Mid-day Update

S&P 500 1,131.87 +.50%
NASDAQ 2,008.83 +.73%

Leading Sectors
Insurance +1.92%
Semis +1.38%
Broadcasting +1.25%

Lagging Sectors
Iron/Steel -.88%
Retail -.92%
Oil Service -1.59%

Other
Crude Oil 35.21 -1.57%
Natural Gas 5.92 -.30%
Gold 429.00 +.16%
Base Metals 115.07 +1.47%
U.S. Dollar 87.28 -.38%
10-Yr. Long-Bond Yield 3.87% +.94%
VIX 17.03 +1.73%
Put/Call .62 -51.94%
NYSE Arms .72 -41.94%

Market Movers
CADA +26.9% on positive comments about X-charge payment processing applications.
LSCP +22.2% after announcing higher reimbursement from the government for their prostate treatment.
PHTN +9.7% after multiple upgrades.
NDC -13.5% after saying it will delay 3Q results on accounting review.
MANU -16.9% after disappointing 4Q and lowering 1Q guidance, multiple downgrades.
SUPG -29.0% after disappointing Dacogen drug-study results.

Economic Data
Producer Price Index for February +.1% vs. expectations of a .3% rise.
PPI Ex Food & Energy for February +.1%, meeting expectations.
Initial Jobless Claims last week were 342K vs. expectations of 340K.
Continuing Claims were 3063K vs. expectations of 3008K.
Construction Spending for February was -.1% vs. expectations of unch.
ISM Manufacturing for March was 62.5 vs. expectations of 59.5.
ISM Prices Paid for March was 86.0 vs. 82.0 forecast.

Recommendations
UTSI raised to Buy at Deutsche Bank, target $33. WMAR rated Outperform at Thomas Weisel. IACI raised to Buy at Legg Mason, $41 target. DDS cut to sell at Merrill Lynch. Merrill Lynch downgraded many other retailers to Neutral on concern that rising rates will dampen consumer demand. Lehman raised AV price target to $18. LIZ and JNY cut to Underweight at Prudential. Goldman Sachs reiterated Outperform on ATYT, SVU, MRVL, DDR, GCI, WEN, VZ, SBC and BIIB. GS upgraded KRI to Outperform. GS reiterated Underperform on HUM. GS believes newspaper help-wanted ad revenues are poised for a significant rebound in 04-05. GS reiterated Attractive view on Oil Service sector. Goldman says cable companies will most directly and profoundly utilize VoIP, happening now and impact is broad. Favorite VoIP equipment vendors are NT, SONS, CSCO, AV and NT. GS reiterated Underperform on HRB and PNRA. Citi Smith Barney says March came in stronger-than-expected for datacom equipment, thinks 2Q will be exceptional. Citi's favorites are CSCO, FDRY, EXTR, FFIV and RDWR. Citi reiterated 1H on IGT. Citi thinks WFMI, OATS and COST benefited from California grocer strike. Citi reiterated 1H on BBY, target $64. TheStreet.com has positive article on YHOO.

Mid-day News
U.S. stocks are modestly higher mid-day on strength in insurance and technology shares. American International Group(AIG), Pfizer(PFE) and Verizon(VZ) will be added to the Dow Jones Industrial Average on April 8, taking the place of AT&T(T), Eastman Kokak(EK) and Intl. Paper(IP). JC Penney is close to completing the sale of its Eckerd drugstore chain to CVS Corp. and Jean Coutu Group, the Wall Street Journal reported. A training manual by the terrorist group al-Jama'ah al-Islamiyyah discovered in Indonesia outlines plans to take over the world, CNN reported. Silver rose above $8 an ounce in London, the highest in more than 16 years. The ISM manufacturing index rose more-than-expected last month as production increased and more factories added workers than at any time since the 80's. "The breadth of the expansion as well as its speed is breathtaking," said Stephen Stanley, chief economist at RBS Greenwich Capital. The first quarter ISM employment index average of 62.5 was the highest since 1983.

BOTTOM LINE: The Portfolio is having a very good day today as several longs are up significantly and my shorts are down. I have not traded as of yet, leaving market exposure at 75% net long. It is good to see tech outperforming again. The bond market has moved down in anticipation of a strong employment report, thus cushioning the downside on a blow-out number. The NASDAQ is hovering above the psychologically important 2000 level. I may leave market exposure at 75% if this level can hold into the close. The writing is on the wall. The employment situation is improving. Whether it is this month or sometime in the near future, a strong jobs report is inevitable. The bond market's reaction will determine a lot as to the strength of the equity market for 04. It will be interesting to see where the mainstream media turns their negative focus next. I expect it will be inflation.

Quarterly Scoreboard

Indices
S&P 500 1,126.21 +1.28%
Dow 10,357.70 -.92%
NASDAQ 1,994.22 -.46%
Russell 2000 590.31 +5.99%
Wilshire 5000 11,039.42 +2.22%
Volatility(VIX) 16.74 -8.57%
AAII Bullish % 31.48 -51.95%
US Dollar 87.80 +1.15%
CRB 282.50 +12.10%

Futures Spot Prices
Gold 426.50 +1.89%
Crude Oil 35.74 +14.92%
Natural Gas 5.92 +15.68%
Base Metals 113.40 +12.22%
10-year US Treasury Yield 3.85% -9.41%
Average 30-year Mortgage Rate 5.40% -7.06%

Leading Sectors
Gaming +21.90%
Broadband +20.16%
Wireless +16.93%

Lagging Sectors
Semis -4.13%
Drugs -4.47%
Airlines -8.55%

*% Gain or loss for the 1st quarter

Thursday Watch

Earnings Announcements
Company/Estimate
DLP/.24
PIR/.54
SCHN/.47

Splits
None of note.

Economic Data
Producer Price Index for February estimated +.3% vs. +.6% in January.
PPI Ex Food & Energy for February estimated +.1% vs. +.3% in January.
Initial Jobless Claims for last week estimated at 340K vs. 339K the prior week.
Continuing Claims estimated at 3008K vs. 3004K prior.
Construction Spending for February estimated unch. vs. -.3% in January.
ISM Manufacturing for March estimated at 59.5 vs. 61.4 in February.
ISM Prices Paid for March estimated at 82.0 vs. 81.5 in February.
Total Vehicle Sales for March estimated at 16.7M vs. 16.4M in February.
Domestic Vehicle Sales for March estimated at 13.4M vs. 13.2M in February.

Recommendations
Goldman Sachs reiterated Underperform on HUM. GS reiterated Outperform on PPL.

Late-Night News
Asian stocks are mixed as strength in Australian shares is offset by modest weakness in Hong Kong and Japan. Eliot Spitzer, NY's attorney general, asked state lawmakers to limit the amount auto dealers may mark up interest rates on consumer car loans, the WSJ reported. Sun Mirco's(SUNW) version of the Linux operating system is now available on personal computers sold on the Wal-Mart Web site, the AP reported. Sony sued Kodak over digital camera patents, Nikkei said. The Bank of Japan's Tankan survey showed sentiment among large manufacturers was the highest since 1997 and service companies became optimistic for the first time in 7 years as an export-led recovery spreads to consumers. Japan joined the U.S. and E.U complaint against China in the World Trade Organization over tax breaks that give Chinese chipmakers an unfair advantage in the world's fastest growing semiconductor market.

Late-Night Trading
Asian Indices -.25% to +.75%.
S&P 500 indicated +.11%.
NASDAQ indicated +.03%.

BOTTOM LINE: I expect U.S. stocks to rise modestly on light volume tomorrow ahead of Friday's employment report. I will use any strength to cut market exposure to 50% net long by the close. The numerous economic reports will likely result in above-average volatility.

Wednesday Close

S&P 500 1,126.21 -.07%
NASDAQ 1,994.22 -.32%

Leading Sectors
Airlines +2.24%
Fashion +1.36%
Hospitals +.80%

Lagging Sectors
Iron/Steel -.88%
Disk Drives -1.05%
Computer Boxmakers -1.28%

Other
Crude Oil 35.75 -.03%
Natural Gas 5.88 -.81%
Gold 427.70 -.14%
Base Metals 113.40 +1.0%
U.S. Dollar 87.61 -.93%
10-Yr. Long-Bond Yield 3.84% -1.52%
VIX 16.74 +2.83%
Put/Call 1.29 +111.48%
NYSE Arms 1.24 +63.16%

After-hours Movers
SUPG -24.7% after it reported disappointing study results on its Dacogen medicine for a bone-marrow disorder.
LSCP +13.50% saying that the Centers for Medicare and Medicaid Services moved its treatment for enlarged prostates to a new classification with double the reimbursement rate.
AEOS +5.75% after significantly raising 1Q estimates.

Recommendations
Cramer, of TheStreet.com says to Buy ADP ahead of the employment report. He thinks 250,000 jobs were created in March. QLTI cut to Underperform at Raymond James, target $22. CTX raised to Buy 1 at UBS. Goldman reiterated Outperform on BSX, BBY and KO. GS reiterated Underperform on TSG.

After-hours News
U.S. stocks finished lower Wednesday on weaker-than-expected economic reports, OPEC's production cut and QLogic's(QLGC) disappointing earnings report. After the close, Martha Stewart has asked for a new trial, alleging that one of the jurors who found her guilty concealed his arrest on assault charges.

BOTTOM LINE: The Portfolio was down slightly today as I cut market exposure to 75% net long on the close. While today wasn't a good day for the bulls, several positive developments occurred. The markets could have dropped a lot more considering the news. Oil prices dropped, notwithstanding the fire in Texas and the OPEC production cut. Best Buy(BBY), a good barometer of consumer spending, reported great earnings and rose almost 7% on huge volume. The Put/Call ratio soared, which is a good short-term contrary indicator. Finally, the market breadth was good on a down day.

Mid-day Update

S&P 500 1,125.98 -.09%
NASDAQ 1,993.51 -.36%

Leading Sectors
Airlines +2.75%
Fashion +1.36%
Hospitals +.72%

Lagging Sectors
Software -.63%
Disk Drives -1.0%
Computer Boxmakers -1.07%

Other
Crude Oil 35.05 -3.31%
Natural Gas 5.75 -.02%
Gold 427.20 +1.04%
Base Metals 113.40 +1.0%
U.S. Dollar 87.62 -.90%
10-Yr. Long-Bond Yield 3.87% -.54%
VIX 16.58 +1.97%
Put/Call .91 +49.18%
NYSE Arms .94 +23.68%

Market Movers
QLGC -21.2% after the company said 4Q sales missed its forecast.
BBY +8.0% after beating 4Q estimates and raising 1Q guidance.
CC +6.0% after meeting 4Q estimates and announcing the acquisition of ITN for $284M and privately held MusicNow.
TSG +18.1% after boosting 1Q and 04 estimates.
REDF +44.8% after announcing an agreement with YHOO to promote online shopping and content across both portals.
PLMO +11.58% after JP Morgan made positive comments.
USNA -8.4% after lowering 1Q estimates.

Economic Data
Chicago Purchasing Manager report for March was 57.6 versus a forecast of 61.0.
Factory Orders for February were +.3% versus a +1.5% estimate.

Recommendations
RDWR raised to Buy 2 at UBS, target $31. WDC raised to Overweight at Thomas Weisel. LLY raised to Buy at Merrill Lynch, target $80. ALKS added to Focus 1 list at Merrill, target $20. Bank of America said investors should sell bonds issued by European telecom companies as intensifying competition and regulation will dent earnings. XTO raised to Overweight at Prudential, target $31. ADSK price target raised to $38 at Pru. BBY raised to Buy at Legg Mason, target $65. TheStreet.com is recommending for-profit education stocks APOL, CECO, COCO, DV, EDMC, STRA, favorites are STRA and DV. TSC also recommending homebuilders DHI, KBH, LEN, PHM and SPF. Goldman Sachs reiterates Underperform on QLGC. Goldman reiterated Outperform on X, CCE, BBY, VZ, SBC and CCU. Citi Smith Barney said to Buy APCC ahead of quarter, $31 target. Citi upgraded LLY to 2M, target $72. Citi reiterated Buy on CCU and DIS.

Mid-day News
U.S. stocks are modestly lower on weaker-than-expected economic reports. At last count, Wall Street firms have contributed $5.5 million to Bush's re-election campaign, compared with $1.2 million to John Kerry's campaign, according to the Center for Responsive Politics, a nonpartisan organization. A recent analysis by the center found that many of Kerry's biggest donors on Wall Street actually have given far more generously to Bush's re-election effort. Goldman Sachs says the number of dividend increases announced this year continues to run ahead of the record levels in 2003. Exelon and Entergy, the biggest U.S. nuclear-power generators, and five other companies will seek government funding for design and licensing of new reactors. The U.S. Homeland Security department's campaign to encourage the public to prepare for terrorism hasn't spurred the majority of Americans to act, USA Today reported. A recent poll by the Council for Excellence shows 21% of Americans believe a major terrorist attack on U.S. soil is likely in the next few months. OPEC agreed to reduce oil production quotas starting tomorrow by 4.1%, threatening to drive gas prices higher and impede world economic growth, reported Bloomberg. Crude Oil fell after the Energy Department reported that U.S. inventories surged to the highest level in 19 months.

BOTTOM LINE: The Portfolio is down slightly today as my longs are mixed and shorts are up. I have not made any trades today and net market exposure is still 100% long. It is positive that violence in Iraq, below-expectations economic reports, confirmation of OPEC production cuts and a fire at America's third largest oil refinery could not send shares significantly lower or oil prices higher. Thus, while it is hard to game the last day of the quarter, I expect a rally later in the day.

Wednesday Watch

Earnings Announcements
Company/Estimate
AM/.64
BBBY/.44
BBY/1.39
CC/.36
MANU/.03
MON/.57
VXGN/-.15

Splits
GGG 3-for-2
IDSA 2-for-1
WRI 3-for-2

Economic Data
Chicago Purchasing Manager for March estimated at 61.0 vs. 63.6 last month.
Factory Orders for February estimated +1.5% vs. -.5% in January.

Recommendations
Goldman Sachs reiterated Outperform on CCU.

Late-Night News
Asian stocks are mixed as strength in China is being offset by weakness in Japan and Hong Kong. Honda filed a lawsuit against Shuanghuan Automobile, alleging the Chinese company infringed its copyright on a sport utility vehicle, the Beijing Times reported. Wal-Mart suppliers will miss the January deadline set by the world's largest retailer for equipping shipments with radio-frequency tags, the Wall Street Journal reported. Aluminum producers in China have shuttered 350,000 tons a year of production capacity as efforts by the government to slow growth in the industry take effect, reported Bloomberg. Chinese steel producers are preparing to set up steel mills in the U.S., Brazil and Australia, from where they will ship the metal back to their home country, the Wall Street Journal reported. Kmart has sued almost 500 U.S. towns, cities and counties because the discount retailer claims its tax bills are too high, the WSJ reported. Crude oil in NY surged as much as 1.2% after reports of a fire in a refinery in Texas raised concern of gasoline shortages ahead of the peak demand season in the third-quarter.

Late-Night Trading
Asian Indices -.25% to +1.00%.
S&P 500 indicated -.18%.
NASDAQ indicated -.35%.

BOTTOM LINE: U.S. stocks will likely open weaker as gasoline in New York climbed to its highest price in 18 years after the explosion at the third largest refinery in the U.S. As of now, it is not clear if this was an act of terrorism or an accident. If the explosion was in fact an accident, U.S. shares will likely rally after early morning weakness. The Portfolio is 100% net long and I will look to trim market exposure into Friday's employment report. If terrorism was responsible, U.S. shares will fall significantly on the open. Under this scenario, I will wait for a bounce to reduce exposure significantly.