Wednesday Close

S&P 500 1,1116.27 -.45%
NASDAQ 1,850.64 -.43%

Leading Sectors
Fashion +1.21%
Transports +.62%
Computer Boxmakers +.42%

Lagging Sectors
Foods -1.36%
Homebuilders -1.60%
Airlines -1.90%

Other
Crude Oil 42.76 -.02%
Natural Gas 4.64 +.19%
Gold 401.60 +.05%
Base Metals 106.80 unch.
U.S. Dollar 88.77 -.52%
10-Yr. T-note Yield 4.16% -1.78%
VIX 14.06 -.07%
Put/Call 1.05 +23.53%
NYSE Arms 1.32 +38.95%

After-hours Movers
CMVT +4.0% after beating 2Q estimates.
GLW +3.45% after reiterating 3Q outlook.
ULCM +6.76% after beating 2Q estimates substantially.
MEE -4.3% after cutting 3Q outlook.
RCII -10.87% after lowering 3Q/04 outlook.
MATK -5.77% on profit-taking after beating 3Q estimates.

Recommendations
Goldman Sachs reiterated Outperform on UST, WMT, AVP, BHI, PHCC, VLO, SUN, RCL, CCL and ISG. Goldman reiterated Underperform on PBG, BVF and DJ.

After-hours News
U.S. stocks fell modestly today as investors took profits and worries continued over economic growth. After the close, Mills, a U.S. developer and manager of retail centers, may be considering building a casino in Contra Costa County, California, the San Francisco Chronicle reported. Poor working conditions at companies in China's Pearl river delta have led to a shortfall of 2 million workers that could erode the competitiveness of the region bordering Hong Kong, the Financial Times reported. JetBlue Airways said third-quarter profit will be lower than it expected because of hurricanes that forced flight cancellations in Florida and high fuel costs, Bloomberg reported. Texas Instruments lowered its third-quarter sales forecast slightly as demand for handsets slowed, Bloomberg reported. The dollar had its biggest drop against the euro in a week after Federal Reserve Chairman Greenspan said U.S. inflation has eased in recent months, while rising oil prices have contributed to a slowdown in growth, Bloomberg said. Greenspan then said U.S. economic growth is picking up and oil prices aren't causing inflation to accelerate, Bloomberg reported.

BOTTOM LINE: The Portfolio rose modestly today as my rising security, gaming and telecom equipment longs offset declines in my internet and homebuilding longs. I took profits in a few of my financial and telecom equipment longs in the afternoon and added another technology long, AMAT. I am using a stop-loss of $15.25 on this position. The Portfolio is now 100% net long. Today's action wasn't too bad considering recent gains. A number of sectors rose and volume continues to accelerate from recent anemic levels. Energy prices and interest rates continue to fall which should provide further stimuli to economic growth in the fourth quarter. As well, the Put/Call and Arms readings both rose nicely today, which is also a positive. Greenspan said in his speech today what I have been pointing out for awhile. Inflation fears are falling as is evidenced by declining long-term interest rates and a falling CRB. I still believe oil will trade near $35/bbl. within the next few months, which should further calm inflation anxieties and boost growth.

***Alert***

I believe the publishing problem is fixed. I plan to post the Wednesday close at its regularly scheduled time. Thank you for your patience.

Wednesday Watch

Earnings of Note
Company/Estimate
CMVT/.05
KFY/.14
MATK/.14
VRNT/.19

Splits
TCHC 3-for-2

Economic Data
Fed's Beige Book
Consumer Credit for July estimated at $7.5B versus $6.6B in June.

Recommendations
Goldman Sachs reiterated Outperform on COH. Goldman reiterated Underperform on TLAB. Goldman lowered estimates on AAI, AWA, JBLU, LUV and UAIR on overcapacity and hurricane issues in Florida.

Late-Night News
Asian indices are mostly higher on optimism over falling energy prices and rising exports. British Broadcasting Corp., the U.K.'s public broadcasting service, will hold talks with Time Warner, Disney and Bertelsmann AG about possible selling BBC Worldwide, its publishing and commercial sales unit, the Financial Times reported. Pakistan's President Musharraf asked Islamic teachers to help fight terrorism by controlling schools that harbor extremists, Agence France-Press reported. U.S. Treasury Undersecretary John Taylor expressed concern that Taiwan's currency is undervalued, the Commercial Times reported. Taiwan Semiconductor Manufacturing's fourth-quarter sales may lag the company's original expectations because of weak demand for chips used in consumer electronics products, Commercial Times reported. GE may sell its contact center business in India for $1 billion, the Economic Times reported. China's macroeconomic controls are still at a crucial stage and banks must keep up lending curbs to prevent a resurgence of excessive investment in industries such as steel and cement, the People's Daily reported. President Bush finished 22nd out of 53 pilots in his Air National Guard flight class of 1969 and flew 336 hours in a fighter jet between 1969 and 1972, according to records released today, the AP reported. Defense officials found the records after the Associate Press filed a complaint under the Freedom of Information Act alleging that not all of Bush's records were made public, the AP said. Nokia will introduce today a slimmer version of its top-of-the-range Communicator handset to compete better in the market for phones that double as mini-computers, the Wall Street Journal reported. Crude oil extended today's 1.6% drop after OPEC's president said the group can raise capacity by 1 million barrels a day by year-end, Bloomberg said. Hurricane Ivan, the fifth hurricane this year, swept through Grenada with winds up to 135 mph and strengthened as it headed toward the eastern Caribbean Sea, Bloomberg reported. Viacom offered its shareholders the opportunity to exchange Viacom shares for shares of the company's Blockbuster video-rental chain, Bloomberg reported. America Movil, South America's largest mobile-telephone company, believes investors are underestimating its potential for revenue growth from increased subscribers in Brazil, CFO Moreno said.

Late-Night Trading
Asian Indices are -.25% to +.50 on average.
S&P 500 indicated -.09%.
NASDAQ 100 indicated -.18%

BOTTOM LINE: I expect U.S. equities to open modestly higher in the morning as investors anticipate positive comments from Alan Greenspan, oil prices fall and technology shares rebound from oversold levels. The Portfolio is 125% net long heading into tomorrow.

Tuesday Close

S&P 500 1,121.30 +.69%
NASDAQ 1,858.56 +.76%

Leading Sectors
Homebuilders +3.45%
I-Banks +2.69%
Disk Drives +2.38%

Lagging Sectors
Restaurants -.45%
Oil Service -1.10%
Semis -1.14%

Other
Crude Oil 43.17 -.32%
Natural Gas 4.87 +1.77%
Gold 400.10 +.18%
Base Metals 106.80 +1.07%
U.S. Dollar 89.23 -.37%
10-Yr. T-note Yield 4.24% -1.23%
VIX 14.07 +1.15%
Put/Call .85 -16.67%
NYSE Arms .95 -5.0%

After-hours Movers
MYL +4.27% after saying billionaire Carl Icahn holds a 6.8% stake and plans to oppose the company's purchase of King Pharmaceuticals.
CYMI +4.79% on bargain-hunting after reiterated 3Q outlook.
MAMA +10.65% after announcing a 600,000 share buyback.
MCK -7.32% after lowering 1st half outlook and maintaining full-year guidance.
TLAB +14.04% after reducing its takeover offer for AFCI to $1.5 billion.

Recommendations
Goldman Sachs reiterated Outperform on EMC, DIS, UST, FSL, STZ and KO.

After-hours News
U.S. stocks rose today, pushing the S&P 500 to a two-month high, as falling oil prices, declining interest rates and pro-business political rhetoric boosted investor optimism. After the close, Costco Wholesale Corp. plans to open its first Australian store next year, the Australian Financial Review reported. Amvescap Plc's U.S. mutual-fund units, Invesco Funds Group and AIM Investments, reached a $450 million settlement with federal and state complaints of improper trading, Bloomberg said. Neiman Marcus Group said 4th quarter earnings almost tripled as shoppers bought more designer dresses and handbags, Bloomberg said. Coach, the largest U.S. seller of luxury-leather goods, said 1Q earning will beat analyst expectations, Bloomberg said. Prudential Financial's Ed Yardeni, one of the most bullish strategists on Wall Street, left the firm to join Oak Associates, a money manager that overseas more than $8 billion. Republican Senator McCain and Democratic Senator Lieberman introduced a bill to implement the findings of the panel that investigated the 9/11 terrorist attacks, including the appointment of a national intelligence director, Bloomberg reported. Tyco International said it repurchased $350 million of convertible bonds and will take a charge of about $167 million in the fiscal fourth quarter for the purchase as it works to reduce net debt to $10 billion, Bloomberg reported.

BOTTOM LINE: The Portfolio finished substantially higher today as my gaming, internet, telecom equipment and homebuilding longs rose. I took profits in a few of my retail and restaurant longs and added a few technology longs in the afternoon, thus leaving the Portfolio 125% net long. One of my new longs is OSTK and I am using a $31 stop-loss on this position. The overall tone of the market was pretty good today as afternoon profit-taking proved fleeting, most sectors rose, volume improved and small-caps outperformed. Greenspan's upcoming comments should further boost investor optimism for accelerating U.S. economic growth.

Mid-day Update

S&P 500 1,122.34 +.78%
NASDAQ 1,863.61 +1.04%

Leading Sectors
Disk Drives +2.89%
Homebuilders +2.71%
I-Banks +2.28%

Lagging Sectors
Energy -.37%
Restaurants -.45%
Oil Service -1.05%

Other
Crude Oil 42.93 -2.41%
Natural Gas 4.75 +1.60%
Gold 401.00 -.37%
Base Metals 106.80 +1.07%
U.S. Dollar 89.35 -.23%
10-Yr. T-note Yield 4.26% -.77%
VIX 14.24 +2.37%
Put/Call .90 -11.76%
NYSE Arms 1.04 +4.0%

Market Movers
NFLX +16.6% after Newsweek reported that it entered an agreement with TiVo to let customers download movies into TiVo's digital video recorders.
RIMM +4.47% after announcing plans to enable BlackBerry Connect on Symbian OS-based devices, such as the Nokia 9500 Communicator.
TZOO +14.2% on short-squeeze.
FLE +11.9% after beating 1Q earnings estimates but missing its sales forecast.
CEPH +4.6% after saying it received a subpoena from U.S. prosecutors in Philadelphia for documents relating to sales and marketing practices from 1998 to the present.
PXD -4.6% after lowering its 3Q production forecast after hurricanes Charley and Earl forced worker evacuations and the company shut output at a Gulf of Mexico field.
HOV +7.7% after beating 3Q forecast and raising 05 outlook.
*Homebuilders up across the board on HOV report and falling interest rates.

Economic Data
None of note.

Recommendations
Goldman Sachs reiterated Underperform on PYX, LVLT, VRSN and T. Goldman reiterated Outperform on AIG, ASN, FD, IGT, FS, HOT, FDC, CZN, UST and ALL. Citi SmithBarney reiterated Buy on GE, target $38. OSG raised to Overweight at JP Morgan. GMR raised to Overweight at JP Morgan. SNIC rated Overweight at JP Morgan. ATRS raised to raised to Outperform at CSFB, target $30. CSCO raised to Sector Outperform at CIBC, target $25.

Mid-day News
U.S. stocks are higher mid-day on optimism over falling energy prices, declining interest rates and pro-business political rhetoric. The U.S. Navy is proposing cuts in its shipbuilding program that may hurt the industry, as the Pentagon considers shifting the military's focus from preparing for large-scale warfare to building resources for guerrilla warfare, long-term peacekeeping and counter-terrorism efforts, the Washington Post reported. Denver billionaire Philip Anschutz hired Frederick Anderson and Ryan McKibben to help study potential acquisitions among U.S. weekly or daily newspapers, the Denver Post reported. Disney's ABC broadcast network is experimenting with "ABC News Now," a 24-hour news broadcast available on the Internet, mobile phones and digital tv, the AP reported. Several pharmaceutical companies are participating in a $3 million pilot project to test a system for tracking and identifying prescription drug battles using radio frequency identification devices, the Boston Herald reported. Frank Quattrone, who earned $120 million at the height of the stock market bubble as Credit Suisse First Boston's top investment banker for technology companies, may receive 21 months in prison, Bloomberg reported. Hurricane Ivan, the fifth Atlantic hurricane this year, was racing west toward Trinidad, Tobago and other Caribbean islands on a track that's expected to take it past Cuba to the edge of the Gulf of Mexico by the weekend, Bloomberg reported. More than 2.5 million Floridians are still without power as of 9am local time as a result of Hurricane Frances, according to Florida's Emergency Management Department. Crude oil futures in New York are falling after Hurricane Frances missed U.S. offshore production facilities in the Gulf of Mexico, Bloomberg reported.

BOTTOM LINE: The Portfolio is substantially higher mid-day as my security, gaming, telecom equipment and internet longs are rising. I have not traded and the Portfolio is 125% net long. The overall tone of the market is good today. Interest rates are falling, oil and gasoline prices are declining, the CRB is dropping and the VIX/Arms are rising, which are all positives for stocks. While the CRB briefly broke below its 200-day moving average a couple of times over the last few months, it appears headed for a more substantial technical breakdown. This would be a very positive development with respect to future inflation readings. Commodity prices have been the main source of exaggerated inflation fears. I expect U.S. stocks to rise modestly into the close.

Tuesday Watch

Earnings of Note
Company/Estimate
CEN/.19
UTIW/.44
NMG/B/.36
HOV/1.35

Splits
RIO 3-for-1
TCB 2-for-1
GILD 2-for-1

Economic Data
None of note.

Weekend Recommendations
Louis Rukeyser's Wall Street had guests that were positive on HAL, NE, MSFT, RIG, GS, LXK, DNR, MNT, ISCA, YDNT and DRCT. Wall St. Week w/Fortune had guests that were positive on EDMC, BAC, PFE and WAT. Barron's had positive columns on IGT, VSEA, SMMX, LF, IMAX and negative columns on CAKE and CDN. Goldman Sachs reiterated Outperform on UDR, EBAY, SYMC, MERQ and ASN. Goldman reiterated Underperform on PBG. Byte and Switch has a positive article on Storage Networking.

Weekend News
Bank of China, the country's second-biggest lender, may choose Citibank and JP Morgan Chase as its strategic investors ahead of an IPO to overseas investors, the 21st Century Business Herald reported. OPEC is pumping at near capacity and providing oil that exceeds oil market demand, the Qatari Oil Minister told al-Hayat. Izzat Ibrahim al-Duri, Iraq's second in command under former President Saddam Hussein, was captured by Iraqi defense officials, al-Arabiya reported. Netflix and TiVo plan to announce an agreement where customers can download Netflix movies onto TiVo recorders, Newsweek reported. China's annual demand for gold may triple after the country deregulates its market of the precious metal, China Daily said. Saddam Hussein and other leaders of his ousted regime will face trial within a matter of weeks, the AP said. The online gambling industry is growing rapidly, fueled by the popularity of televised poker tournaments, the Washington Post reported. 9 in 10 American workers find their job at least somewhat satisfying, according to an AP survey. U.S. tv networks such as CBS and NBC are working to increase product-placement advertising in shows to counter falling ratings and new technology that allows viewers to skip commercials, the NY Times reported. U.S. companies are ranked first in a global survey of corporate governance standards, beating Canada and the U.K. for the first time, the Financial Times reported. Afghanistan's presidential election campaign begins today in preparation for voting Oct. 9 when 17 candidates will challenge President Karzai in the country's first nationwide election, the BBC reported. President Bush leads Senator Kerry by 11 percentage points, receiving a 13 point bounce, according to a poll conducted after the Republican National Convention, Newsweek reported. Tradesports.com is now showing a 61% chance of Bush's re-election versus 49% during the Democratic Convention. Russian President Putin vowed to strengthen his security forces to combat terrorism, as the number of dead from the school siege increased to at least 323, almost half of them children, Bloomberg reported. Capital spending in Japan rose 10.7% from a year earlier, prompting economists to raise their estimates for growth in the world's second-largest economy, Bloomberg reported. Former President Clinton, in a 90-minute telephone call from his hospital bed, gave Senator Kerry advice on how to revive his campaign, the NY Times reported. Wal-Mart said September sales are rising 2% to 4% as consumers bought more food, health and beauty products last week, Bloomberg said. Former President Clinton is recovering after undergoing successful heart bypass surgery at a NY hospital, Bloomberg reported. Crude oil futures are falling in New York after tropical storm Frances passed east of the main U.S. oil and natural gas-producing region in the Gulf of Mexico, Bloomberg said. Intel President Otellini today will outline plans for computer chips due next year that simultaneously run tasks such as burning CDs and playing video games as he seeks to allay concerns about product delays, Bloomberg said. Allstate, Ace and other insurers face $3 billion to $6 billion in losses from Hurricane Frances, a fraction of earlier estimates, after the storm weakened as it crossed Florida, storm modelers said.

Late-Night Trading
Asian indices are mixed, -.50% to +.50% on average.
S&P 500 indicated +.28%.
NASDAQ indicated +.18%.

BOTTOM LINE: I expect U.S. stocks to open higher in the morning on diminishing domestic terrorism fears, falling energy prices, pro-business political rhetoric and short-covering. The Portfolio is 125% net long heading into tomorrow.