong demand for IPO.
COH +5.7% after beating 1Q estimates and raising 2Q/05 outlooks.
SEPR +5.7% after beating 3Q estimates.
EXBD +6.3% after beating 3Q estimates and raising 4Q/04 outlooks.
OMC +7.4% after beating 3Q estimates.
SLAB -18.6% after meeting 3Q estimates, lowering 4Q guidance substantially and multiple downgrades.
WIRE -18.6% on disappointing 3Q report.
TRMB -7.9% after beating 3Q estimates and lowering 4Q/04 outlooks.
TWP -8.1% after missing 3Q estimates and reiterating 04 outlook.
APOL -4.2% on Piper Jaffray downgrade to Market Perform.
OVNT -7.5% after missing 3Q estimates and lowering 4Q guidance.
DVA -8.4% after receiving a subpoena from U.S. prosecutors in NY for documents relating to their operations.
ATRS -7.3% after missing 3Q estimates, raising 4Q outlook and Jefferies downgrade to Hold.
AH -5.1% after announcing that it had priced at par its previously announced offering of $300 million in aggregate principal amount of 2.0% senior subordinated convertible notes.
CNCT -7.5% after beating 3Q estimates and lowering 4Q outlook.
*Insurance and HMO stocks up across the board on news that Spitzer would not pursue criminal charges against MMC.

Economic Data
Consumer Confidence for October fell to 92.8 versus estimates of 94.0 and a reading of 96.7 in September.

-Goldman Sachs reiterated Outperform on ENH, RIG, KO, IP, RE and AIG. Goldman reiterated Underperform on NFS, LVLT, AKS, RAI and MMC.
-Citi SmithBarney says to Buy IMCL for a trade into earnings on Thur., target $66. Citi also said to Buy HAIN on any weakness related to 1Q earnings, target $21. Citi reiterated Buy on KMB, target $72. Citi reiterated Buy on FLEX, target $17. Citi reiterated Buy on WLP, target $142. Citi reiterated Buy on DIS, target $30. Citi reiterated Buy on BWA, target $50. Citi reiterated Buy on VECO, target $26. Citi reiterated Buy on BJ, target $30. AMAT reiterated Buy on AMAT, target $22. Citi reiterated Buy on CMCSK, target $34. Citi reiterated Buy on SMTC, target $24. Citi reiterated Buy on INTX, target $18. Citi reiterated Buy on PHM, target $83.
-JP Morgan rated BBBY Overweight.
-Morgan Stanley downgraded QCOM to Underweight.
-Bank of America raised TRW to Buy, target $21. Bank of America downgraded SUP to Sell, target $18.

Mid-day News
U.S. stocks are higher mid-day, led by HMO and Insurance shares, after Democratic Attorney General Spitzer said he would not pursue criminal charges against Marsh & McLennan. Political action committees supporting Senator Kerry and his bid for the White House are outspending backers of President Bush by more than 4 to 1, the AP reported. U.S. retailers, preparing for the holiday sales season, are waiting longer than usual for merchandise shipped from Asia due to a backload of cargo ships, railroads and truck lines, the NY Times reported. An NBC News crew, embedded with the U.S. Army during the liberation of Iraq last year, reported that the 380 tons of explosives that were recently reported missing were already gone when troops arrived, CNN reported. Iraqi Prime Minister Allawi said today he has asked the United Nations to send troops to help guard the country's January elections from terrorist attack, Agence France-Presse reported. Afghanistan's interim President Hamid Karzai has won a majority of 55.4% of the votes in the final count of the country's first presidential election, the Afghan Election Web site said. Senator Kerry grants special access to top Democratic California fundraisers, letting them listen in on conference calls and visit his family on retreats, the LA Times reported. The fundraisers, often well-connected or celebrities, have helped bring in more than $102 million from Californians for Kerry and Democratic causes, a record for contributions from a single state, the newspaper said. Hewlett-Packard is testing ways of using wireless tracking technology, known as radio frequency identification or RFID, that's aimed at replacing bar codes, the San Jose Mercury News reported. Comcast may report a fifth consecutive quarterly profit after expanding its video-on-demand service in an effort to keep subscribers from leaving for satellite-TV, Bloomberg reported. Mittal's $4.5 billion acquisition of Intl. Steel Group may prompt a spree of deals as the steel industry consolidates to cut costs, Bloomberg said. Monsanto won European Union approval for one of its gene-modified corn varieties to be used in food as the EU seeks to expand the biotech market after a six-year moratorium and ease a transatlantic trade dispute, Bloomberg reported. A U.S appeals court lifted a ban on sales of rebuilt toner cartridges that compete with products made by Lexmark Intl., Bloomberg said. U.S. consumer confidence fell more-than-expected in October as both political parties engage in historically negative rhetoric, Bloomberg said. A divided U.S. SEC ordered hedge fund managers to register with the agency, subjecting the private investment partnerships to SEC oversight for the first time, Bloomberg reported.

Bottom Line: The Portfolio is higher mid-day on strength in my internet, Russian telecom ADR and wireless longs. I have not traded today and the Portfolio is still 100% net long. The tone of the market is better today, however the advance/decline line is near even, technology stocks are underperforming and measures of investor anxiety are mostly lower. I expect U.S. stocks to trade mixed into the afternoon as political worries and domestic terrorism fears offset stabilizing energy prices and optimism over the MMC news.

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