Mid-day Update

S&P 500-.4%
NASDAQ-1.5%

Leading/Lagging Sectors
Airlines+1.1%
Drugs+.8%
Defense+.6%
Networking-3.5%
Internet-2.5%
Homebuilders-2.2%

Market Movers
CIEN,CSCO down on profit-taking and CIEN guidance.
ASYT down on earnings report and 3 downgrades.
FLIR up on earnings surprise and raised guidance.
HET down on earnings disappointment...higher gaming taxes and development costs.
PSFT up as ORCL boosts offer price to $26...its final offer.
TOM up earnings report...lower store costs.
WEBX up on earnings report...raised guidance...gets 1 upgrade.

Other
Crude Oil 33.35-2.2%
Lumber 344.5+2.99%
VIX 17.71+2.13%

Mid-day News
ISM services index rose to a record in January and factory orders in December increased for the 3rd time in 4 months, suggesting the economy is picking up steam. The ISM number was 65.7, the highest since the surveys inception in 97. This was up from a prior reading of 58 and exceeded the 60 estimate. Factory orders +1.1% vs. -.9% last month and exceeding the estimate of .2%. This number is VERY important since services account for 85% of the US economy. Economists are now estimating GDP of 4.4% for the 1stQ. I am thinking north of 5%. The employment number this Fri. is key. Expectations are for the creation of 175,000 jobs. I think we will meet this number. Ed Yardeni, chief investment strategist at Prudential said on CNBC he thinks we are in the midst of the greatest sycronized global recovery we have ever see and that the Fed will raise rates at its next 3 meetings 25 basis points each. FDA changed the way drugmakers have to disclose risks. Instead of alot of fine print they will be required to highlight the most important risks and leave out smaller ones.

BOTTOM LINE: I have taken profits in a few positions today...1 Long and 2 shorts. I have also added 2 new short positions. This leaves me about 10% net short. I am thinking we will see a short-term bottom some time tomorrow. However, alot depends on the employment data Fri. If it meets or exceeds expectations then we probably rally...if not, we probably continue downward. I will be looking to cover some shorts at some point tomorrow.

Wednesday Watch

Earnings Announcements
Company/Estimate
ESST/.19
LIN/1.01
FLIR/.40
HET/.53
NEM/.31
OHP/1.07
NOC/1.10
PIXR/1.27
TDS/.47
CAKE/.30
UTEK/.10
TOM/.13

Economic Data
ISM Non-manufacturing estimated at 60 vs. 58 last month.
Factory Orders estimated at .2% vs. -1.4% last month

Market Movers
See After-Hours below
SINA exceeded earnings expectations....rebounding modestly after an 8% drop on SOHU release.
TRMB exceeded earnings expectations...announced 3-for-2 split and raised guidance.

Late-night News
Clark takes Oklahoma winning 30%.....Edwards 30%...Kerry 27%
Edwards wins South Carolina 45%...Kerry 30%
Kerry wins Delaware, Missouri, Arizona, North Dakota and New Mexico by a large margin.
Lieberman drops out.
Tradesports.com still projecting Bush/Kerry match-up with Bush having a 67% chance of being re-elected...down 3%.
Toyota, Nissan , Asian rivals take record US market share of 35.6%.
Asian markets are mixed....ranging from -1.5% to up 1.5%.
S&P 500 indicated -.4%
NASDAQ indicated -.71%

Tuesday Close

S&P 500+.07%
NASDAQ+.05%

Leading/Lagging Sectors
Homebuilders+1.58%
Drugs+.7%
Gaming+.68%
Airlines-2.93%
Disk Drives-2.78%
HMO's-1.99%

After-Hours Movers
ERES+5.0% Earnings exceeded estimates...raised guidance.
IVIL+15% Earnings exceeded estimates...raised guidance.
WEBX+7.3% Earnings exceeded estimates..raised guidance.
CIEN-13.6% lowers earnings guidance.
TRDO-9.3% Earnings didn't meet expectations...lowered guidance.
CSCO-4.2% Earnings exceeded expectations but didn't meet whisper numbers...guidance was conservative.

After-Hours News
Major Indices were little changed Tues. The bears had plenty of reasons to push stocks lower, yet stocks held firm. After the close, US banks reported an increase in demand for business loans for the first time in 4 years. The most important reasons for the increase were greater customer investment in plant and equipment and increased customer needs to finance accounts and inventories.

Bottom Line: Tech will likely come under pressure tomorrow on continued profit-taking. Cisco's quarter was good, but likely not good enough to justify its current valuation. CIEN will also result in a re-evaluation of the notion that all networking companies are benefiting from the current environment. As I stated earlier in the day, I want to see the market's reaction to the CSCO quarter before initiating new positions. As of right now it looks to be negative. I did not trade today and the portfolio finished down a bit. I am still market neutral and looking to trade tomorrow.

Mid-day Update

S&P 500+.05%
NASDAQ+21%

Leading/Lagging Sectors
Homebuilders+1.64%
Retail+.87%
Restaurants+.69%
Disk Drives-1.73%
HMO's-1.51%
Airlines-2.05%

Market Movers
SINA,SOHU,NTES,CHINA down on SOHU earnings guidance...instant messaging was weak
CHTR down on "Heard on the Street" column stating relationship with Paul Allen deteriorating..financial troubles
HUM down on earnings results and analyst's lowered estimates
TBL up on strong earnings report...Asian sales strong
AMZN weak on volume...at 200 day moving avg...can't find any reason...doesn't bode well for net stocks
SNDK down on comments by CFO at Thomas Weisel conference that flash prices will drop last half of yr
ACH,BYH,SNP up as Chinese cyclicals find technical support
INTC up on Bear Stearns comments about semi sector

Other Movers
Crude Oil-1.2%
Natural Gas+1.36%
US Dollar Index-.66%

Mid-Day News
US senate offices close on Ricin detection.
Pakistan's top nuclear scientist said President Musharraf knew he was helping N.Korea prepare facilities
to make weapons-grade uranium.
US budget doubles anti-terror funds to cities.
US equities quiet waiting for CSCO earnings after close...CSCO estimates are for $.17..whisper is $.20.

BOTTOM LINE: The Markets are surprisingly strong today given the late-day sell-off yesterday and overnight news. I haven't made any trades. My portfolio is basically flat on the day. Technicals are starting to weaken a bit. I will closely watch the final hour and the markets reaction to a strong CSCO report. I will then add a couple of new positions, but will not go net long or short more than 20% as I think we are still correcting.

Tuesday Watch

Earnings Announcements
Company/Estimate
ASYT/-.22
AVP/1.04
CSCO/.17
CECO/.47
EMR/.57
DIOD/.22
HCA/.60
SINA
TYC/.32
ZIXI/-.23

Economic Data
Auto Sales/Total Sales estimated at 16.8M vs. 18.0 last month

Market Movers
See After-Hours below
AFL up on earnings release...new premium sales in 4th $345M...best in company's history
PFE won FDA approval for a new drug combining Lipitor and Norvasc

Late-night News
Ricin, a poisonous substance, was found in the mailroom of the U.S. Senate building.
Asian bird flu death total hits 12.
North Korea agrees to nuclear talks on Feb. 25.
Janet Jackson admitted Super Bowl stunt was planned
Tradesports.com is projecting an 81% chance of Edwards winning South Carolina primary...Kerry 21%
Tradesports.com is projecting a 94% chance of Kerry winning Arizona...Edwards 3%
Tradesports.com is projecting a 50% chance of Clark winning Oklahoma...Kerry 49%...Edwards 5%
Tradesports.com is projecting a 97% chance of Kerry winning Missouri...Clark 2%
Asian markets are down 1-2% on avg.
S&P 500 indicated down .1%
NASDAQ indicated down .2%

Bottom Line: Tomorrow will most likely be negative on terror fears, Asian market weakness, bird flu, and today's late day sell-off. I may look to add a short or 2 depending on the how we open.

Monday Close

S&P 500+.37%
NASDAQ-.15%

Leading/Lagging Sectors
Telecom+2.14%
Broadcasting+1.78%
Biotech+1.53%
Airlines-1.88%
Semis-1.63%
Iron/Steel-1.43%

Market Movers
ACS down on Florida contract difficulties
ANDW up on strong earnings report
RDWR down on earnings report that just met expectations
NT,SUNW,CSCO up on anticipation of strong corp. spending

Commodity Movers
Crude Oil+5.6%
Natural Gas+3.02%
Gold unchanged.....rallied as stocks fell on bird flu and profit taking

End-of-Day News
The S&P 500 rose modestly today led by telecom and healthcare companies. The final hour saw a round of futures related selling. Semis also seemed to lead the market to the downside. PFE paced the gains in drug stocks as regulators approved its drug for lung disease. SBC says it will raise high-speed internet access by 11% to some customers, helping the telecom sector. Smith Barney said strength in the enterprise will continue to accelerate throughout 04. Volatility(VIX) is creeping back up to more healthy levels finishing the day at 17.11. Insider buying was reported at SNDK,CHK,FDX.

Bottom Line
The weak rally that occurred early in the day, due to a terrorism-free Super Bowl and strong economic numbers, gave way to concerns over the Asian bird flu as CNBC talked about it a good part of the day. The market still feels heavy to me and seems to be in a corrective phase. I made no new trades today as my longs greatly out-performed and my shorts under-performed. A very good day for relative performance. My portfolio is still market neutral and I am looking for more down-side near-term.

After-Hours
JCOM+5.3% up on strong earnings and guidance...raising 04 estimates significantly
TASR+11.2% up on strong earnings and guidance...sees 04 sales up 100%...also short squeeze
Goldman downgrades semi. equipment stocks after close-I view this as a short-sighted call
Goldman makes positive comments on MSFT-I agree
Morgan Stanley makes positive comments on ANDW-I agree