Mid-day Report

Indices
S&P 500 1,172.82 -.11%
Dow 10,448.78 -.48%
NASDAQ 2,042.89 -.16%
Russell 2000 617.43 +.12%
DJ Wilshire 5000 11,533.60 -.09%
S&P Barra Growth 563.87 -.17%
S&P Barra Value 604.37 -.12%
Morgan Stanley Consumer 581.58 -.18%
Morgan Stanley Cyclical 745.87 -.33%
Morgan Stanley Technology 468.22 +.15%
Transports 3,536.99 -.01%
Utilities 338.30 +.27%
Put/Call .83 +3.75%
NYSE Arms .91 -20.18%
Volatility(VIX) 13.20 -1.79%
ISE Sentiment 205.00 +1.49%
US Dollar 83.43 +.16%
CRB 286.13 -.57%

Futures Spot Prices
Crude Oil 49.05 +.55%
Unleaded Gasoline 135.60 -.24%
Natural Gas 6.43 +.74%
Heating Oil 140.00 -.24%
Gold 426.40 -.14%
Base Metals 121.07 +.02%
Copper 142.60 -.66%
10-year US Treasury Yield 4.21% +.37%

Leading Sectors
HMOs +.91%
Defense +.88%
Hospitals +.46%

Lagging Sectors
Software -.81%
Boxmakers -.84%
Telecom -1.24%

Market Movers
VRSN +12.81% on profit-taking after beating 4Q estimates, missing whisper and Citi SmithBarney downgrade to Hold.
TZOO -9.0% on continued profit-taking.
BSTE -5.0% after beating 4Q estimates and Wachovia downgrade to Market Perform.
LSTR -7.95% after beating 4Q estimates and lowering 1Q outlook.
SWIR -36.0% after missing 4Q estimates, lowering 1Q outlook and multiple downgrades.
ORCT +38.9% after beating 4Q estimates and raising 05 guidance substantially.
OXPS +21.5% on strong demand for IPO.
GCOR +22.97% after Danisco A/S, whose products are used in half the world’s ice cream, agreed to buy Eastman Chemical’s 42% stake in it for $419 million.
HRS +14.6% after meeting 2Q estimates and raising 05 guidance.
AFFX +12.99% after beating 4Q estimates and lowering 1Q guidance.
GRU +11.74% after the Wall Street Journal reported it has developed an Internet search service that directly answers questions instead of providing a list of Web sites.
WBSN +7.2% after beating 4Q estimates and raising 1Q guidance.
GMR +9.98% after saying it will pay a dividend based on most of its cash flow starting in the second quarter of this year and Morgan Stanley upgrade to Overweight.
DRIV +9.18% after beating 4Q estimates and raising 1Q/05 guidance.
CL +5.21% after beating 4Q estimates and JP Morgan upgrade to Overweight.
DLX +7.97% after beating 4Q estimates, raising 1Q guidance and boosting dividend.
CVD +8.48% after beating 4Q estimates and reiterating 05 guidance.
DRCT -32.0% after cutting 4Q outlook and multiple downgrades.
CCMP -8.84% after missing 1Q estimates.
PHTN -11.85% after missing 1Q estimates and lowering 2Q guidance substantially.
NAVR -11.38% on profit-taking after beating 3Q estimates.

Market Internals
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
-Durable Goods Orders for December rose .6% versus estimates of a .7% increase and a 1.8% gain in November.
-Durable Goods Less Transportation for December rose 2.1% versus estimates of a 1.3% rise and a .9% fall in November.
-Initial Jobless Claims for last week rose to 325K versus estimates of 332K and 318K the prior week.
-Continuing Claims for last week were 2840K versus estimates of 2683K and 2698K prior.

Recommendations
-Goldman Sachs: Reiterated Outperform on X, UPS, NUE, CAT, BC, DTV, SBC, CVD, CL and AMGN. Reiterated Underperform on T, ABY, ANTO, APU, FSS, KMG, AMCC and LSI.
-C: Raised C to Outperform, target $55.
-JP Morgan: Raised CL to Overweight.
-UBS: Raised GLW to Buy, target $14.
-Citi SmithBarney: Downgraded EAT to Sell, target $36.
-CSFB: Raised ABY to Outperform, target $8.
-Merrill Lynch: Rated KOMG Buy, target $22. Cut SWIR to Sell.
-CIBC: Raised EBAY to Sector Outperform, target $105.

Mid-day News
US stocks are modestly lower mid-day on rising concerns ahead of this weekend’s election in Iraq. China’s state assets regulator said it will make an announcement on the telecom industry tomorrow, amid speculation that the agency is considering breaking up China United Telecom, the nation’s second-biggest mobile-phone company, Bloomberg reported. Government agencies and local governments around the world are using the availability of Linux-based open-source software to force Microsoft to cut its prices, the Wall Street Journal reported. Comcast and major television networks including CBS, ABC, NBC and Fox remain unable to reach an agreement over video-on-demand for some of the most popular television shows, the Wall Street Journal reported. The Palestinian Authority banned its citizens from carrying weapons in the area it controls, the AP reported. The City of Port Gibson, Mississippi urged Entergy Corp. to build a nuclear reactor nearby, in contrast to some other municipalities that are trying to shut down their neighboring nuclear plants, the NY Times reported. Federal Reserve Governor Gramlich, a liberal Democrat who headed a Social Security advisory commission during the Clinton administration, says the US retirement system should be fixed now, before the need to do so becomes urgent, the Wall Street Journal reported. Computer Associates International CEO-elect Swainson expects the software industry to further consolidate after the combination of Oracle and PeopleSoft, CNBC reported. OAO Yukos Oil won’t export crude in February because it can’t pay export duties after its accounts were frozen, Bloomberg reported. US durable goods orders rose in December, helping produce the biggest annual increase in a decade for makers of appliances, autos and other long-lasting items, Bloomberg reported. Israel agreed “in principle” to withdraw from West Bank cities and give Palestinians policing authority over those areas, Reuters reported.

Bottom Line: The Portfolio is slightly lower mid-day on losses in my internet and homebuilding longs. I have not traded today, thus the Portfolio remains 100% net long. The tone of the market is not that bad today considering losses in the major indices. A number of sectors are higher, small-caps and tech are mostly unchanged and the advance/decline line is mildly negative. It is also a positive that oil is unable to penetrate the 50$/bbl. level ahead of the possibility of extreme violence in Iraq, further OPEC production cuts and continuing problems at OAO Yukos. As well, the AAII% Bulls fell 21.48% this week to 26.43%. This is the lowest level since the market began an exceptional run higher in February of 2003. I will look to add market exposure tomorrow on any further weakness related to rising apprehension ahead of the weekend. I expect US stocks to rise modestly from current levels into the close on short-covering, stable energy prices and optimism over earnings.