Thursday, January 20, 2005

Mid-day Report

S&P 500 1,175.80 -.75%
NASDAQ 2,051.80 -1.05%


Leading Sectors
Hospitals -.02%
Foods -.07%
Semis -.11%

Lagging Sectors
Gaming -2.34%
Internet -2.75%
Wireless -2.78%

Other
Crude Oil 46.85 -1.47%
Natural Gas 6.25 -.68%
Gold 422.30 -.24%
Base Metals 120.02 -.28%
U.S. Dollar 83.85 +.29%
10-Yr. T-note Yield 4.15% -.33%
VIX 13.83 +5.08%
Put/Call .89 +7.23%
NYSE Arms 1.34 -32.32%
ISE Sentiment 149.00 -8.59%

Market Movers
EBAY -18.55% after slightly missing 4Q estimates, lowering 05 guidance, multiple downgrades and announcing 2-for-1 split.
QCOM -7.55% after beating 1Q estimates and lowering 2Q outlook.
RMBS +16.41% after the company said it won a ruling that Hynix Semi infringed some Rambus patents.
MAY +8.7% after the Wall Street Journal reported Federated Dept. Stores is holding talks to buy it.
IGT -8.9% after disappointing 1Q results and multiple downgrades.
MACR +21.9% after beating 3Q estimates, raising 4Q guidance and multiple upgrades.
PGNX +12.4% after announcing positive top-line results from a phase 2 clinical trial of its investigational drug, methylnaltrexone for the management of post-operative bowel dysfunction and Legg Mason upgrade to Buy.
FFIV +10.05% after substantially beating 1Q estimates and raising 2Q guidance.
SPW +6.74% after selling its Kendro lab and life sciences business for $833.5 million to Thermo Electron.
KNX +6.96% after beating 4Q estimates and BB&T upgrade to Buy.
DOX +7.04% after beating 1Q estimates, raising 2Q guidance and Janney Montgomery upgrade to Buy.
AVCT +6.41% after meeting 4Q estimates.
BEBE -14.12% after missing 2Q estimates and lowering 3Q guidance.
CREAF -12.33% after missing 2Q estimates.

Economic Data
-Leading Indicators for December rose .2% versus estimates of a .2% increase and a .3% rise in November.
-Philadelphia Fed. for January fell to 13.2 versus estimates of 25.0 and a reading of 25.4 in December.

Recommendations
-Goldman Sachs: Reiterated Outperform on GCI, EBAY, MDT, COH, KRB and INTC. Reiterated Underperform on TRB, MAY, PRXL, BA and DJ. Rated STR Outperform. Downgraded NDC to Underperform.
-Citi SmithBarney: Reiterated Buy on EBAY, target $110. Reiterated Buy on FFIV, target $65. Reiterated Buy on EXTR, target $11. Reiterated Buy on INTC, target $26.50. Reiterated Buy on SWKS, target $11. Reiterated Buy on PRE, target $71. Reiterated Sell on MYG, target $13. Reiterated Buy on LRCX, target $38. Downgraded SAFC to Sell, target $44. Reiterated Sell on TRMK, target $26. Reiterated Buy on TER, target $17.50. Reiterated Buy on LLTC, target $44. Reiterated Buy on SLR, target $7. Reiterated Buy on APH, target $48. Reiterated Buy on FD, target $62. Reiterated Buy on BK, target $37. Reiterated Buy on DOX, target $34.
-CSFB: Raised BNI to Outperform, target $54. Cut UNP to Underperform, target $54. Raised WWY to Outperform, target $67. Raised URS to Outperform, target $36.
-Deutsche Bank: Raised FON to Buy, target $25.50. Raised TEO to Buy, target $12.20.
-UBS: Rated UAPH, target $13.
-Morgan Stanley: Raised HAS to Overweight, target $23.50.
-Bear Stearns: Raised HOTT to Outperform. Raised QLGC to Outperform, target $43-$47.
-Legg Mason: Raised PGNX to Buy, target $23.
-Thomas Weisel: Rated ERTS Outperform.

Mid-day News
U.S. stocks are lower mid-day on weakness in technology shares and worries over slowing economic growth. EarthLink plans to begin offering wireless high-speed Internet services in certain markets in the US in the second half of the year, and other companies have similar plans, the Wall Street Journal reported. Air America, the US liberal radio network thrown off the air in Los Angeles and Chicago last year after running out of money, plans to broadcast to Washington, Detroit and Cincinnati after getting fresh financing and new management, the Wall Street Journal reported. The Financial Accounting Standards Board, which sets the US’s accounting standards, may require companies to more accurately reflect the state of their pension plans, the NY Times reported. Apple Computer’s new Mac Mini personal computer, which will sell for $499 beginning Jan. 22, will be a more viable option for PC users seeking to switch brands, the Wall Street Journal reported. Bank of America signed a 15-year lease with Tishman Speyer Properties for 34,000 square feet of space at 50 Rockefeller Plaza, the NY Post reported. The Fed will probably keep raising its target interest rate at a “measured” pace because inflation remains “subdued,” Gary Stern, president of the Fed Bank of Minneapolis said. California is introducing a temporary tax amnesty to allow people to pay back taxes with interest for the years before 2003, without penalties or prosecution, the San Francisco Chronicle reported. Sony cut its full-year operating profit and sales targets as prices of digital products fell, Bloomberg said. Citigroup said fourth-quarter earnings rose 12% to a record as revenue from consumer and investment banking climbed, Bloomberg reported. UnitedHealth Group said fourth-quarter profit increased 46% as the company added members through acquisitions, Bloomberg said. S&P may soon upgrade Gap Inc.’s bonds from junk status, Bloomberg reported. Manufacturing in the Philadelphia area expanded at a slower pace this month, missing economists’ estimates, Bloomberg said. Crude oil is falling to a one-week low after an Energy Dept. report showed that US fuel stockpiles increased more than expected, Bloomberg reported. A forward-looking measure of the US economy rose for a second straight month in December, lifted by gains in stock prices and consumer confidence, Bloomberg said.

Bottom Line: The Portfolio is unchanged mid-day as gains in my oil service, auto parts and software shorts are offsetting losses in my homebuilding and computer service longs. I have not traded today and the Portfolio remains 25% net long. The tone of the market is poor once again as decliners swamp advancers, volume is good and all sectors are lower. Falling interest rates and energy prices are muting declines to an extent. Most tech stocks are underperforming, however semis are showing relative strength. This is a positive considering the decline in leader QCOM. Most measures of investor anxiety are rising today which is also a positive. I expect US stocks to trade mixed-to-higher into the close.

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