Tuesday, November 30, 2004

Mid-day Report

S&P 500 1,177.35 -.11%
NASDAQ 2,104.29 -.12%


Leading Sectors
Iron/Steel +1.36%
HMOs +.73%
Defense +.39%

Lagging Sectors
I-Banks -.90%
Broadcasting -.93%
Retail -2.18%

Other
Crude Oil 49.18 -1.17%
Natural Gas 7.49 -4.43%
Gold 452.50 -.72%
Base Metals 120.75 -.02%
U.S. Dollar 81.91 -.02%
10-Yr. T-note Yield 4.35% +.73%
VIX 13.09 -1.58%
Put/Call .87 +16.0%
NYSE Arms 1.0 -2.91%

Market Movers
TASR +7.6% on short-covering after 2-for-1 split.
PACT +23.0% after announcing it signed a partnership agreement to become a designated distributor of China Netcom(CN), and to distribute Netcom's XiaoLingTone/PHS mobile phone products, prepaid calling cards, wireless broadband and internet services.
RHAT +9.7% after Prudential upgrade to Overweight.
UNFI +8.2% after beating 1Q estimates and reiterated 05 guidance.
ELOS -19.0% after the FDA refused to review its VelaSmooth device for treating cellulite.
HOTT -11.8% after lowering 4Q guidance and multiple downgrades.
XING -12.9% after disappointing 9-months earnings report.

Economic Data
Preliminary 3Q GDP rose 3.9% versus estimates of 3.7% and a prior forecast of 3.7%.
Preliminary 3Q Personal Consumption rose 5.1% versus estimates of 4.7% and a prior forecast of 4.6%.
Preliminary 3Q Price Deflator rose 1.3% versus estimates of 1.3% and a prior estimate of 1.3%.
Consumer Confidence for November fell to 90.5 versus estimates of 96.0 and a reading of 92.9 in October.
Chicago Purchasing Manager for November was 65.2 versus estimates of 62.0 and a reading of 68.5 in October.

Recommendations
-Goldman Sachs reiterated Outperform on WAG. Goldman reiterated Underperform on ABY.
-Citi SmithBarney reiterated Buy on SHO, target $22. Citi reiterated Buy on INTC, target $25.50. Citi reiterated Sell on HOTT, target $14. Citi reiterated Buy on K, target $48.
-JP Morgan rated KEA Underweight. JP Morgan rated DTPI Overweight. AMT rated Overweight at JP Moran.
-Banc of America rated AMTD Sell, target $12.
-Legg Mason rated TSA Buy, target $37. AV rated Buy at Legg Mason, target $21.
-Prudential raised OSI to Overweight, target $41. Pru raised RHAT to Overweight, target $17.
-CSFB rated MMM Outperform, target $92.
-Merrill Lynch rated SHO Buy, target $21.
-Raymond James rated ANT Outperform, target $43.

Mid-day News
U.S. stocks are slightly lower mid-day on a continuing consolidation of recent gains. IBM and Sybase plan to collaborate to market an edition of Sybase's database software for IBM Servers that use the Linux operating system, the Wall Street Journal reported. Oragenics will likely say today it has received U.S. FDA approval to test bacteria that's intended to prevent tooth decay, the NY Times reported. Helicopter companies are benefiting from increased demand for medical airlifts and other commercial services, the NY Times reported. A U.S. appeals court ruled the government can't withhold federal funds from universities that bar military recruiters from campus, the Washington Post reported. Materials for making chemical blood agents and literature on how to produce a deadly form of anthrax were found at two houses in Fallujah, Iraq, last week, the Washington Times reported. Dallas Mavericks owner Mark Cuban says he plans to create a hedge fund managed by professional gamblers in which investors could wager on sporting events, the Dallas Morning News reported. Allergan's shares fell as much as 4.5% after the company said it was investigating whether injections of its Botox wrinkle treatment may have caused two people in Florida to become ill with botulism, Bloomberg reported. OAO Yukos Oil has lost financial stability and spent all its capital, Interfax said. German Chancellor Schroeder and Russian President Putin agreed during a telephone call that the result of any rerun of the disputed Ukrainian presidential election must be "strictly respected," Bloomberg reported. The U.S. economy grew at a 3.9% annual pace from July through September, faster than the government estimated last month, as consumer spending strengthened, Bloomberg said. Priceline.com and Lowestfare.com stopped selling retail airline tickets for Northwest Airlines as the companies disagree on distribution terms, Bloomberg said. Pfizer may be the first to produce a single medication designed to reduce "bad" cholesterol and elevate "good" cholesterol, Bloomberg reported. OAO Gazprom, Russia's state-run natural gas company, will bid for OAO Yukos' biggest unit and may buy other domestic producers to created an oil business rivaling that of Exxon Mobil within six years, Bloomberg reported. NAACP President Mfume said he is resigning from the civil rights group, Bloomberg said. Crude oil in NY is falling as warm temperatures and rising inventories eased concern that demand may outpace supplies of heating oil and natural gas, Bloomberg said. The employment index component of the Chicago Purchasing Manager report rose to a 16-year high, suggesting the manufacturing recovery is secure and will help drive economic growth, Bloomberg reported.

Bottom Line: The Portfolio is unchanged mid-day as strength in my security, telecom equipment and internet longs is being offset by weakness in my wireless, retail and medical equipment longs. I have not traded today and the Portfolio is still 100% net long. The major indices continue to consolidate recent gains in an orderly and healthy manner. I still expect one more substantial run higher over the next few weeks into year-end and plan to buy favorite longs aggressively on any near-term weakness. Friday's employment report should exceed expectations, thus boosting consumer confidence, and provide the catalyst for higher stock prices. I expect U.S. stocks to trade modestly higher into the close on declining energy prices.

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