Friday, January 07, 2005

Mid-day Report

S&P 500 1,189.81 +.16%
NASDAQ 2,097.30 +.35%


Leading Sectors
Semis +1.90%
Boxmakers +1.19%
Internet +.73%

Lagging Sectors
Energy -.31%
Gaming -.63%
Oil Service -1.26%

Other
Crude Oil 45.75 +.42%
Natural Gas 6.02 -.48%
Gold 417.90 -.90%
Base Metals 119.05 +1.59%
U.S. Dollar 83.78 +.76%
10-Yr. T-note Yield 4.27% +.14%
VIX 13.27 -2.28%
Put/Call .67 -14.10%
NYSE Arms 1.02 +22.89%
ISE Sentiment 150.0 -32.43%

Market Movers

Economic Data
Unemployment Rate for December remained at 5.4% versus estimates of 5.4% and a prior reading of 5.4%.
Average Hourly Earnings for December rose .1% versus estimates of a .2% increase and a .1% rise in November.
Change in Non-farm Payrolls for December was 157K versus estimates of 175K and an upwardly revised 137K in November.
Change in Manufacturing Payrolls for December was 3K versus estimates of 0K and a downwardly revised -9K in November.
Average Weekly Hours for December was 33.8 versus estimates of 33.8 and 33.7 in November.

Recommendations
-Goldman Sachs: Reiterated Outperform on RIG, DO, SII, BHI, SLB, ROH, INTC, MRVL and LIZ. Downgraded BMC to Underperform.
-Citi SmithBarney: Said to Buy Chemicals on pullback, favorites are DOW, NCX and LYO. Remains bearish on commercial aerospace sector. Reiterated Sell on BA, target $40. Reiterated Buy on MSFT, target $32.
-CSFB: Rated AGU Outperform, target $18.
-JP Morgan: Rated LABS, PDLI and MEDX Overweight. Raised SHPGY, SYMC to Overeweight. Cut SUN to Underweight.
-Legg Mason: Rated WEN Buy, target $46.
-Banc of America: Rated HRB Sell, target $42.
-Bear Stearns: Downgraded DE to Underperform.
-Morgan Stanley: Downgraded OVNT, CNF to Underweight. Raised FDX, UPS to Overweight.
-Oppenheimer: Rated CAO Buy, target $18.50.

Mid-day News
U.S. stocks are modestly higher mid-day on strength in the semiconductor sector and a jobs report that met most expectations. US office vacancy rates dropped to 16.2% from 16.6% in the fourth quarter as more companies snapped up space, the Wall Street Journal reported. Rents were unchanged for the second quarter in a row at an annual $20.11 a square foot, the paper said. Scientists at Pfizer said they may have found a simple test to diagnose for Parkinson’s disease, the Wall Street Journal reported. A “sharp” increase in US government spending on military research programs is expected to boost total funding for research and development in the country this year, the Wall Street Journal reported. Burlington Resources CFO Shapiro told CNBC the price of crude oil may be $30-$40/bbl. by the end of the year, Bloomberg said. MedImmune has sold only about 1 million doses of its FluMist nasal spray after it increased the number of doses to 3 million amid reports of a shortage of flu vaccine, the AP reported. Crude oil prices may fall next week as warmer-than-normal weather in the eastern US cuts demand for heating fuel and refineries boost supplies, according to a survey by Bloomberg. Shares of Taser International are dropping after the company said the SEC is looking into its products’ safety and a recent order, Bloomberg reported. A growing number of Krispy Kreme shareholders are seeking the ouster of CEO Livengood, Bloomberg reported. President Bush picked former Senators Mack and Breaux to head a nine-member panel of former lawmakers, business owners and tax experts that will recommend ways to overhaul the US tax code, Bloomberg said. Tiffany & Co., the largest US luxury jewelry retailer, said holiday sales increased 12% as demand for diamond jewelry and watches rose, Bloomberg reported. The US dollar rose against the euro for a sixth straight day after Treasury Secretary Snow said members of the Bush administration “want to do things to sustain the strength” of the US currency, Bloomberg reported. US employers added 157,000 workers in December, capping the best year for job growth since before the stock market bubble burst and the economy began plunging into recession in 2000, Bloomberg reported.

Bottom Line: The Portfolio is slightly lower mid-day as losses in my security and homebuilding longs more than offset gains in my internet and networking longs. I added a few new technology longs this morning, thus bringing the Portfolio to 25% net long. One of my new longs is JNPR and I am keeping a tight stop-loss of $25.10 on this position. The tone of the market remains weak today as more stocks are declining than advancing as small-caps fall and a number of sectors are lower. However, it is a positive to see semiconductors outperform substantially. While the US dollar likely has further to go on the upside, I do not expect such a rally as to substantially damage multi-national corporate profits. I expect US stocks to rise modestly into the close on short-covering and bargain-hunting in the tech sector.

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