Thursday Watch

Earnings Announcements
Company/Estimate
AES/-.02
Dox/.24
CELL/.34
EDS/.11
JNY/.32
LVLT/-.32
MXIM/.27
THQI/.77

Economic Data
Non-farm productivity estimated at 2.5% vs. 9.4% last Q.
Initial jobless claims estimated at 340K vs. 342K last week.
Continuing claims estimated at 3114K vs. 3131K last week.

After-Hours News
Progress made in containing Asian bird flu in China and Thailand.
Israeli police will question Sharon today in bribe investigation.
Toyota, which probably overtook Ford as the world's second-largest car-maker, said third-quarter profit rose 60% as it sold more Tundra pickup trucks and Sienna minivans in the US.
The continuing tightness is some components is causing CSCO to increase component stocking and inventory....suppliers are IDTI(23% of sales),AVNX(18%),PWER(16%),MERX(15%),PMCS(13%),TXCC(11%),BRCM(9%),JBL(24%),SLR(8%). This was one of the main problems with their quarter.
Asian markets are quiet...ranging from -.5% to +.5%.
S&P 500 indicated -.06%.
NASDAQ incdicated +.07%.

BOTTOM LINE: The recent rotation from all cyclicals and mainly tech, into consumer stocks is a result of Fed tightening fears, temporary slowdown in GDP, US dollar stabilization,anemic job growth and the strengthening of Kerry with anti-business rhetoric. Like I have said before, I don't think the Fed will tighten until employment strengthens considerably. I do think this will happen and most likely around 2nd/3rd quarter. Historically, cyclicals do well for another 6 months after the first tightening. I believe GDP is re-accelerating and will come in above 5% for the first quarter. The US dollar will likely move in a trading range for awhile. Our strengthening economy and improving trade deficit should counter budget deficit fears. I feel that most of Kerry's anti-business rhetoric is a result of fact that the other democratic candidates are pushing him into this stance. I expect him to win the nomination and tone down the anti-business rhetoric against President Bush. As mentioned earlier in the day, I am 10% net short and will look to cover a few of these tomorrow in anticipation of a good jobs report on Fri.

Wednesday Close

S&P 500 1,126.52-.84%
NASDAQ 2,014.14-2.52%

Leading/Lagging Sectors
Drugs+.7%
Fashion+.23%
Restaurants+.16%
Networking-5.2%
Internet-3.76%
Semis-2.99%

After-Hours Movers
OPTV+9.29% up on pact with Matsushita.
AEOS+8.9% up on better than expected 4Q earnings.
ESST+7.49% up on better than expected 4Q and raised 1Q guidance.
UNM-10.31% down on disappointing earnings due to increased claims reserves.
MDT-4.3% down on earnings report...profit-taking.

After-hours News
US bans Asian bird imports to try and prevent flu from spreading here. China plans to slow investment growth in steel, aluminum and cement industries to curb future inflation.

BOTTOM LINE: Market will likely be up modestly tomorrow. Probably a quiet day in anticipation of Fri. employment numbers. Initial jobless claims and productivity reports could provide sparks, but not likely. My portfolio was essentially flat today with the major indices down. I am about 10% net short and will be looking to cover a few of these at some point tomorrow.

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.