Wednesday Close

Indices
S&P 500 1,190.80 +.56%
Dow 10,673.79 +.59%
NASDAQ 2,031.25 +.05%
Russell 2000 620.54 +.42%
DJ Wilshire 5000 11,718.47 +.54%
S&P Barra Growth 572.45 +.48%
S&P Barra Value 614.04 +.64%
Morgan Stanley Consumer 582.51 +.65%
Morgan Stanley Cyclical 759.02 +.82%
Morgan Stanley Technology 462.90 -.18%
Transports 3,611.74 +2.02%
Utilities 345.38 +.72%
Put/Call .86 +13.16%
NYSE Arms .75 -48.98%
Volatility(VIX) 12.39 -5.71%
ISE Sentiment 149.00 +4.93%
US Dollar 82.68 +.33%
CRB 299.16 +.50%

Futures Spot Prices
Crude Oil 51.32 +.29%
Unleaded Gasoline 131.45 +.24%
Natural Gas 6.30 -.10%
Heating Oil 148.74 +.29%
Gold 435.90 -.05%
Base Metals 128.61 -.13%
Copper 149.05 -.30%
10-year US Treasury Yield 4.26% -.55%

Leading Sectors
Transports +2.02%
HMOs +1.76%
Oil Service +1.63%

Lagging Sectors
Semis -.42%
Gaming -.54%
Disk Drives -1.42%

After-hours Movers
APPB +6.88% after better-than-expected same-store-sales.
MATK +4.17% after saying it will replace Banknorth Group(BNK) in the S&P MidCap 400 after the close of trading on March 1.
FWHT -19.03% after missing 1Q revenue estimates and lowering 05 outlook.
SGMS -6.3% after beating 4Q estimates and saying it is working to eliminate a "material weakness" in its accounting.

Detailed Market Summary
Market Wrap CNBC Video(bottom right)
Futures Recap
NASDAQ 100 After-hours Indicator
Real-time/After-hours Stock Quote

Afternoon Recommendations
- Goldman Sachs: Reiterated Underperform on KO. Reiterated Outperform on RAI.
- Lehman Brothers: Reiterated Overweight on CPS, target $46.
- Oppenheimer: Reiterated Buy on RDWR, target $40. Reiterated Buy on OSI, target $52.
- Morgan Stanley: Reiterated Overweight on DDR, target $46. Reiterated Overweight on IPCR, target $44.
- Raymond James: Downgraded MHS and ACDO to Underperform.
- UBS: Reiterated Buy on HYSL, target $60.
- Prudential: Reiterated Overweight on OMC, target $97. Reiterated Overweight on RBK, target $50.
- Banc of America: Upgraded JBL to Buy, target $30.

After-hours News
US stocks finished modestly higher today on optimism over merger activity and strength in energy-related stocks. After the close, Martha Stewart is determined to return as CEO of Martha Stewart Living Omnimedia despite a potential ban by the SEC, Newsweek reported. Hedge funds hold more capital to use for acquisitions and more lucrative incentive structures than private equity groups, the Financial Times reported. “Unless private equity groups recognize the weapons at the disposal of hedge funds they risk becoming dinosaurs,” said David Rubenstein, Carlyle Group co-founder. Playmates Holdings Ltd., which owns the toy rights for the Teenage Mutant Ninja Turtles, is seeking acquisitions in the US, Europe and Japan, the South China Morning Post reported. AT&T may be liable for as much as $500 million in fees related to its prepaid calling cards after US regulators rejected the company’s request for an exemption, Bloomberg reported. Northrop Grumman or General Dynamics may be shut out of production work on the US Navy’s new destroyer program, worth at least $13.5 billion, under a plan submitted to the Pentagon, Bloomberg said. Colombian Foreign Minister Carolina Barco said her country plans to start easing its dependence on US aid in about 2 years as the economy grows fast enough to fund the fight against drug-funded terrorism on its own, Bloomberg reported. Chiron’s John Lambert, president of the company’s vaccine unit, resigned after contamination at a plant in England caused a shortage of influenza shots in the US during the 04-05 season, Bloomberg said.

BOTTOM LINE: The Portfolio finished slightly lower today as losses in my computer hardware and steel shorts more than offset gains in my alternative energy longs. I covered a few shorts in the afternoon, thus leaving the Portfolio 25% net long. The tone of the market weakened modestly into the afternoon as the advance/decline line finished near its daily lows, volume declined and sector performance was mostly positive. Technology stocks underperformed throughout the day and most measures of investor anxiety fell. Today’s action appeared to be the result of a technical bounce from yesterday’s sharp sell-off and I continue to expect weakness to resurface over the coming weeks.

Mid-day Report

Indices
S&P 500 1,188.73 +.39%
Dow 10,658.86 +.44%
NASDAQ 2,028.80 -.07%
Russell 2000 621.87 +.64%
DJ Wilshire 5000 11,703.52 +.41%
S&P Barra Growth 571.41 +.30%
S&P Barra Value 613.03 +.47%
Morgan Stanley Consumer 581.60 +.49%
Morgan Stanley Cyclical 756.83 +.53%
Morgan Stanley Technology 460.17 -.76%
Transports 3,619.43 +2.24%
Utilities 346.16 +.94%
Put/Call .84 +10.53%
NYSE Arms 1.02 -30.61%
Volatility(VIX) 12.67 -3.58%
ISE Sentiment 145.00 +2.11%
US Dollar 82.78 +.45%
CRB 298.98 +.44%

Futures Spot Prices
Crude Oil 51.45 +.06%
Unleaded Gasoline 131.30 +.31%
Natural Gas 6.25 +2.49%
Heating Oil 147.20 +2.21%
Gold 436.00 +.05%
Base Metals 128.61 -.13%
Copper 149.40 +.34%
10-year US Treasury Yield 4.27% -.14%

Leading Sectors
Oil Service +1.47%
Energy +1.36%
Airlines +1.31%

Lagging Sectors
Networking -.63%
Semis -1.15%
Disk Drives -1.36%

Market Movers
MAS -8.81% after beating 4Q estimates and lowering 1Q/05 outlook.
ACDO +38.5% after Medco Health Solutions agreed to buy it for about $2.2 billion to expand into faster-growing specialty drugs.
USFC +11.51% after the Wall Street Journal reported it may be acquired by Yellow Roadway.
OPTN +11.74% after beating 4Q estimates, announcing 3-for-2 split and raising 05 estimates.
IAAI +23.69% after agreeing to be purchased by closely held investment firm Kelso & Co. for about $385M.
YELL +5.33% on USFC news.
PFGC +9.08% after Chiquita Brands agreed to buy its Fresh Express for $855M in cash.
CPS +6.26% on Smith Barney recommendation to Buy on weakness.
LCAV +10.17% after meeting 4Q estimates and raising 05 guidance.
APSG -21.5% after missing 1Q estimates substantially.
COGT -14.2% after beating 4Q estimates and Needham downgrade to Hold.
POSS -9.57% after missing 2Q estimates, lowering 3Q guidance and 05 outlook.
NANO -9.89% after missing 4Q estimates.
LAMR -5.23% after meeting 4Q estimates and lowering 1Q outlook.
ADM -7.34% after saying it won’t be able to increase prices for high fructose corn syrup this year and Merrill downgrade to Neutral.
SNDA -5.6% after SINA introduced a poison pill plan to try to rebuff its takeover attempt.

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

Economic Data
- Consumer Price Index for January rose .1% versus estimates of a .2% increase and unchanged in December.
- CPI Ex Food & Energy for January rose .2% versus estimates of a .2% increase and a .2% rise in December.

Recommendations
- Goldman Sachs: Reiterated Outperform on KSS, JTX, GILD.
- Smith Barney: Upgraded MCCC to Buy, target $7.75. Said to Buy CPS on weakness. Reiterated Buy on BLS, target $32. Reiterated Buy on MRO, target $47. Reiterated Buy on DPZ, target $21. Reiterated Buy on HD, target $48. Reiterated Buy on TYC, target $40. Reiterated Buy on FD, target $70. Reiterated Buy on EEFT, target $33. Reiterated Buy on CVH, target $73.50.
- Morgan Stanley: Raised FD to Overweight, target $65. Raised ONXX to Overweight, target $44.
- UBS: Raised SKYW to Buy, target $20.25. Raised PG to Buy, target $65.
- JP Morgan: Raised CCU to Overweight.
- Thomas Weisel: Raised ARRS to Outperform.
- CIBC: Raised PGNX to Sector Outperform, target $30.
- Banc of America: Upgraded JBL to Buy, target $30.
- Legg Mason: Raised CLDN to Buy, target $25. Raised FWRD to Buy, target $47.

Mid-day News
US stocks are mixed mid-day as gains in energy-related stocks are being offset by losses in the technology sector. OPEC may boost output to lower prices that are trading close to a four-month high, Agence France-Presse reported, citing the group’s president. Macau territory, the only place in mainland China where casinos are allowed, is likely to outstrip Las Vegas as the world’s biggest gambling center, and global investors are looking for ways to profit from that, the Wall Street Journal said. Toymakers such as Mattel and Playmates Holdings are struggling to remain relevant as children gravitate from toys at a younger age, the NY Times reported. Procter & Gamble has been unable to make its Pur water purifying tablets a profitable venture by selling it to poor countries with unclean drinking supplies because of cost, the Wall Street Journal reported. Time Warner plans to sell DVDs at discounted prices in China, to combat the sale of illegally made home videos there, the Wall Street Journal reported. Canadian cattle imports may resume slowly when the US removes a ban on March 7, because rules are so complicated, the Wall Street Journal said. Time Warner’s cable tv unit’s success with its Internet-based telephone service shows that cable companies are able to compete for residential phone customers, the Wall Street Journal said. US amputations of legs, feet and toes have increased as the number of cases of diabetes rises, the Wall Street Journal reported. Fannie Mae will say today that its regulator extended the deadline for the company to increase its capital, the Wall Street Journal said. New Jersey is second only to New York and well above the national average in the amount of cancer-causing diesel soot emitted from buses, trucks and other vehicles, the Star-Ledger reported. CVS Corp. will become a sponsor for the Boston Red Sox in a five-year agreement that will give it a sign at the base of Fenway Park’s famous Green Monster, the Boston Herald reported. California Assemblyman Leno is proposing a law banning the sale of Taser International’s stun guns to civilians and requiring police officers to log all use of Tasers on suspects, the San Francisco Chronicle reported. Harvard University researchers plan to test whether the illegal psychedelic party drug ecstasy can help terminally ill cancer patients, the Boston Globe reported. German Chancellor Schroeder said differences of opinion with the US over the liberation of Iraq are a thing of the past and that Germany is ready to play a larger role in building democracy in the country, Bloomberg reported. Martha Stewart Living Omnimedia, in its last earnings report before the company’s founder leaves prison, posted a fourth-quarter loss because sales at its flagship magazine and tv unit plummeted, Bloomberg said. Fannie Mae said its federal regulator has found additional policies that may violate accounting rules, Bloomberg reported. Prices paid by US consumers rose .1% in January, less than forecast and suggesting companies haven’t been able to pass on their higher raw materials costs, Bloomberg said. Southern California residents face a seventh day of downpours in what may be the region’s wettest season in history, Bloomberg reported. Apple Computer cut the prices of its iPod mini by 20% and introduced new models to capitalize on demand that has made iPods the top-selling digital music players in the US, Bloomberg said. The Fed “still has a ways to go” in raising interest rates as it seeks to thwart inflation, Fed Bank of Atlanta President Guynn said. The FOMC considers interest rates too low to ensure stable prices and future rate decisions will depend on incoming data, according to minutes of their Feb. 1-2 meeting, Bloomberg reported.

BOTTOM LINE: The Portfolio is slightly lower mid-day as losses in my computer hardware and steel shorts are more than offsetting gains in my alternative energy longs. I have not traded today, thus leaving the Portfolio market neutral. The tone of the market is mixed as the advance/decline line is slightly higher, sector performance is mixed and volume is light. As well, measures of investor anxiety are mostly lower. Technology stocks are underperforming, while interest-rate sensitive shares and energy-related stocks are outperforming. Today’s muted gains appear to be just a temporary technical bounce after yesterday’s steep losses. I expect US stocks to trade modestly lower into the close on continuing worries over higher interest rates, increasing commodity prices and slowing global growth.

Wednesday Watch

Late-Night News
Asian indices are mostly lower as concerns over slowing growth and rising energy prices are pressuring the region's exporters. China will announce a bailout for Industrial & Commercial Bank of China, the nation's biggest lender, in the next few days, Hong-based Sing Tao Daily reported. Viacom, which is looking for ways to revive its Paramount Pictures movie studio, can turn to DVD sales of television and movie hits because former studio managers held back many titles, the Wall Street Journal reported. Dyson Appliances Ltd., the UK maker of bagless vacuum cleaners, sells the most floor cleaners in the US, beating competition from Maytag's Hoover, the Guardian said. Walt Disney's Miramax Films will release a number of previously shelved or delayed movies before co-Chairman Harvey Weinstein and Bob Weinstein leave, the NY Times said. A computer virus is being distributed by e-mails that falsely claims to be from the FBI, Bloomberg reported. South Korea's central bank, which holds the world's fourth-largest foreign currency reserves, said it has no plan to sell dollars from those holdings and no plan to change the current portfolio of currencies in its reserves, Bloomberg reported. The yen dropped from near a three-week high against the dollar and weakened versus the euro after a government report showed Japan's exports grew at the slowest pace in more than a year, Bloomberg said. The US government called on North Korea to return to talks about scrapping its nuclear weapons program, saying it wasn't setting conditions for the discussions, Bloomberg said. Manhattan apartment prices in Uptown neighborhoods such as Harlem more than quadrupled over the last decade, outpacing the tripling of prices in the costlier Midtown and Downtown areas, Bloomberg reported. Toshiba Corp. will raise capital spending by as much as $210 million to increase output of displays used in mobile phones and car navigation systems, Bloomberg reported. Visa Intl., MasterCard Inc. and other credit-card companies have lowered the fees they charge high-volume merchants to woo business from purchases of less than $5, the Washington Post reported. McDonald's won't shift its emphasis on hamburgers and french fries in favor of the salads and fruit that it's introduced in recent years, the Wall Street Journal said. MCI Inc., which has agreed to be bought by Verizon Communications for $6.75 billion, is under pressure from hedge funds to look at any revised offer from Qwest Communications, the Wall Street Journal said.

Late Recommendations
- Goldman Sachs: Reiterated Outperform on TYC, MDT, GILD, CL and PXD. Reiterated Underperform on DE, CNH and AG.

Night Trading
Asian Indices are -1.0% to -.25% on average.
S&P 500 indicated +.03%.
NASDAQ 100 indicated -.17%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Analyst Actions
Macro Calls
CNBC Guest Schedule

Earnings of Note
Company/Estimate
CVC/-.34
ESV/.22
LAMR/.03
LIZ/.74
LOW/.59
MSO/-.16
MAS/.54
NAV/.22
PDG/.11
SGMS/.22
TJX/.39
TOL/1.15
WMB/.10

Splits
CHS 2-for-1

Economic Data
- Consumer Price Index for January is estimated to have risen .2% versus no change in December.
- CPI Ex Food & Energy for January is estimated to have risen .2% versus a .2% increase in December.
- Minutes of Feb. 2 FOMC Meeting

BOTTOM LINE: I expect US equities to open mixed and weaken later in the day on a continuation of today's sell-off related to higher commodity prices, rising interest rates and slowing global growth. The Portfolio is market neutral heading into tomorrow.

Tuesday Close

Indices
S&P 500 1,184.16 -1.45%
Dow 10,611.20 -1.61%
NASDAQ 2,030.32 -1.37%
Russell 2000 617.93 -1.94%
DJ Wilshire 5000 11,655.73 -1.49%
S&P Barra Growth 569.70 -1.49%
S&P Barra Value 610.15 -1.42%
Morgan Stanley Consumer 578.74 -1.94%
Morgan Stanley Cyclical 752.82 -1.87%
Morgan Stanley Technology 463.73 -.81%
Transports 3,540.15 -2.20%
Utilities 342.91 -2.68%
Put/Call .76 -9.52%
NYSE Arms 1.47 +145.00%
Volatility(VIX) 13.14 +17.53%
ISE Sentiment 142.00 -14.46%
US Dollar 82.41 -1.33%
CRB 297.66 +2.41%

Futures Spot Prices
Crude Oil 51.15 -.53%
Unleaded Gasoline 130.80 -.07%
Natural Gas 6.07 -.46%
Heating Oil 143.20 -.57%
Gold 437.00 +.28%
Base Metals 128.78 +1.58%
Copper 148.90 unch.
10-year US Treasury Yield 4.28% +.55%

Leading Sectors
Drugs -.14%
Networking -.22%
Semis -.45%

Lagging Sectors
Utilities -2.68%
Homebuilding -2.79%
HMOs -2.95%

After-hours Movers
NVEC +6.68% after announcing that it has been awarded a one-year contract for approximately $400,000 by the Defense Advanced Research Projects Agency to develop ultra-sensitive spin-dependent tunneling sensor systems.
MTLG +6.67% after beating 4Q estimates.
NOVL -3.43% on profit-taking after beating 1Q estimates.
APSG -20.06% after missing 1Q estimates substantially.

Detailed Market Summary
Market Wrap CNBC Video(bottom right)
Futures Recap
NASDAQ 100 After-hours Indicator
Real-time/After-hours Stock Quote

Afternoon Recommendations
- Goldman Sachs: Reiterated Underperform on INFA, AG, CVH and THC. Reiterated Outperform on HD and RIO.

After-hours News
US stocks finished sharply lower today on continuing worries over rising commodity prices, slowing global growth and higher interest rates. After the close, Vivendi Universal’s mobile phone unit, Universal Mobile, expects the value of content sold via cell phones to jump as much as threefold to $15.9 billion over the next five years, the Financial Times reported. Sony Corp. will fully withdraw from the PDA business by ending production for the Japanese market as early as July, the Nihon Keizai reported. Taiwan Semiconductor Manufacturing plans to more-than triple its cash dividend payment this year in a move that signals Asian companies are more willing to share cash with shareholders, the Wall Street Journal reported. Sina Corp., which operates China’s No.1 Internet search engine, has introduced a shareholder rights plan that may help rebuff a takeover attempt by Shanda Interactive Entertainment, the Financial Times reported. Beijing’s city government bought Microsoft software after canceling a $3.5 million order for the company’s Office product and Windows operating system last year, the Financial Times reported. China’s passenger car prices may fall by as much as 8% this year from a year earlier because of oversupply, Xinhua News Agency reported. California Insurance Commissioner Garamendi said he is “actively investigating” title insurers Fidelity National Financial and LandAmerica Financial as part of a probe into hidden payments with developers, Bloomberg reported. United Technologies’ Pratt & Whitney unit agreed to buy Boeing’s Rocketdyne rocket engine unit, which makes the reusable main rockets used by the space shuttle, for $700 million in cash to bolster its sales to NASA, Bloomberg said. BHP Billiton and Rio Tinto may have their profit estimates raised by analysts should the two companies obtain the same iron ore price increase as rival Cia. Vale do Rio Doce, Bloomberg reported. Crude oil traded above $51/bbl. in NY, close to its highest price in almost four months, as colder-than-normal weather in the US and Europe raised demand, Bloomberg said.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my homebuilding, steel and medical information systems longs. I added a few new consumer-oriented shorts in the afternoon, thus leaving the Portfolio market neutral. One of my new shorts is ERTS and I am using a $66 stop-loss on this position. The tone of the market weakened further into the afternoon as the advance/decline line finished at its daily lows, volume accelerated and every major sector fell. The US dollar declined and the CRB made new highs, further stoking inflation fears. Interest-rate/energy sensitive sectors and small-cap stocks significantly underperformed throughout the day. On the positive side, most measures of investor anxiety rose and technology stocks outperformed. I expect US stocks to test their January lows over the coming weeks.

Mid-day Report

Indices
S&P 500 1,192.10 -.79%
Dow 10,685.39 -.92%
NASDAQ 2,045.25 -.65%
Russell 2000 621.85 -1.32%
DJ Wilshire 5000 11,731.44 -.86%
S&P Barra Growth 573.52 -.82%
S&P Barra Value 613.86 -.82%
Morgan Stanley Consumer 582.32 -1.34%
Morgan Stanley Cyclical 760.33 -.89%
Morgan Stanley Technology 467.18 -.07%
Transports 3,568.49 -1.42%
Utilities 346.32 -1.71%
Put/Call .74 -11.90%
NYSE Arms 1.09 +81.67%
Volatility(VIX) 12.55 +12.25%
ISE Sentiment 142.00 -14.46%
US Dollar 82.58 -1.13%
CRB 296.81 +2.11%

Futures Spot Prices
Crude Oil 50.55 +4.55%
Unleaded Gasoline 131.00 +3.69%
Natural Gas 6.07 +2.74%
Heating Oil 143.30 +6.20%
Gold 435.80 +1.73%
Base Metals 128.78 +1.58%
Copper 148.60 -.10%
10-year US Treasury Yield 4.27% +.32%

Leading Sectors
Semis +.87%
Networking +.55%
Drugs +.28%

Lagging Sectors
Utilities -1.89%
Airlines -1.96%
HMOs -2.67%

Market Movers
ELAB +9.1% after Novartis AG agreed to buy German generic-drug market Hexal AG and its US affiliate Eon Labs for about $8.3 billion in cash.
SINA +10.47% after Shanda Interactive said it acquired a 20% stake in the company.
BOOM +16.54% on strong 4Q results.
ACI +5.76% on Morgan Stanley upgrade to Overweight.
KMG +5.55% after saying investor Carl Icahn plans to buy as much as $1 billion of the company’s stock.
HELE -15.0% after lowering 4Q outlook.
PER -13.78% after saying Harvard Pilgrim ended its outsourcing pact with the company and KeyBanc downgrade to Hold.
EASI -12.3% after meeting 1Q estimates and lowering 05 guidance.
AYI -7.89% after lowering second half outlook and announcing 1,100 job cuts.
OSTK -5.35% on no news.
CPS -6.92% after saying identity theft at the company may involve as many as 500,000 victims, the AP said.

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

Economic Data
- Consumer Confidence for February rose to 104.0 versus estimates of 103.0 and an upwardly revised reading of 105.1 in January.

Recommendations
- Goldman Sachs: Reiterated Outperform on MRVL, TU, HD, BC, BSX, BBBY and PFE. Reiterated Underperform on AG, CVC and WIN.
- Smith Barney: Upgraded Semis/Equipment to Overweight and Tech Hardware/Equipment to Marketweight. Added CSCO and INTC to Recommended List and removed BG and G. Said to Buy WY, target $75. Reiterated Buy on FNM, target $81. Reiterated Buy on FRE, target $84. Reiterated Buy on RRI, target $16.50. Reiterated Sell on SUP, target $20. Reiterated Buy on WMT, target $65.
- JP Morgan: Raised MTG to Overweight. Raised PMI to Overweight. Cut DVSA to Underweight. Cut NAFC to Underweight.
- Morgan Stanley: Downgraded CNX to Underweight. Upgraded ACI to Overweight, target $52.
- CSFB: Raised BMET to Outperform, target $50.
- Deutsche Bank: Raised JCP to Buy, target $55.
- Thomas Weisel: Rated CTRX Outperform, target $11. Rated MCHX Outperform.

Mid-day News
US stocks are lower mid-day on worries over higher commodity prices and slowing global growth. Shares of Costco have risen more than 30% in the past year, but some investors and analysts say sharper competition may now slow the momentum, the Wall Street Journal reported. The recommendation by a FDA panel that Merck’s Vioxx painkiller should be allowed back on the market raises the question whether it was sensible to withdraw the drug in the first place, the Wall Street Journal reported. Iraqi soldiers successfully struggled to recover the bodies of three US soldiers from the icy waters of the Isaki Canal where they drowned, and the Iraqis’ heroic efforts are helping to change negative perceptions US soldiers had of their allies, the Washington Post reported. A new surgery recently performed at a Chicago hospital may be used to treat atrial fibrillation, a condition that affects 2.2 million Americans, the Wall Street Journal reported. Patient identity theft is an increasing problem in US hospitals, in part because of the use of Social Security numbers as identification, the Wall Street Journal reported. GM plans to begin building the Saturn Sky roadster at its Wilmington, Delaware, factory in a bid to win customers back to the brand, the Philadelphia Inquirer reported. OPEC doesn’t see a need to cut crude output for the time being, Agence France-Presse reported. The US Dept. of Homeland Security is considering measures that would force companies to safeguard themselves from terrorist attacks by using the insurance industry as a watchdog, the Boston Globe reported. GM reduced prices as much as $2,000 on sport utility vehicles such as the Chevrolet TrailBlazer, USA Today reported. Egypt named Mohammed Asim Ibrahim as ambassador to Israel, ending a four-year diplomatic hiatus and signaling an improvement in ties, Agence France-Presse said. The Fed must keep raising interest rates as the economy grows to keep inflation low and stable, St. Louis Fed Bank President Poole told USA Today. Home Depot said fourth-quarter earnings gained 9.5% as demand from contractors and holiday sales increased, Bloomberg said. Omnicom Group, the world’s largest owner of ad agencies, said fourth-quarter net income rose 12% after it won new accounts from clients including Capital One Financial and PepsiCo, Bloomberg reported. All 26 members of NATO are making some contribution, whether financial or with personnel, to the training of Iraqi security forces and police, Bloomberg said. Hovnanian Enterprises and DR Horton are among junk-rated homebuilders taking advantage of improving credit ratings to sell bonds and cut borrowing costs, Bloomberg reported. US consumer confidence fell in February from a six-month high, however Americans were more upbeat about their present situation, Bloomberg reported. Merck’s legal liability may be reduced by almost 75% after US government advisers found Vioxx’s benefit outweighed the risks of heart damage, according to CSFB analyst Catherine Arnold. The US dollar is falling the most in more than four months against the yen and dropped versus the euro, Korean won and at least 30 other currencies after the Bank of Korea said it plans to increase its non-dollar reserves, Bloomberg reported. Crude oil is surging above $50/bbl., the highest since Nov. 30, as colder-than-normal weather in the US and Europe raised demand fro furnace fuels, Bloomberg said.

BOTTOM LINE: The Portfolio is slightly lower mid-day as losses in my homebuilding and medical information systems longs are more than offsetting gains in my gaming longs. I exited a number of longs this morning as they hit stop-losses, thus bringing the Portfolio’s market exposure to 25% net long. The tone of the market is poor as decliners are swamping decliners, most sectors are lower and volume is higher. Technology stocks are outperforming, while interest-rate sensitive shares, small-caps and energy-sensitive stocks are underperforming. Finally, the CRB is making a new high today which is a negative. Measures of investor anxiety are mostly higher. I expect US stocks to trade modestly lower into the close from current levles on worries over higher interest rates, increasing commodity prices and slowing global growth.