Thursday, November 04, 2004

Mid-day Update

S&P 500 1,153.48 +.90%
NASDAQ 2,011.76 +.37%


Leading Sectors
Airlines +3.05%
Gaming +2.69%
Retail +2.52%

Lagging Sectors
Disk Drives -.40%
Drugs -.63%
Homebuilders -1.10%

Other
Crude Oil 49.55 -2.81%
Natural Gas 8.35 -4.59%
Gold 431.20 +1.36%
Base Metals 116.73 +1.32%
U.S. Dollar 84.51 -.21%
10-Yr. T-note Yield 4.06% -.33%
VIX 13.18 -6.13%
Put/Call .92 +5.75%
NYSE Arms .93 +27.4%

Market Movers
QCOM -4.4% after meeting 4Q estimates and lowering 05 outlook.
GPS +6.8% after reporting strong Oct. sales and boosting 3Q outlook.
ADRX -19.7% after missing 3Q estimates and JP Morgan downgrade to Underweight.
ISLE +15.6% on PENN/ARGY merger.
PENN +24.7% after agreeing to purchase Argosy Gaming for $1.4 billion in cash to create the third-largest U.S. operator of gambling properties. AGY +11.3%.
PDII +12.3% after beating 3Q estimates and raising 04 forecast.
BEBE +9.1% on very strong Oct. sales.
COHR +8.3% on strong 4Q results.
COGT +10.6% on continued optimism over its fingerprint ID technology.
DITC -29.5% after lowering 2Q/3Q guidance and First Albany downgrade to Buy.
DIGE -26.4% after missing 1Q estimates, lowering 2Q/05 outlooks and multiple downgrades.
JOSB -14.2% after disappointing Oct. sales.
BOBJ -17.0% after meeting 3Q estimates and lowering 4Q outlook.

Economic Data
Preliminary 3Q Non-farm Productivity rose 1.9% versus estimates of 1.5% and a rise of 3.9% in 2Q.
Preliminary 3Q Unit Labor Costs rose 1.6% versus estimates of 2.3% and a rise of 1.0% in 2Q.
Initial Jobless Claims for last week were 332K versus estimates of 340K and 351K the prior week.
Continuing Claims were 2800K versus estimates of 2805K and 2820K prior.

Recommendations
-Goldman Sachs reiterated Outperform on DHR, GE, STZ, ASN, CMX, TYC, MMM, AA, DELL, VNO, CBG, MDT, HD. Goldman reiterated Underperform on IHR.
-Citi SmithBarney upgraded PHS(target $53), AET(target $125) and HUM(target $29) to Buy. Citi reiterated Buy on L, target $11.50. Citi reiterated Sell on WTW, target $31. Citi reiterated Buy on NJR, target $46. Citi reiterated Buy on RSG, target $34. Citi reiterated Sell on BLDP, target $5. Citi reiterated Buy on UNM, target $20. Citi reiterated Sell on HOTT, target $14. Citi reiterated Buy on PCG, target $35. Citi reiterated Buy on ACLS, target $9.
-Merrill Lynch named JCP Focus 1 stock of the week.
-UBS rated APCS Buy, target $13. UBS rated NBL Buy, target $76.
-Bank of America lowered AMAT to Sell, target $12.59. BofA downgraded KLAC to Sell, target $36.33.
-Legg Mason rated MHK Buy, target $100. Legg Mason rated DXYN Buy, target $20.
-Prudential raised EOG to Overweight, target $80. Pru cut APC to Underweight, target $66. Pru cut ASYT to Underweight, target $3.50.
-Deutsche Bank raised XOM to Buy, target $55.
-JP Morgan cut PBG, CINF and ADRX to Underweight. JP Morgan raised STA to Overweight.
-Raymond James raised SPN to Strong Buy, target $19.25. Raymond James raised XEC, target $44.
-Bear Stearns downgraded ENR to Underperform.

Mid-day News
U.S. stocks are higher mid-day on optimism over President Bush's stated agenda and falling energy prices. Alcan expects a reduction in the aluminum surplus this year, CEO Engen told CNBC. A technical problem with a computer file server on election night delayed tv networks' access to exit poll data for 2 ½ hours just as the consortium conducting the polling was about to update with information showing President Bush with a 1-point lead, the Washington Post reported. Public Service Co. of Colorado and other utilities will have to produce at least 10% of the state's electricity from renewable energy sources by 2015 because of voter support for a ballot initiative, the Wall Street Journal reported. California is poised to become the U.S. center for stem-cell research after voters in the state passed Proposition 71, the NY Times said. U.S. Attorney General Ashcroft may submit his resignation in two weeks, CNN reported. Starbucks plans to add 100 stores in Canada over the next 12 months as it expands around the world, the Globe and Mail reported. Viacom said it plans to make an offer to buy the rest of financial news Internet site MarketWatch.com that it doesn't already own, Bloomberg reported. Bill Miller, manager of the $14.9 billion Legg Mason Value Trust, may lose his 13-year streak of outperforming the S&P 500 after he missed this year's rally in energy-related stocks, Bloomberg said. The number of U.S. workers filing first-time claims for unemployment insurance fell more than forecast last week to a level consistent with more job creation, Bloomberg reported. General Motors recalled 1.22 million Chevrolet Cavalier sedans, GMC Envoy sport-utilities and other vehicles, bringing U.S. recalls by all automakers this year to a record of almost 25 million, Bloomberg said. Sales at U.S. retailers including Federated Dept. Stores and Nordstrom rose 4% in October, signaling growth for the holiday season, Bloomberg said. Palestinian leader Arafat is still being treated in a French hospital and hasn't died, Bloomberg reported. Crude oil is falling on expectations of extended inventory increases as OPEC production rises, Bloomberg said.

Bottom Line: The Portfolio is lower mid-day as gains in my retail and gaming longs are being more than offset by declines in my telecom equipment and internet longs. I exited a couple of longs as they hit stop-losses and added a few semiconductor and restaurant longs, thus leaving the Portfolio 125% net long. One of my new longs is ADBL and I am using a $21 stop-loss on this position. The tone of the market is mixed today and improving. The advance/decline line is mildly positive and tech is underperforming again. I suspect the Bears are beginning to get very nervous as they expected a sell-the-news fall in the major indices after the election. Instead stocks are strengthening, breaking out clearly from downtrends that have been in place since early in the year. The shorts are having one of their best years ever. I believe many will cover in the later part of the month, as the economy accelerates, to protect their gains. As well, mutual fund and hedge fund managers that are significantly underperforming for the year will have to put money to work on the long-side as fundamentals improve. I feel more confident than ever about my prediction for a strong double-digit 4Q rally in the major indices. However, stocks are getting overbought short-term and will likely pause over the coming days.

No comments: