Mid-day Update

S&P 500 1,089.98 -.47%
NASDAQ 1,820.25 -.61%

Leading Sectors
Oil Service +1.24%
Iron/Steel +1.0%
Commodity +.81%

Lagging Sectors
Hospitals -1.24%
Disk Drives -1.75%
Airlines -2.46%

Other
Crude Oil 47.05 +1.51%
Natural Gas 5.45 +1.26%
Gold 409.00 +.59%
Base Metals 111.05 +1.37%
U.S. Dollar 87.73 -.40%
10-Yr. T-note Yield 4.21% -.50%
VIX 16.83 +3.76%
Put/Call .81 -17.35%
NYSE Arms .93 +116.28%

Market Movers
SNPS -29.7% after beating 1Q estimates and raising 2Q outlook.
PETM -5.6% after missing 2Q revenue estimates and reiterating 3Q guidance.
MYL +10.5% after saying billionaire financier Carl Icahn got U.S. FTC permission to buy as much as 12% of the company's shares.
CAI +13.4% after beating 4Q estimates, raising 1Q guidance and saying it has "no deep concern" about the possible findings of a forthcoming Army report probing prisoner abuse in Iraq.
TZOO +10.9% after moving from the Nasdaq SmallCap market to the Nasdaq National market.
PETC +8.7% after beating 2Q estimates and raising 3Q outlook.
CLE +9.2% after beating 2Q forecast and raising 3Q estimates.
NAV -4.9% after beating 3Q forecast and maintaining forward guidance.
DV -11.7% after missing 4Q estimates.
AMED -8.4% after announcing a 2M share secondary offering.
HRL -9.1% after beating 3Q estimates and lowering 4Q outlook.

Economic Data
Initial Jobless Claims for last week were 331K versus estimates of 335K and 334K the prior week.
Continuing Claims were 2904K versus estimates of 2874K and 2888K prior.
Leading Indicators fell .3% in July versus estimates of a .1% decline and a .1% fall in June.
Philly Fed fell to 28.5 in August versus estimates of 30.0 and a reading of 36.1 in July.

Recommendations
Goldman Sachs reiterated Outperform on MDT, NAV, WMT, IBM, PETC and IBM. Goldman reiterated Underperform on FRX. Goldman reiterated Underperform on newspaper stocks. TRMK rated Overweight at JP Morgan. WTNY rated Underweight at JP Morgan. TELK rated Overweight at JP Morgan. CELG rated Overweight at JP Morgan. TLB cut to Underweight at Prudential, target $25. NPSP rated Underweight at JP Morgan. Merrill Lynch rated MON Focus 1 stock of the week.

Mid-day News
U.S. stocks are lower mid-day on rising energy prices and weakness in the healthcare sector. More than 400,000 Florida residents remained without electricity five days after Hurricane Charley passed through and utility companies say downed lines are the biggest hurdle to restoring power, the New York Times reported. Venezuela, the world's fifth-largest oil supplier, probably will propose that OPEC raise it price target to a range of $28-$38/bbl., El Nacional reported. Amazon.com plans to buy Joyo.com, China's largest online retailer, Reuters reported. A man who died Monday at an Anderson County, South Carolina, jail after being stunned by a Taser gun already had poor health, the AP reported. China may bid for OAO Yukos Oil's biggest production unit if Russia sells the subsidiary to collect back taxes, Interfax said. Limited Brands said second-quarter profit rose 45%, helped by new products at its Victoria's Secret and Bath & Body Works chains, Bloomberg said. Iraqi Prime Minister Allawi issued a "final call" to Shiite Muslim cleric al-Sadr to disarm his militia and end a two-week uprising in Najaf and other southern cities that the government says has killed hundreds of people, Bloomberg said. Women who eat more fruits, vegetables and protein-rich foods before becoming pregnant may reduce their child's risk of developing leukemia, according to a study published in the journal Cancer, Bloomberg reported. The number of Americans filing first-time jobless claims unexpectedly fell for the third straight week as more companies retained workers, Bloomberg said.

BOTTOM LINE: The Portfolio is higher mid-day as my alternative energy, software and homebuilding longs are rising and my healthcare shorts are falling. I have not traded today and the Portfolio is still 125% net long. While the major indices are lower, a number of market leading stocks are rising and the advance/decline line isn't that bad. I expect U.S. stocks to remain near currrent levels into the close.

Wednesday Close

S&P 500 1,095.17 +1.24%
NASDAQ 1,831.37 +2.01%

Leading Sectors
Disk Drives +5.78%
Airlines +5.18%
Biotech +3.52%

Lagging Sectors
Broadcasting +.50%
Foods +.41%
Fashion -.58%

Other
Crude Oil 46.40 +.11%
Natural Gas 5.38 -.04%
Gold 406.60 unch.
Base Metals 109.55 -1.14%
U.S. Dollar 88.08 +.02%
10-Yr. T-note Yield 4.23% +.97%
VIX 16.23 -4.64%
Put/Call .98 +5.38%
NYSE Arms .43 -50.57%

After-hours Movers
HOTT +11.87% after beating 2Q estimates and announcing additional 2M share buyback.
CAI +7.24% after beating 4Q estimates and raising 1Q guidance.
PETC +5.15% after beating 2Q estimates and raising 3Q forecast.
SNPS -30.2% after missing 3Q estimates and lowering 4Q outlook substantially.

Recommendations
Goldman reiterated Outperform on MET and CZN.

After-hours News
U.S. stocks finished higher today, boosted by optimism over improvements in Iraq and a rebounding technology sector. After the close, Iran's defense minister warned the U.S. and Israel against any pre-emptive attack on its nuclear facilities, saying his country could similarly target American forces in Iraq, Agence-France Presse reported. Google is poised to begin selling shares to bidders in the company's auction-style IPO after receiving approval from U.S. securities regulators, Bloomberg said. Medtronic, the world's largest maker of spinal implants, said first-quarter profit rose 18% as demand increased fro devices used in back surgery, Bloomberg said. Synopsys said third-quarter profit fell to $41.8 million as semiconductor companies curtailed purchase, Bloomberg reported.

BOTTOM LINE: The Portfolio finished substantially higher today as my homebuilding, semi and RFID-related longs rose more than my steel and Chinese ADR shorts. I added a few more longs in various sectors in the afternoon, leaving the Portfolio 125% net long. One of my new longs is YHOO and I am using a $27.70 stop-loss on the position. The technicals and tone of the market continue to improve. While I continue to expect significant weakness to reappear in Sept., it is very possible the lows for the year are in place.

Mid-day Update

S&P 500 1,087.65 +.55%
NASDAQ 1,813.26 +1.02%

Leading Sectors
Airlines +3.38%
Disk Drives +3.01%
Networking +1.92%

Lagging Sectors
Telecom -.04%
Defense -.49%
Fashion -.56%

Other
Crude Oil 46.21 -.11%
Natural Gas 5.38 +.13%
Gold 405.00 -.42%
Base Metals 109.93 -.79%
U.S. Dollar 88.24 +.20%
10-Yr. T-note Yield 4.22% +.83%
VIX 16.57 -2.64%
Put/Call 1.0 +7.53%
NYSE Arms .64 -26.44%

Market Movers
NTAP +9.7% after beating 1Q estimates and raising 2Q outlook.
OHB +11.0% after beating 4Q estimates and raising 05 guidance.
ARB +9.7% after raising 3Q and 04 outlook substantially.
MSTR +5.8% after announcing strengthened global alliance with Syntel.
GNTX -7.6% after raising dividend and cutting 3Q outlook.

Economic Data
None of note.

Recommendations
HAL added to JP Morgan's Focus List. DELL rated Outperform at CSFB, target $40. IM rated Outperform at CSFB, target $17. SKS cut to Underweight at Prudential, target $12. MAR rated Focus 1 stock of the week at Merrill Lynch. EL raised to Buy at Bank of America. ASO raised to Strong Buy at Raymond James, target $30. ARTC raised to Buy at Bank of America, target $30. AMT rated Overweight at Morgan Stanley, target $18. TJX cut to Underweight at JP Morgan. Goldman Sachs reiterated Outperform on DOW, IP and PFE. Citi SmithBarney said to Buy FITB ahead of 3Q, target $58. Citi reiterated Buy on AMAT, target $22. Citi reiterated Buy on MO, target $65. Citi reiterated Buy on HAL, target $37. Citi reiterated Buy on BJ, target $30. Citi reiterated Buy on JCP, target $50.

Mid-day News
U.S. stocks are higher mid-day on optimism over corporate earnings and stabilizing energy prices. Deloitte & Touche is being investigated by the governing body for Ontario's accounting industry over Nortel Networks' financial statements, Bloomberg reported. The Swift Boat Veterans for truth tv ad, which says Senator Kerry lied about his war record, has resulted in doubts in 27% of voters who planned or were likely to vote for Kerry, an independent study by HCD Research showed. Chinese Premier Wen Jiabao urged banks to keep up lending curbs aimed at slowing the economy, state-owned China Central Television reported. US Airways Chairman Bronner says no one will be willing to rescue the airline if it files for bankruptcy, the Pittsburgh Post-Gazette reported. The SEC is expected to formally approve Google's IPO today, the Wall Street Journal reported. Iraqi Shiite Muslim cleric al-Sadr agreed that his militia should lay down their arms and quit Najaf's Imam Ali Mosque, acceding to demands from an Iraqi delegation to end an uprising in the city, Reuters reported. Google lowered its IPO price to between $85-95 from $108-135, Bloomberg reported. The SEC ordered mutual funds to stop paying increased commissions to brokers in exchange for promoting the companies' funds, Bloomberg said. Janus Capital agreed to pay $100 million to settle U.S. regulators' allegations that the mutual fund company permitted "market timing," Bloomberg reported. For the first time since the Vietnam era, national security issues are largest concerns than the economy and jobs for U.S. voters, according to a report by the Pew Research Center. Crude oil prices rose after an Energy Department report showed that U.S. refineries boosted their operations and that gasoline demand rose to the highest level this year, Bloomberg reported.

BOTTOM LINE: The Portfolio is substantially higher mid-day as my homebuilding, semi and RFID-related longs are rising and my steel and Chinese ADR shorts are mixed. I added a few new technology longs this morning, bringing the Portfolio's market exposure to 100% net long. One of my new longs is SWIR and I am using a $22.50 stop-loss on the position. It is impressive that the market has sustained today's rally in the face of increasing oil prices this morning. The advance/decline line is strong and the Put/Call ratio is rising, which are also positives. Moreover, Google may have prevented disaster by lowering its offering price, which is good for psychology. I expect stocks to rise modestly in the afternoon.

Wednesday Watch

Earnings of Note
Company/Estimate
BRCD/.05
BKST/-.03
CAI/.58
BWS/.39
EV/.49
HAR/.68
HOTT/.10
INTU/-.07
MDT/.43
MW/.44
ROST/.29
SNPS/.32
TLB/.34

Splits
IMGC 3-for-2
POT 2-for-1

Economic Data
None of note.

Recommendations
Goldman Sachs reiterated Outperform on SPLS, AYE, MERQ, BIIB and AMAT. Goldman reiterated Underperform on FRX.

Late-Night News
Asian indices are mixed as strength in Taiwan is offset by weakness in India. Iran would destroy Israel's Dimona nuclear reactor if Israel attacked an Iranian nuclear power plant under construction, the AP reported. Taiwan President Chen Shui-bian said the island would never accept China's demand to refer to direct air links across the Taiwan Strait as "domestic" flights, the Taipei Times said. Sony expects to increase digital-camera production next fiscal year by at least 20% to 30% to try to meet demand, Bloomberg reported. A busy hurricane season in the Gulf of Mexico may drive up crude oil prices, the Wall Street Journal reported. The National Weather Service is predicting an "above-average" season, with 12 to 15 tropical storms and two to four major hurricanes, the newspaper said. Venezuela's National Electoral Council will conduct an audit of Sunday's recall vote on President Hugo Chavez to address opposition allegations of fraud, Bloomberg said. ING Groep NV will withdraw about $5 billion from Janus Capital funds this year, the Wall Street Journal reported.

Late-Night Trading
Asian Indices are -.25% to +.75% on average.
S&P 500 indicated -.15%.
NASDAQ 100 indicated -.11%

BOTTOM LINE: I expect U.S. equities to open modestly higher in the morning on stronger earnings reports and stabilizing energy prices. The Portfolio is 75% net long heading into tomorrow.

Tuesday Close

S&P 500 1,081.71 +.22%
NASDAQ 1,795.25 +70%

Leading Sectors
Broadcasting +2.42%
Networking +2.20%
Homebuilders +1.95%

Lagging Sectors
Commodity -.64%
Energy -2.30%
Oil Service -2.48%

Other
Crude Oil 46.20 -.13%
Natural Gas 5.39 +.22%
Gold 406.40 -.07%
Base Metals 110.81 -.80%
U.S. Dollar 88.06 +.11%
10-Yr. T-note Yield 4.19% -1.68%
VIX 17.02 -3.13%
Put/Call .93 +10.71%
NYSE Arms .87 +135.14%

After-hours Movers
NTAP +6.96% after beating 1Q estimates and raising 2Q outlook.
PLAB +4.24% after beating 3Q estimates.

Recommendations
Goldman Sachs reiterated Outperform on AVP, CLX and PG.

After-hours News
U.S. stocks finished higher today, boosted by positive economic data and strong earnings reports. After the close, the Chinese government will invest $16.9 billion through 2020 in alternative energy sources, including wind and solar power, Nikkei English News said. Mexico's economy grew 3.9% in the second quarter, the faster pace since the global economy began plunging into recession in 2000, on resurgent demand from the U.S. for the country's electronics, oil and metals, Bloomberg reported. Applied Materials, the world's biggest maker of semiconductor-equipment, reported its largest quarterly profit in almost 4 years after chipmakers doubled purchases of its machines, Bloomberg said. Network Appliance, whose products store and distribute data for customers including the Vatican and Coca-Cola, said first-quarter net income jumped 73% as software sales surged, Bloomberg reported. Google said its IPO is being delayed for SEC approval of its paperwork, the AP reported.

BOTTOM LINE: The Portfolio finished substantially higher today as my homebuilding, retail and semi longs all rose and my steel and Chinese ADR shorts were mixed. I did not trade in the afternoon and the Portfolio is still 75% net long. An interesting shift took place today with respect to investor psychology. Oil rose to another record and the major U.S. indices rallied. As well, interest rates and commodity-related stocks fell. The market seems to be saying that inflation is not nearly the problem the bears and media made it out to be and that oil is approaching at least an intermediate-term top. A fall in oil prices back to around the mid-30's/bbl. during the next couple of months should solidify this view.

Mid-day Update

S&P 500 1,083.26 +.36%
NASDAQ 1,799.50 +.93%

Leading Sectors
Homebuilders +2.49%
Semis +2.27%
I-Banks +2.12%

Lagging Sectors
Telecom -.43%
Oil Service -1.93%
Energy -1.98%

Other
Crude Oil 46.33 +1.34%
Natural Gas 5.42 +.78%
Gold 406.40 +.30%
Base Metals 111.29 -.37%
U.S. Dollar 88.05 +.10%
10-Yr. T-note Yield 4.22% -.95%
VIX 16.94 -3.59%
Put/Call .93 +10.71%
NYSE Arms .77 +108.11%

Market Movers
HD +3.5% after beating 2Q estimates and raising 04 guidance.
HAL -3.5% after saying the U.S. Army will withhold 15% of payments for feeding and housing U.S. troops in Iraq.
NVEC +24.6% after announcing it has been notified by the U.S. Patent and Trademark Office of the expected grant of a key MRAM patent.
WIND +18.5% after beating 2Q estimates substantially and raising 3Q/4Q guidance.
DKS+14.0% after beating 2Q estimates and raising 3Q/4Q outlook.
*Homebuilders are up across the board on better-than-expected Housing Starts and falling interest rates.
*Energy stocks are down across the board on speculation energy prices are topping.
EL -8.3% after missing 4Q estimates and lowering 05 outlook.

Economic Data
Consumer Price Index for July fell .1% versus estimates of a .2% rise and an increase of .3% in June.
CPI Ex Food & Energy for July rose .1% versus estimates of a .2% rise and a .1% increase in June.
Housing Starts for July were 1978K versus estimates of 1898K and an upwardly revised 1826K in June.
Building Permits for July were 2055K versus estimates of 1950K and an upwardly revised 1945K in June.
Industrial Production for July rose .4% versus estimates of a .5% increase and a downwardly revised decrease of .5% in June.
Capacity Utilization for July was 77.1% versus estimates of 77.5% and 76.9% in June.

Recommendations
CIBC rated EMR Sector Outperform, target $72. CIBC rated GE Sector Outperform, target $38. FCX rated Buy at Legg Mason, target $42. PD rated Buy at Legg Mason, target $100. FILE rated Overweight at Prudential, target $25. Goldman Sachs reiterated Outperform on BAX, KSS, IR, AMT, ETN and HD. Goldman reiterated Underperform on VRTX, AG, CNH and SGP. Citi SmithBarney reiterated Buy on SSI, target $54.

Mid-day News
U.S. stocks are higher mid-day on better-than-expected economic data and strong earnings reports. Moody's Investors Service yesterday gave the U.S. its top Aaa rating on its debt, Bloomberg reported. U.S. Homeland Security officials said they plan to begin screening airline passengers against a list of potential terror suspects, taking over the duty from the airlines, the NY Times reported. Bond investors are buying more non-conventional mortgage-backed securities, including loans to borrowers with low credit scores and home-equity loans, as interest rates rise, the Wall Street Journal reported. Thefts from luggage at airports have been increasing, in part because of a federal security requirement that all checked bags can be inspected by security screeners, the NY Times reported. New York state lawmakers have approved the first tax credit for film and tv productions in the state to counter the flight of industry jobs to Vancouver, Montreal and Toronto, the NY Times reported. OAO Yukos Oil lost its appeal to suspend an enforcement order on a $3.4 billion tax bill, Interfax reported. Shares of Motorola are rising after Reuters quoted an executive in Singapore as saying the company will have strong sales growth for the rest of the year. California Governor Schwarzenegger is preparing to sign new gambling agreements with several Indian tribes, including one that will create a casino near San Francisco, the LA Times reported. Costco is test-marketing caskets at two of its Chicago-area stores, the AP said. Staples said second-quarter earnings climbed 39%, beating analysts' estimates, Bloomberg said. RealNetworks will begin selling Internet music at half price today as it steps up efforts to draw customers from Apple Computer's iTunes site, Bloomberg reported. Home Depot said second-quarter earnings climbed 19%, beating estimates, helped by strong appliance sales and home installation services, Bloomberg said. U.S. consumer prices unexpectedly fell in July, the first decline is eight months, as shoppers paid less for gasoline, clothing and transportation, Bloomberg reported. U.S. housing starts rose more than forecast in July as builders responded to the best two months of home sales on record, Bloomberg said. Deere & Co. said third-quarter profit climbed 62% as farmers boosted spending on tractors and combines, and demand for construction and forestry machines increased, Bloomberg said. Money managers this month boosted the proportion of assets held in cash to the highest since March 2003, when a major global stock rally began, Merrill Lynch said. Fidelity increased stakes in Elan and Cisco and cut those of Motorola and Texas Instruments, Bloomberg reported. Berkshire Hathaway bought 5 million shares of Comcast in April, Bloomberg said.

BOTTOM LINE: The Portfolio is substantially higher mid-day as my homebuilding, retail and semi longs are rising and my shorts are mixed. I took profits in one of my computer longs this morning and added a small long position in homebuilder OHB. I am using a $16.25 stop-loss on this position. The Portfolio is still 75% net long. The tone of the market and psychology is improving today. It appears that investors are finally paying attention to the better inflation readings I have been talking about for weeks and interest rates are dropping. As well, the sell-off in the energy stocks is a result of speculation that oil is very close to a top. A rotation from this sector into interest-rates sensitive groups, such as homebuilders, is currently underway. It is also positive that the Arms and Put/Call readings are rising. I am a bit concerned about the market's reception of Google's IPO and this could pressure the tech sector again short-term. As well, terrorism worries will likely take front stage again early next week ahead of the Republican convention.