Thursday Close

Indices
S&P 500 1,209.25 +.19%
Dow 10,851.51 +.42%
NASDAQ 2,059.72 -.08%
Russell 2000 626.94 -.66%
DJ Wilshire 5000 11,892.11 +.07%
S&P Barra Growth 581.11 -.90%
S&P Barra Value 622.25 +.12%
Morgan Stanley Consumer 588.02 +.49%
Morgan Stanley Cyclical 772.81 -.11%
Morgan Stanley Technology 476.46 +.25%
Transports 3,819.09 -.55%
Utilities 356.60 +.74%
Put/Call .99 +4.21%
NYSE Arms .73 -19.78%
Volatility(VIX) 12.49 -1.65%
ISE Sentiment 130.00 -23.98%
US Dollar 81.59 -.05%
CRB 315.15 +.46%

Futures Spot Prices
Crude Oil 53.39 -.28%
Unleaded Gasoline 148.25 -.04%
Natural Gas 6.73 -.49%
Heating Oil 150.40 -.34%
Gold 443.00 -.09%
Base Metals 130.89 -.30%
Copper 149.20 -.27%
10-year US Treasury Yield 4.46% -1.25%

Leading Sectors
Broadcasting +1.55%
Semis +1.41%
Drugs +.74%

Lagging Sectors
Energy -1.85%
Iron/Steel -2.24%
Airlines -2.81%

After-hours Movers
KMRT +6.11% on UBS upgrade to Buy, target $160.
VC +6.23% after Ford Motor agreed to provide it some assistance while continuing to negotiate broader changes in their 2000 spinoff agreement.
S +3.64% on KMRT news.
TECD -4.07% after beating 4Q estimates and lowering 1Q guidance.
ERES -26.9% after cutting 1Q estimates.
JILL -16.9% after meeting 4Q estimates and lowering 1Q guidance.

Evening Review
Detailed Market Summary
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
Futures Recap
S&P 500 Gallery View
Timely Economic Charts
PM Market Call
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
- Goldman Sachs: Reiterated Outperform on ADP and ENH. Reiterated Underperform on DDS.
- UBS: Raised KMRT to Buy, target $160. Upgraded S to Buy, target $66.50. Raised QCOM to Buy.
- Business Week: Pier 1 Imports(PIR) shares may rise as much as 60% within the next 12 months as sales may increase on a new ad campaign, different items for sale and higher prices for some products.

After-hours News
US stocks finished mixed today as gains in consumer-related stocks were offset by losses in commodity shares. After the close, Muslim clerics in Spain issued what they described as the first fatwa, or religious decree, against al-Qaeda leader Osama bin Laden, the AP reported. Taiwan froze plans to expand transportation and economic links with China as the mainland’s National People’s Congress moves toward passage of an anti-secession law targeting the island, the Financial Times reported. Hewlett-Packard may name a new CEO as early as the end of the month, Business Week reported. Advanced Micro Devices is seeking to add to suppliers that include Chartered Semiconductor Manufacturing, the Commercial Times reported. The EPA tightened limits on air pollution from power plants in 28 eastern states, one day after legislation with similar cuts for the entire US stalled in the Senate, Bloomberg said. Bill Gates is the world’s richest person for the 11th consecutive year, even as his net worth fell slightly to $46.5 billion, according to Forbes magazine’s annual survey. Fed Chairman Greenspan said he sees no market crisis occurring as a result of the level of the US current account and budget deficits, Bloomberg reported. Intel said first-quarter sales will be at the high end of the company’s forecast and unexpectedly boosted its estimated profit margin as development costs drop, Bloomberg reported. The US Senate gave credit-card issuers long-sought relief from unpaid loans by approving legislation to force some consumers to pay off part of their debts in bankruptcy, Bloomberg said. Tenet Healthcare agreed to settle lawsuits over prices charged to patients without adequate health insurance for prescription drugs and services, Bloomberg reported. Time Warner might take its cable-tv unit public after an acquisition of Adelphia Communications assets, Business Week reported.

BOTTOM LINE: The Portfolio finished slightly lower today as losses in my Biotech, Software and Alternative Energy longs more than offset gains in my Computer and Semi longs. I did not trade in the afternoon, thus leaving the Portfolio 75% net long. The tone of the market deteriorated slightly into the afternoon as the advance/decline line finished lower, sector performance was mixed and volume was light. Commodity-related stocks underperformed throughout the day, while semiconductors outperformed ahead of Intel’s mid-quarter update. Tech is trading marginally higher after-hours on the report. Measures of investor anxiety were mixed into the close. Overall, today’s market action was a bit disappointing for the Bulls, considering the fall in long-term interest rates and energy prices. I expect to see tech lead to the upside tomorrow. A failure to do so would lead me to cut exposure to this sector.

Mid-day Report

Indices
S&P 500 1,210.93 +.32%
Dow 10,870.35 +.59%
NASDAQ 2,062.82 +.07%
Russell 2000 631.61 +.08%
DJ Wilshire 5000 11,912.96 +.23%
S&P Barra Growth 582.95 +.31%
S&P Barra Value 623.41 +.31%
Morgan Stanley Consumer 589.81 +.80%
Morgan Stanley Cyclical 774.34 +.09%
Morgan Stanley Technology 475.71 +.10%
Transports 3,865.35 -.10%
Utilities 356.38 +.68%
Put/Call 1.06 +11.58%
NYSE Arms .84 -9.89%
Volatility(VIX) 12.51 -1.50%
ISE Sentiment 126.00 -26.32%
US Dollar 81.54 -.11%
CRB 315.47 +.56%

Futures Spot Prices
Crude Oil 53.80 -1.77%
Unleaded Gasoline 149.90 -2.34%
Natural Gas 6.80 -1.02%
Heating Oil 151.10 -1.40%
Gold 443.40 +.11%
Base Metals 130.89 -.30%
Copper 149.60 -.50%
10-year US Treasury Yield 4.47% -.98%

Leading Sectors
Broadcasting +1.69%
Drugs +.88%
Utilities +.83%

Lagging Sectors
Airlines -1.88%
Iron/Steel -1.94%
Energy -2.0%

Market Movers
DISH -6.83% after reports that the company may have improperly booked transactions with suppliers and made suspect consulting payments to a friend of the Chairman.
NGPS +16.51% after beating 4Q estimates and giving positive guidance.
VLTR +9.61% on Thomas Weisel upgrade to Outperform.
GBX +11.6% after saying it received orders for almost 5,000 railcars valued at about $260 million.
HITK +13.2% after beating 3Q estimates.
HIBB +9.05% after beating 4Q estimates and raising 1Q outlook.
MW +4.75% after beating 4Q estimates and raising 1Q outlook.
ADRX +6.4% after beating 4Q estimates.
BXC -18.05% after reporting disappointing 4Q results.
MTEX -14.86% after reporting disappointing 4Q results.
MATK -12.81% after meeting 1Q estimates, giving disappointing guidance and First Albany downgrade to Neutral.
KWK -5.9% after missing 4Q estimates.
MTEX -14.91% after disappointing 4Q report.

Mid-day Overview
Market Internals
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon
Real-time Intraday Chart/Quote

Economic Data
- Initial Jobless Claims for last week rose to 327K versus estimates of 310K and 310K the prior week.
- Continuing Claims rose to 2703K versus estimates of 2662K and 2664K prior.
- Wholesale Inventories for January rose 1.1% versus estimates of a .6% increase and a .4% gain in December.

Recommendations
- Goldman Sachs: Reiterated Outperform on HEW, CVD, MSFT and COH. Reiterated Underperform on FGP.
- Smith Barney: Reiterated Buy on ALTR, target $25. Reiterated Sell on FR, target $26. Reiterated Buy on RA, target $35. Reiterated Buy on EGP, target $40. Reiterated Buy on PKY, target $54.25. Reiterated Sell on HIW, target $21. Reiterated Sell on JBX, target $34. Reiterated Buy on MCD, target $37.
- Merrill Lynch: Named DG to Focus 1 List.
- JP Morgan: Raised ALTR to Overweight.
- Deutsche Bank: Raised MOT to Buy, target $18. Raised CK to Buy, target $18.
- Thomas Weisel: Raised VLTR to Outperform.
- Banc of America: Raised AVY to Buy, target $67.
- CSFB: Raised GSF to Outperform, target $48.

Mid-day News
US stocks are mostly higher mid-day on optimism over falling energy prices and interest rates. PalmOne, Apple Computer and other US companies have taken a lead in the $125 billion global consumer electronics market, the Wall Street Journal reported. China’s imports of steel products fell 47% to 3.5 million metric tons in the first two months this year, the Beijing-based customs office said. Nokia Oyj may benefit from holding the rights to technology used in so-called 3G cellphones, as its competitors have to pay more for license rights, the Wall Street Journal said. One of four possible bidders for Toys “R” Us, an investment group including Cerberus Capital Management LP, values the entire toy and baby-products company at about $5 billion, the Wall Street Journal reported. Google has put Web sites at a disadvantage by adding links using its Google Toolbar for the Internet Explorer browser, Walter Mossberg wrote in today’s Wall Street Journal. Kmart Holding plans put about 400 locations, or more than a quarter of its stores, under the Sears name after it completes the $11 billion acquisition of Sears, Roebuck & Co., the NY Post reported. “Robots,” the animated film from News Corp.’s Twentieth Century Fox that debuts tomorrow, is the latest computer-generated effort as movie studios seek to meet consumers’ growing demand for animated films, the Wall Street Journal reported. Samsung Electronics now is more profitable than Sony Corp. and has taken Sony’s position as a premium electronics brand, the NY Times reported. Hewlett-Packard’s printer business is being hurt by price undercutting from competitors such as Dell and Seiko Epson, the Wall Street Journal reported. Verizon Communications will spend $200 million this year to build a fiber-optic network in New Jersey, which will help it compete with cable companies in offering high-speed Internet, voice service and television programming, the Star-Ledger reported. Motorola delayed plans to release a phone that can play music bought from Apple Computer’s iTunes Web site, the Chicago Tribune said. Biogen Idec officials may have known that an “adverse event” occurred with a patient taking the company’s Tysabri MS drug before Feb. 18, the NY Times reported. Iraq’s main Shiite party and a Kurdish bloc have reached an agreement to form a coalition government following Iraq’s Jan. 30 election, the AP said. The US House Resources committee is sending to trade groups a draft bill that would lift Congressional bans on new offshore oil and gas drilling, the San Francisco Chronicle reported. A CBS News producer sued the network for defamation and age discrimination after she was demoted for errors in Dan Rather’s report about President Bush’s National Guard service, the NY Times reported. Citigroup removed Daniel Dantas as manager of a $651 million fund that has stakes in some of Brazil’s biggest phone companies, after years of disputes over control of its investments, Bloomberg reported. Microsoft Chairman Bill Gates said he wants to make more acquisitions and he’s pushing his most senior managers to help find the right candidates, Bloomberg reported. US wholesale inventories rose 1.1% in January, almost twice as much as expected, led by increased supplies of metals and cars, Bloomberg said. Microsoft agreed to buy Lotus Notes creator Ray Ozzie’s software company, Groove Networks, and to hire Ozzie as a chief technical officer, Bloomberg reported. Bill Gross, manager of the world’s biggest bond fund, said his firm bought US Treasury notes after a two-day tumble pushed yields up to levels he considered attractive, Bloomberg said. Crude oil in NY is falling for the first time in seven sessions amid strengthening US inventories and lower shipments to China, Bloomberg reported. The number of Americans filing first-time claims for unemployment insurance increased to a level that still reflects labor market strength, Bloomberg said.

BOTTOM LINE: The Portfolio is slightly lower mid-day on losses in my Software, Alternative Energy and Biotech longs. I exited a few longs from various sectors this morning as they hit stop-losses and added a few new energy-related and tech longs, thus leaving the Portfolio’s market exposure 75% net long. One of my new longs is SMH and I am using a $33.70 stop on this position. The tone of the market is modestly negative as the advance/decline line is slightly lower, sector performance is mixed and volume is decent. Measures of investor anxiety are mixed. However, the AAII % Bulls rose 25.7% this week to 49.66%, which is a negative. Consumer-related stocks are outperforming on declines in energy and interest rates. Today’s overall market action is modestly negative, considering the declines in energy and interest rates. I expect US shares to trade mixed-to-higher from current levels into the close as short-covering and more optimism over lower energy prices/interest rates more than offsets continued profit-taking in commodity-related stocks.

Thursday Watch

Late-Night News
Asian indices are lower as exporters in the region decline on worries over rising US interest rates. China's passenger car production and sales fell in the first two months of this year as automakers cut capacity to clear stockpiles, the Shanghai Morning Post said. Former President Bill Clinton is backing Superfund Asset Management, an Austrian company, that is seeking to encourage US retail investors to buy hedge fund-type products, the Financial Times reported, citing company founder Christian Baha. NYSE members want the not-for-profit organization to move more quickly toward becoming a for-profit company in preparation for a possible alliance with London Stock Exchange Plc, the London-based Times said. America West Holdings, owner of the eighth-largest US airline, needs to increase revenue to cut its losses as "there isn't anything else we can do on costs that we didn't do a long time ago," the Financial Times said. China's export growth gathered pace in the first two months, resulting in a trade surplus for the period, as companies such as Motorola shipped more mobile phones and other electronics to the US, Europe and Japan, Bloomberg reported. Shares of LG.Philips LCD Co. and AU Optronics Corp. may end a four-month rally amid concern the makers of flat screens for televisions and computers will be forced to continue cutting prices, Bloomberg said. The dollar dropped in Asia after Japan's Prime Minister Koizumi said his country "in general" needs to consider diversifying the investment of it foreign reserves, Bloomberg reported. US Treasuries pared losses after Japan's Ministry of Finance said it has no plans to alter the holdings, Bloomberg said.

Late Recommendations
- Goldman Sachs: Reiterated Outperform on GLK and Underperform on AMCC.

Night Trading
Asian Indices are -.75% to -.25% on average.
S&P 500 indicated -.11%.
NASDAQ 100 indicated -.16%.

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
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/Estimate
ARO/.65
ANN/-.07
BGP/1.61
CLE/.58
PLCE/.86
DDS/.73
KKD/-.03
NSM/.16
PETC/.55
ZQK/.22
TSA/.93
TECD/.73
VTS/.33

Splits
None of note

Economic Data
- Initial Jobless Claims for last week are estimated to remain at 310K versus 310K the prior week.
- Continuing Claims are estimated to fall to 2658K versus 2672K prior.
- Wholesale Inventories for January are estimated to rise .6% versus a .4% increase in December.

BOTTOM LINE: I expect US equities to open lower in the morning on continuing worries over interest rates and losses in Asia. However, stocks may rise later in the afternoon on lower energy prices and short-covering ahead of Intel's mid-quarter update. The Portfolio is 75% net long heading into tomorrow.

Wednesday Close

Indices
S&P 500 1,207.01 -1.02%
Dow 10,805.62 -.98%
NASDAQ 2,061.29 -.59%
Russell 2000 631.08 -1.08%
DJ Wilshire 5000 11,884.12 -1.03%
S&P Barra Growth 581.11 -.90%
S&P Barra Value 621.48 -1.13%
Morgan Stanley Consumer 585.15 -.86%
Morgan Stanley Cyclical 773.63 -1.0%
Morgan Stanley Technology 475.25 -.23%
Transports 3,840.09 -.83%
Utilities 353.97 -1.89%
Put/Call .95 +9.20%
NYSE Arms .91 -29.46%
Volatility(VIX) 12.70 +2.42%
ISE Sentiment 171.00 -2.84%
US Dollar 81.63 -.43%
CRB 313.70 +.34%

Futures Spot Prices
Crude Oil 54.27 -.91%
Unleaded Gasoline 151.75 -1.0%
Natural Gas 6.84 -.58%
Heating Oil 151.90 -.88%
Gold 441.10 -.41%
Base Metals 131.29 +.03%
Copper 149.40 -.63%
10-year US Treasury Yield 4.52% +2.93%

Leading Sectors
Networking +1.20%
Telecom -.15%
Semis -.25%

Lagging Sectors
Homebuilders -2.21%
Oil Service -2.78%
Energy -2.80%

After-hours Movers
ADRX +4.59% after beating 4Q estimates.
GYMB -4.3% after saying restatement cut 04 results.
MATK -12.3% on disappointing 1Q results.
EAT -6.95% after cutting 3Q and 4Q guidance.
ENCY -5.8% after saying it will off $100 million in convertible notes.

Evening Review
Detailed Market Summary
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
Futures Recap
S&P 500 Gallery View
Timely Economic Charts
PM Market Call
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
- Goldman Sachs: Reiterated Outperform on MO, GD and XOM. Reiterated Underperform on RAI. Lowered Gaming Manufactures to Cautious from Neutral, favorite is GTK and least favorite is MGAM.
- Banc of America: Downgraded PHCC to Sell, target $21. Upgraded WOOF to Buy, target $24. Downgraded HSIC to Sell, target $33.50.
- UBS: Raised STR to Buy, target $75.

After-hours News
US stocks finished lower today on heightened worries over rising long-term interest rates. After the close, OPEC should more than double its spare capacity of oil to provide a buffer against any problems, the Financial Times reported, citing the IMF’s World Economic Outlook. Morgan Stanley is being urged to sell its Discover credit-card division, the Financial Times reported. The NY-based Gambino organized crime family was infiltrated by an undercover FBI agent as part of a two-year investigation that yielded indictments against 32 members and associates, including it top four leaders, Bloomberg reported. President Bush said concerns about higher oil and pas prices are hurting the economy and urged Congress to pass energy legislation that has faltered for almost four years, Bloomberg said. US Treasury Notes fell today, pushing the 10-year note’s yield to its highest since July, strong US growth and higher energy prices fanned concerns inflation will accelerated, Bloomberg reported. Emerging-market bonds tumbled, led by Brazil and South Africa, on concern higher yields in the US will reduce the attractiveness of developing nations’ debt, Bloomberg reported. Manufacturers in parts of the US found it easier to pass on rising material and labor costs to customers in January and February, the Fed said in its Beige Book report, Bloomberg reported. MBIA said it received a subpoena from federal prosecutors in NY about reinsurance agreements in 1998 that prompted the company yesterday to restate seven years of profit, Bloomberg reported.

BOTTOM LINE: The Portfolio finished unchanged today as gains in my Biotech, Semi and Chinese ADR longs offset losses in my Computer, Software and Healthcare longs. I exited a few longs from various sectors in the afternoon as they hit stop-losses and added to my AAPL long, thus leaving the Portfolio 75% net long. The tone of the market deteriorated into the afternoon as the advance/decline line finished at its daily lows, almost every sector declined and volume was decent. Technology stocks outperformed substantially while commodity-related and interest-rate sensitive stocks underperformed throughout the day. Measures of investor anxiety were mostly higher into the close. Overall, today’s market action was negative, however most losses were contained to sectors with recent outsized gains. At this point, I still anticipate a resumption of the current rally when interest rates and oil stabilize.

Mid-day Report

Indices
S&P 500 1,211.82 -.62%
Dow 10,836.80 -.70%
NASDAQ 2,065.74 -.38%
Russell 2000 633.84 -.65%
DJ Wilshire 5000 11,934.01 -.62%
S&P Barra Growth 583.61 -.48%
S&P Barra Value 623.63 -.79%
Morgan Stanley Consumer 585.02 -.88%
Morgan Stanley Cyclical 775.81 -.72%
Morgan Stanley Technology 475.91 -.09%
Transports 3,852.23 -.51%
Utilities 355.93 -1.34%
Put/Call .98 +12.64%
NYSE Arms .68 -47.29%
Volatility(VIX) 12.55 +1.21%
ISE Sentiment 178.00 +1.14%
US Dollar 81.51 -.57%
CRB 313.34 +.22%

Futures Spot Prices
Crude Oil 55.45 +1.58%
Unleaded Gasoline 155.30 +1.15%
Natural Gas 6.88 +.48%
Heating Oil 154.85 +1.62%
Gold 442.90 +.41%
Base Metals 131.29 +.03%
Copper 150.30 +.23%
10-year US Treasury Yield 4.46% +1.64%

Leading Sectors
Networking +1.17%
Energy +.37%
Semis +.14%

Lagging Sectors
Homebuilders -1.48%
Restaurants -1.79%
Airlines -2.21%

Market Movers
HLTH +13.6% after meeting 4Q estimates and raising 05 guidance.
GLK +18.65% after Crompton Corp.(CK) agreed to buy it for about $1.55 billion in stock, creating the third-biggest US publicly traded specialty chemicals maker. CK +8.69%.
ISE +53.44% on strong demand for IPO.
RETK +22.12% after Oracle said it plans to make a $504 million takeover offer for it, sparking a bidding war with larger competitor SAP AG.
CMTL +10.67% after beating 2Q estimates and announcing 3-for-2 split.
NPSP -13.36% after announcing that an order for additional Space Based Augmentation System equipment was received from Raytheon Company in support of the Indian GAGAN program.
NDN -10.85% after CFO resigned after 3 months and Johnson Rice downgrade to Underweight.
HAR -9.31% on Fulcrum downgrade to Neutral.
OSTK -5.93% after Piper Jaffray lowered estimates due to higher advertising costs.
CMC -5.4% on continued weakness in metal stocks.
LVS -4.69% after missing 4Q estimates.
NEW -4.89% on rise in long-term interest rates.

Mid-day Overview
Market Internals
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon
Real-time Intraday Chart/Quote

Economic Data
None of note

Recommendations
- Goldman Sachs: Reiterated Outperform on MDT, LVS, CZN, HEW, TPX, STR and BSX. Reiterated Underperform on EW and THC.
- Smith Barney: Upgraded XLNX to Buy, target $38. Upgraded GTK to Buy, target $29. Upgraded MEE to Buy, target $54. Reiterated Buy on ACI, target $54. Reiterated Buy on CNX, target $57. Reiterated Buy on MSFT, target $31. Reiterated Sell on FCEL, target $7. Reiterated Buy on NPSP, target $20. Reiterated Buy on THC, target $16. Reiterated Buy on RSH, target $36. Reiterated Sell on LRY, target $35.
- JP Morgan: Raised URI to Overweight.
- CIBC: Rated RRI Sector Outperform.
- Bear Stearns: Raised NTE to Outperform, target $35. Raised COF to Outperform, target $95. Downgraded SID to Underperform.
- Prudential: Rated GR Overweight, target $43.
- Oppenheimer: Raised FD to Buy.

Mid-day News
US stocks are lower mid-day on continuing worries over higher interest rates and energy prices. Nokia Oyj expects the mobile music business to be worth “billions of euros” once demand for the services picks up, Taloussanomat reported. Delta Air Lines will stop selling food on many of its flights next month, giving customers a choice of free snacks instead, and it will remove pillows this month, the NY Times reported. Rising prices of commodities such as oil and copper reflect a strong global economy and may have a minimal effect on inflation, the NY Times reported. Plan International, Christian Children’s Fund and Save the Children US are among US charities opening their books for the first time to let outsiders verify that they’re spending donations as promised, the Wall Street Journal reported. Investing in plants that turn corn into ethanol has become popular in the US Midwest, the Wall Street Journal reported. More US hotels are allowing pets and adding perks for them in an effort to boost occupancy rates, the NY Times reported. Europeans are buying second homes in the US because their purchasing power has been boosted by a decline in the value of the dollar, the Wall Street Journal reported. China’s coal exports rose 34% to 6.74 million metric tons in January from a year earlier, the Tex Report said. Toys “R” Us has received an unexpected bid for the whole company, including its Babies “R” Us unit, the NY Post reported. French defense minister Alliot-Marie will seek support for European plans to lift an arms embargo against China when she visits the US this week, the NY Times reported. Microsoft Chairman Bill Gates said the US economy is “very strong” and customers are increasingly willing to spend money on new technology projects and investments, Bloomberg reported. Anthony Bolton, whose Fidelity Special Situations Fund has risen almost 90% since stock markets peaked in 2000, said Chinese stocks will probably produce “very good money” for investors in the next three years, Bloomberg said. German Chancellor Schroeder’s government may lower its forecast for 2005 economic growth for the fourth time in a year as domestic demand fails to accelerate, Bloomberg reported. The US economy will probably expand at a faster rate in the first quarter than previously estimated because of higher company spending on plant and equipment, a Bloomberg survey of economists found. IBM said the planned sale of its personal computer unit to China’s Lenovo Group was cleared by a US government committee, Bloomberg said. Qualcomm’s Paul Jacobs, who takes over as CEO from his father in July, said he plans to make acquisitions to add features such as games and video on mobile telephones, Bloomberg said. Social Security is a “Ponzi scheme” that uses current workers’ money to pay retirees, and President Bush’s plan to add individual accounts would fix that problem, Nobel Prize-winning economist Milton Friedman said, Bloomberg reported. Two more friends of former ImClone Systems CEO Waksal were accused of insider trading, the same allegation that led to Martha Stewart’s conviction of obstruction of justice charges, Bloomberg said. Crude oil is rising to a 4-month high, after a report showing a US inventory increase failed to damp concern about supply shortfalls this summer, Bloomberg said. US 10-year T-notes are falling, pushing yields to the highest since August, as oil and gasoline prices near record highs fanned concern inflation will accelerated, Bloomberg reported. Dan Rather’s departure tonight as the anchor of the “CBS Evening News” provides Viacom with the opportunity to remake a broadcast that has the lowest rating in 24 years and garners 13% less for advertisements than competitor NBC, Bloomberg said.

BOTTOM LINE: The Portfolio is slightly higher mid-day as gains in my Chinese ADR, Semi and Biotech longs are more than offsetting losses in software and healthcare longs. I have not traded today, thus leaving the Portfolio’s market exposure at 100% net long. The tone of the market is modestly negative as the advance/decline line is lower, sector performance is mostly negative and volume is light. Measures of investor anxiety are mixed. Technology stocks are outperforming and consumer-related stocks are underperforming as interest rates and gas rise. Today’s overall market action is disappointing for the Bulls, however losses could be worse considering the jump in rates and energy. I continue to expect NSM, ALTRA and INTC will echo the recent positive comments made by XLNX which should further spur tech shares. I expect US stocks to trade mixed from current levels into the close as optimism over US economic growth, short covering and bargain hunting offset worries over higher energy prices and interest rates.