Mid-day Report

Indices
S&P 500 1,187.92 +.56%
Dow 10,547.21 +.55%
NASDAQ 2,067.83 +.26%
Russell 2000 626.55 +.41%
DJ Wilshire 5000 11,693.44 +.57%
S&P Barra Growth 570.74 +.57%
S&P Barra Value 612.96 +.57%
Morgan Stanley Consumer 584.66 +.22%
Morgan Stanley Cyclical 759.05 +.68%
Morgan Stanley Technology 475.24 +.31%
Transports 3,607.73 +.26%
Utilities 344.78 +.38%
Put/Call .86 +26.47%
NYSE Arms .85 -3.41%
Volatility(VIX) 12.41 -3.20%
ISE Sentiment 173.00 +11.61%
US Dollar 83.56 -.01%
CRB 283.91 -.30%

Futures Spot Prices
Crude Oil 47.73 -.98%
Unleaded Gasoline 133.25 -1.12%
Natural Gas 6.34 +.38%
Heating Oil 133.10 -1.27%
Gold 422.40 -.40%
Base Metals 121.52 -1.09%
Copper 141.50 -1.39%
10-year US Treasury Yield 4.12% -.09%

Leading Sectors
HMOs +2.24%
Homebuilders +1.52%
Gaming +1.37%

Lagging Sectors
Restaurants -.35%
Broadcasting -.46%
Internet -.46%

Market Movers
ARBA -28.7% after missing 1Q estimates.
AXP +5.66% after saying it plans to spin off its 12,000-broker financial-advisory unit and Merrill Lynch upgrade to Buy.
CTMI +17.11% after substantially beating 1Q estimates, raising 2Q/05 guidance and Piper Jaffray upgrade to Outperform.
AGI +15.64% after missing 2Q estimates and making positive comments on rest of 05.
ZMH +8.62% after beating 4Q estimates and raising 05 guidance.
SRX +8.95% after beating 2Q estimates, raising 3Q/05 guidance and multiple upgrades.
VLO +7.66% after beating 4Q estimates substantially and raising 05 guidance.
JNC +10.8% after a Morningstar analyst said it may benefit from the sale of a 79% stake by St. Paul Travelers.
ASD +6.54% after beating 4Q estimates and raising 05 guidance.
SIE +5.24% after beating 4Q estimates and widening 05 guidance.
ISSX -9.93% after beating 4Q estimates and widening 1Q/05 guidance.
CME -10.43% after missing 4Q estimates and saying it is considering acquisitions.
MAN -9.74% after meeting 4Q estimates and lowering 1Q guidance.
RCL -5.34% after meeting 4Q estimates and lowering 1Q outlook.
WMS -9.86% after missing 2Q estimates and raising 3Q/05 guidance.
ATRS -7.44% on profit-taking after beating 4Q estimates.
VLTR -10.13% on profit-taking after beating 4Q estimates.

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

Economic Data
-Construction Spending for December rose 1.1% versus estimates of a .5% increase and an upwardly revised .3% gain in November.
-ISM Manufacturing for January fell to 56.4 versus estimates of 57.0 and a downwardly revised reading of 57.3 in December.
-ISM Prices Paid for January fell to 69.0 versus estimates of 71.5 and a reading of 72.0 in December.

Recommendations
-Goldman Sachs: Reiterated Outperform on MERQ, DIS, AVP, IR, TYC and BSX. Reiterated Underweight on Semi Equipment stocks.
-Citi SmithBarney: Reiterated Sell on XOM, target $47.50. Reiterated Sell on ONB, target $17. Reiterated Buy on KBH, target $141. Reiterated Sell on AFL, target $35. Reiterated Buy on WYE, target $45.
-Banc of America: Upgraded CNP to Buy, target $13. Upgraded BHE to Buy.
-UBS: Raised MCK to Buy, target $41.
-CIBC: Raised WYE to Sector Outperform, target $45. Raised WIND to Sector Outperform, target $16.
-Thomas Weisel: Raised FON to Outperform.
-Bear Stearns: Raised XOM to Outperform, target $60. Raised HHS to Outperform, target $30.
-Prudential: Raised N to Overweight, target $38.
-Merrill Lynch: Raised ARO to Buy, target $34.
-Raymond James: Rated CNF Strong Buy, target $57.

Mid-day News
US stocks are modestly higher mid-day on lower energy prices, more optimism and declining long-term interest rates. Medicare has started a pilot program to pay some physicians bonuses to curtail costs, the Wall Street Journal reported. United Technologies is close to an agreement to buy Boeing’s Rocketdyne rocket-engine unit, the Wall Street Journal reported. Sun Microsystems is expanding and modifying programs to sell computing services and software on a utility-style basis, the Wall Street Journal reported. Merrill Lynch will buy a $30 million minority stake in a Beijing real-estate project, marking the securities firm’s first investment in Chinese property, the Wall Street Journal reported. Hewlett-Packard says it’s developed a technology that could help to replace the transistor, the smallest building block of the computer, the Wall Street Journal reported. Home Depot will work with Mark Burnett, who created reality tv shows such as “Survivor” and “The Apprentice,” to develop programs to help with its branding image, the Wall Street Journal reported. Google has started giving out an award potentially valued at millions of dollars to employees who work on outstanding projects, the NY Times reported. Iraqi interim President Ghazi al-Yawar today said the withdrawal of US-led troops is being discussed, and that the country’s security problems won’t escalate into a civil war, Bloomberg reported. US construction spending rose 1.1% in December, more than expected, to $1.032 trillion at an annual rate, as residential, office and highway building increased, Bloomberg said. The growth rate of US manufacturing slowed for a second month in January, the ISM report showed. Ford Motor, Toyota Motor and Honda Motor’s US car and truck sales fell in January as buyers backed off after December’s industry rate was the highest in three years, Bloomberg reported. Shareholders of Adolph Coors approved a $3.4 billion merger with Canada’s Molson as the two family-controlled companies try to keep pace with larger rivals, Bloomberg reported.

BOTTOM LINE: The Portfolio is slightly lower mid-day on losses in my internet and semiconductor longs. I exited a few technology longs this morning as they hit stop-losses, thus bringing the Portfolio to 100% net long. The tone of the market is modestly positive as the advance/decline line is mildly higher, most sectors are gaining and volume is better. However, measures of investor anxiety are mostly lower and some market leaders are weak. Energy prices will likely fall further tomorrow on the government inventory reports. I expect US stocks to rise modestly into the close on more optimism, short-covering and bargain-hunting ahead of the Fed rate decision, State of the Union and earnings reports.