Tuesday Close

S&P 500 1,175.43 -.71%
NASDAQ 2,078.62 -.74%

Leading Sectors
Oil Service +.59%
Broadcasting +.33%
Utilities +.02%

Lagging Sectors
Retailers -1.72%
Homebuilders -1.94%
Airlines -2.31%

Other
Crude Oil 46.15 +.09%
Natural Gas 7.12 -.06%
Gold 439.80 -.16%
Base Metals 117.13 -.76%
U.S. Dollar 83.84 +.05%
10-Yr. T-note Yield 4.21% unch.
VIX 13.21 -1.27%
Put/Call .69 +27.78%
NYSE Arms 1.69 +57.94%

After-hours Movers
NTAP +10.3% after beating 2Q estimates and raising 3Q outlook.
HPQ +7.8% after beating 4Q estimates and raising 1Q/2Q 05 guidance.
VNUS +4.8% after meeting 3Q estimates and raising 4Q outlook.

Recommendations
Goldman Sachs reiterated Outperform on HD.

After-hours News
U.S. stocks finished modestly lower today on profit-taking and inflation worries. After the close, Walt Disney is preparing to begin work on a sequel to Pixar Animation Studios' "Toy Story", a move that may make it difficult for Disney to resume negotiations to extend Pixar's distribution agreement, the Hollywood Reporter said. European government bonds offer the best prospects for returns because the region's economy is slowing and inflation is slower than in the U.S., PIMCO's Mark Keisel told CNBC. President Bush phoned Sudan's president and its rebel leader today, asking them to halt two decades of civil war and urging an end to attacks on Africans by government-backed Arab militias, Bloomberg reported. Ohio will recount ballots cast in the Nov. presidential election next month after the Green and Libertarian parties raised more than the $113,600 required to fund the process, the AP reported. The Association of Flight Attendants representing workers at United Airlines, US Airways Group and 24 other carriers, plans to call for a nationwide strike if any airline uses bankruptcy to scrap a contract with attendants, Bloomberg said. Hewlett-Packard said fourth-quarter profit rose 27%, beating analyst estimates, as sales of servers and storage devices rebounded, Bloomberg said. India will start reducing its military contingent in the disputed territory of Kashmir starting today to coincide with a visit to the region by Prime Minister Singh, Agence France-Presse reported. A taped promotion showing a naked actress from ABC's "Desperate Housewives" embracing Philadelphia Eagles receiver Terrell Owens was "inappropriate and unsuitable" for "Monday Night Football's" audience, the NFL said. Network Appliance said second-quarter net income rose 14% and sales jumped, Bloomberg reported. Crude oil futures fell near a two-month low amid speculation a report will show U.S. oil and fuel inventories rose last week, easing concern about lean supplies during the winter, Bloomberg reported.

BOTTOM LINE: The Portfolio finished lower today on weakness in my internet, retail and Chinese ADR longs. I exited some long positions in the afternoon as they hit stop-losses, thus leaving the Portfolio 100% net long. Today's mild declines were mainly a result of profit-taking as the action in the bond market suggested investors believe the current elevated inflation readings to be temporary. A few days of declines and consolidation would help eliminate some of the complacency that has built over the last several weeks. However, HPQ and NTAP are responding quite favorably to their earnings' reports after the close.

Mid-day Update

S&P 500 1,177.18 -.56%
NASDAQ 2,078.78 -.73%

Leading Sectors
Oil Service +.88%
Utilities +.28%
Energy +.15%

Lagging Sectors
Retail -1.47%
Airlines -1.82%
Homebuilders -1.84%

Other
Crude Oil 46.70 -.36%
Natural Gas 7.20 -3.17%
Gold 440.40 +.71%
Base Metals 117.99 -.03%
U.S. Dollar 83.75 -.30%
10-Yr. T-note Yield 4.21% +.64%
VIX 13.36 -.15%
Put/Call .60 +11.11%
NYSE Arms 1.48 +38.32%

Market Movers
RMBS +17.1% after a federal judge issued a ruling defining terms in a patent dispute with Hynix Semiconductor.
GOOG -4.3% after a lock-up on 39.1 million insider shares expired.
CTMI +30.0% after beating 4Q estimates substantially and raising 1Q guidance.
ELOS +5.4% after announcing that its Vela system for non-invasive cellulite treatment has received Medical CE Mark 0344 approval.
GGC +5.7% after CSFB upgrade to Outperform.
IFIN +7.9% after beating 3Q estimates and giving strong 04 outlook.
FNF +9.3% on speculation the company may draw bids of $9 billion from Thomas H. Lee Partners and Texas Pacific.
TSRA +13.1% after agreeing to settle a lawsuit with Samsung.
NILE -12.1% after announcing the intention of insiders to sell.
INSP -9.3% on Raymond James downgrade to Outperform.
XIDE -19.3% after missing 2Q estimates.
ESE -6.8% after beating 4Q estimates and lowering 05 guidance.

Economic Data
Producer Price Index for October rose 1.7% versus estimates of a .6% increase and a .1% gain in September.
PPI Ex Food & Energy for October rose .3% versus estimates of a .1% gain and a .3% rise in September.

Recommendations
-Goldman Sachs reiterated Outperform on CSCO, HD and WMT.
-Citi SmithBarney reiterated Buy on FNM, target $81. Citi reiterated Sell on FRO, target $28. Citi reiterated Buy on MSFT, target $32. Citi reiterated Buy on PRE, target $69. Citi reiterated Buy on HD, target $70. Citi reiterated Buy on GE, target $38.
-JP Morgan raised ARM to Overweight.
-Banc of America rated PLB Sell, target $14. BofA rated ILSE Buy, target $22.
-Prudential rated AAP Overweight, target $44. Pru rated ORLY Overweight, target $48. Pru rated AN Underweight, target $15.
-CSFB raised GGC to Outperform, target $64. CSFB raised NCX to Outperform, target $52.

Mid-day News
U.S. stocks are quietly lower mid-day on profit-taking and a higher inflation reading. Take-Two Interactive Software's ESPN sports games have been able to gain market share against better-known titles from Electronic Arts, including its Madden football franchise, the Wall Street Journal reported. Commerce One is set to sell 39 patents covering aspects of Internet transactions in a bankruptcy court auction next month, the NY Times reported. Side air bags and an automatic brake feature are the two most important car safety features, the NY Times reported, citing recent studies. IBM will help finance a project to use the spare power of personal computers for research on AIDS, cancer and other diseases, the NY Times said. The number of births among U.S. girls ages 10-14 fell 38% from 1994 to 2002 to the lowest level in almost 60 years, the AP reported. U.S. Homeland Security Dept. Secretary Tom Ridge will resign, and Health and Human Services Secretary Tommy Thompson will also step down, Fox News reported. CIT Group plans to expand its international business and improve the U.S. leasing company's brand and name recognition in the U.K. and Europe, the Star-Ledger reported. Janus Capital plans to introduce three funds next year, including the Janus Research Fund in February, to win back customers and attract new ones, Reuters reported. Hedge funds attracted $46.6 billion during the first nine months of this year and more than half the money went to middlemen who don't personally oversee the funds, Bloomberg reported. Home Depot said third-quarter earnings climbed 15%, topping estimates, because of demand for installation services and higher sales during hurricane season, Bloomberg said. Wal-Mart said third-quarter profit rose 13%, helped by a tax credit, Bloomberg reported. International investors increased their holdings of U.S. assets in September by $63.4 billion, the most since June, as foreign demand for corporate bonds and U.S. Treasury securities rose, Bloomberg reported. SBC Communications will begin a residential Internet-based phone service in early 2005 to keep customers from switching to other carriers, Bloomberg said. Prices paid to U.S. producers rose 1.7% last month, the biggest jump in 14 years, as energy prices rose, Bloomberg said. Gasoline futures are falling for a third day in four amid speculation that rising refinery production will keep the U.S. amply supplied with fuel, Bloomberg said.

Bottom Line: The Portfolio is lower mid-day on declines in my internet, retail and Chinese ADR longs. I have not traded today and the Portfolio is still 125% net long. While the tone of the market is mildly negative today, volume is lighter and the advance/decline line isn't that bad. The PPI was likely just an excuse for profit-taking after a large run. Measures of inflation, while rising in the short-run, should begin decelerating again towards year-end on a decline in energy prices. The muted reaction by the bond market echoes this view. I expect U.S. equities to rise into the close on short-covering, bargain-hunting and declining energy prices.

Tuesday Watch

Earnings of Note
Company/Estimate
BJ/.31
BGP/-.02
HPQ/.37
HD/.56
JCP/.48
NTAP/.14
JWN/.46
SKS/.04
SPLS/.40
WMT/.54
ZLC/-.21

Splits
DVN 2-for-1
NFB 3-for-2

Economic Data
Producer Price Index for October estimated up .6% versus a .1% gain in September.
PPI Ex Food & Energy for October estimated up .1% versus a .3% increase in September.
NAHB Housing Market Index for November estimated at 70 versus a reading of 72 in October.

Recommendations
Goldman Sachs reiterated Underperform on SMP, AMCC and VRTX.

Late-Night News
Asian indices are mostly lower as stocks in the region consolidate recent gains. President Bush will name Condoleezza Rice secretary of state tomorrow, Fox News reported. Chunghwa Telecom, Taiwan's largest phone company, this month will sign an accord with eight U.S. movie companies, including Time Warner, for rights to provide their movies on its movies-on-demand channel, Economic Daily reported. The number of millionaires in the U.S. rose 33% from a year earlier because of stock market gains, the Wall Street Journal reported. There were 8.2 million U.S. households with a net worth of more than $1 million excluding their primary residence as of the middle of the year, 2 million more than a year earlier, the newspaper said. Israel is ready to work with a "responsible" Palestinian Authority leadership on coordinating an Israeli plan to withdraw settlements from the Gaza Strip and West Bank, Bloomberg reported. Buyout firms Thomas H. Lee Partners and Texas Pacific Group may each bid $9 billion for Fidelity National, the largest U.S. title insurance company, the NY Times reported.

Late-Night Trading
Asian Indices are -.50% to unch. on average.
S&P 500 indicated -.12%.
NASDAQ 100 indicated -.16%

BOTTOM LINE: I expect U.S. equities to open mixed-to-weaker in the morning and head modestly higher by day's end. The Portfolio is 125% net long heading into tomorrow.

Monday Close

S&P 500 1,183.81 -.03%
NASDAQ 2,094.09 +.42%

Leading Sectors
Airlines +3.47%
Homebuilders +2.06%
HMOs +1.88%

Lagging Sectors
Commodity -1.13%
Energy -2.18%
Oil Service -3.22%

Other
Crude Oil 46.72 -.32%
Natural Gas 7.43 -.01%
Gold 437.00 -.07%
Base Metals 118.03 -.23%
U.S. Dollar 84.00 +.37%
10-Yr. T-note Yield 4.19% +.18%
VIX 13.38 +.38%
Put/Call .54 -28.0%
NYSE Arms 1.07 +28.92%

After-hours Movers
LTON +17.2% after beating 3Q estimates and raising 4Q guidance.
LMIA +10.2% on continued optimism over 2005 outlook.
BOBE -3.7% after meeting 2Q estimates and lowering 2005 guidance.

Recommendations
Goldman Sachs reiterated Outperform on GE and Underperform on PSS, FISV.

After-hours News
U.S. stocks finished mixed today on a consolidation of recent gains. After the close, Skype Technologies SA, the European Internet telephone company, is to start an alliance with Tom Online to enter China's expanding online market, the Financial Times said. Wynn Las Vegas plans to sell $1.1 billion of 10-year first mortgage notes to repay other debt, according to S&P. The U.K. government will introduce a smoking ban in England to include all restaurants and bars that serve food and all enclosed public and work places, the BBC reported. Hedge fund manager Leon Cooperman acquired a 2.8% stake in MCI in the third quarter, making the No. 2 U.S. long-distance phone carrier his largest single stock holding, Bloomberg reported. Steel prices are set to add to gains as supplies remain tight because of surging China demand, said the president of Nippon Steel, the world's third-largest steelmaker. Lionel LLC, a maker of model trains for more than 100 years, filed for bankruptcy protection today, Bloomberg said. Fannie Mae said third-quarter profit rose 1% to $1.85 billion and that it won't meet the SEC's deadline for filing financial statements, Bloomberg reported.

BOTTOM LINE: The Portfolio finished higher today on gains in my security, semi, Chinese ADR and Indian ADR longs. I took profits in one of my internet longs in the afternoon and added VECO long, thus leaving the Portfolio 125% net long. I am using a $19.5 stop-loss on this position. The tone of the market improved modestly into the afternoon, notwithstanding a rebound in oil prices from morning lows. As I forecasted earlier in the year, the Bloomberg Homebuilding Index clearly broke its old all-time high today. While these stocks are a little extended in the short-term, they should continue to perform well over the intermediate-term. U.S. stocks will likely remain mixed-to-higher over the next few days, consolidating recent gains, before another substantial upwards move occurs around Thanksgiving.

Mid-day Update

S&P 500 1,181.22 -.25%
NASDAQ 2,086.67 +.07%

Leading Sectors
Airlines +3.05%
Homebuilders +2.24%
Networking +1.80%

Lagging Sectors
Commodity -1.31%
Energy -2.30%
Oil Service -3.07%

Other
Crude Oil 45.65 -3.53
Natural Gas 7.12 -.78%
Gold 437.30 -.23%
Base Metals 118.03 -.23%
U.S. Dollar 84.07 +.45%
10-Yr. T-note Yield 4.19% +.37%
VIX 13.59 +1.95%
Put/Call .50 -33.33%
NYSE Arms .89 +7.23%

Market Movers
RHAT +14.9% on First Albany upgrade to Buy.
TASR +4.3% after saying that TASER technology was approved for trials by the South Korean National Police Agency and a successful presentation last week in Johannesburg, South Africa.
BOOM +51.4% on continuing optimism over 4Q outlook.
NYNY +23.8% after saying it agreed to buy the Concord and Grossinger's to develop American Indian casinos and hotels.
WLS +21.5% after announcing an increase in stock buyback program to 3M shares.
DWSN +20.8% on Raymond James upgrade to Outperform.
PIXR +4.8% after it movie "The Incredibles" remained the top movie at U.S. and Canadian theaters this weekend.
INCX +13.0% after announcing the appointment of George Kellerman, formerly with Yahoo! Japan, as senior vp of business development.
BKS -29.7% after missing 3Q estimates and lowering 4Q outlook.
*Oil Service stocks down across the board on crude decline.

Economic Data
Empire Manufacturing for November rose to 19.76 versus estimates of 20.6 and a reading of 17.43 in October.

Recommendations
-Goldman Sachs reiterated Outperform on KRB, DIS, FSH and AET. Goldman reiterated Underperform on UNM and CI. Goldman upgraded ABX to Outperform.
-Citi SmithBarney said to Buy MATK on weakness, target $70. Citi reiterated Buy on TYC, target $40. Citi reiterated Sell on MYG, target $14. Citi reiterated Buy on NT, target $5. Citi reiterated Buy on HAL, target $48. Citi reiterated Buy on WMT, target $65.
-CSFB downgraded CAG and HNZ to Underperform. CSFB raised ADM to Outperform, target $25.
-Morgan Stanley raised NNDS to Overweight, target $34.50.
-Legg Mason raised RKY to Buy, target $86.
-Banc of America raised MHS to Buy, target $45. BofA rated TXRH Buy, target $28.
-Raymond James raised DWSN to Outperform, target $35.
-Bear Stearns rated GS Outperform. Bear downgraded TS to Underperform.

Mid-day News
U.S. stocks are quietly mixed today as optimism over falling energy prices is being offset by profit-taking. Warner Brothers film studio made some bets with films such as "Polar Express" that may prove to be costly given the movie's weak box-office results over the weekend, the NY Times reported. Wm. Wrigley Jr. Co. agreed to buy the Altoids mints and Life Savers business from Kraft Foods for almost $1.5 billion to gain a greater share of the candy market, the Wall Street Journal reported. Iran will suspend uranium enrichment-related activities starting Nov. 22, Agence France-Presse reported. Passengers of some of the largest U.S. airlines are facing longer wait times between connecting flights as carriers try to cut cost, USA Today reported. U.S. officials began taking fingerprints and photographs of some visitors today at three border crossings with Canada and Mexico in a bid to boost security, the Canadian Broadcasting Corp. reported. U.S. Secretary of State Colin Powell announced his resignation, according to Fox News. General Electric agreed to buy SPX Corp.'s Edwards Systems Technology business for about $1.4 billion in cash to add fire detection and building safety systems to its three-year-old security systems unit, Bloomberg reported. Merck CEO Gilmartin said the drugmaker acted appropriately in pulling the Vioxx painkiller from the market, and he has no intention of resigning his position, Bloomberg said. Sun Micro will give away its newest operating system to generate more sales from service contracts, Bloomberg said. Saddam Hussein pocketed as much as $21.3 billion under United Nations sanctions designed to isolate the dictator before the U.S.-led liberation of Iraq. The Senate Permanent Subcommittee on Investigations said Hussein's take included $17.3 billion in money from the UN oil-for-food program, Bloomberg reported. American Express said it sued Visa and MasterCard for imposing rules, later overturned by the courts, that barred thousands of banks from issuing its credit card, Bloomberg said. Crude oil is falling to the lowest in almost two months after Iran, OPEC's second-biggest oil producer, said it would stop enriching uranium that could be used in nuclear weapons, to ward off U.S. calls for sanctions, Bloomberg said.

Bottom Line: The Portfolio is slightly higher mid-day on gains in my security, Chinese ADR and Indian ADR longs. I have not traded today and the Portfolio is still 125% net long. The tone of the market is mildly positive today. However, measures of investor anxiety are at levels normally associated with a period of consolidation after recent outsized gains. A rotation out of energy stocks and into technology shares will likely continue in the intermediate-term. I expect U.S. stocks to trade mixed-to-weaker into the afternoon.

Monday Watch

Earnings of Note
Company/Estimate
LOW/.65
TSN/.17

Splits
None of note.

Economic Data
Empire Manufacturing for November estimated at 20.6 versus 17.43 in October.

Weekend Recommendations
Louis Rukeyser's Wall Street had guests that were positive on MMM, ADI, BMET and JOE. Wall St. Week w/Fortune had guests that were positive on PEI and SPG. Forbes on Fox had guests that were positive on ADP, TSN and mixed on BA, HET, CNX, GLW. Cashin' In had guests that were positive on MAR, negative on KMG, MVL and mixed on GPS. Bulls and Bears had guests that were positive on ZLC, FLR, BAB, HD, AMZN, ACF, INTC and mixed on HAL, CX, MSFT, BBBY, SBUX. Barron's had positive columns on FDO, NOK and CLS. Goldman Sachs reiterated Outperform on EBAY, AMD, ATYT, VLTR, MRVL, BBY and Underperform on AMCC, ELX, MMC, ATG. Banc of America upgraded MHS to Buy. Business Week had a positive column on KMRT.

Weekend News
England will limit a smoking ban to restaurants and pubs that serve food, the Financial Times said. Europe will only grow an average of 2% this year and the pace of economic expansion may rise slightly above 2% in 2005, said a board member of the European Central Bank. More than 1,000 insurgents were killed in a six-day joint U.S. and Iraqi assault to take control of the rebel stronghold of Fallujah in western Iraq, Agence France-Presse reported. The U.S. Pentagon is planning to build its own, secure Internet that will give the military real-time access to war intelligence and satellite imagery worldwide, the NY Times reported. Advanced Micro Devices CEO Hector de Jesus Ruiz expects the market for personal computers to expand by 10% in 2005, the San Francisco Chronicle reported. Nicaragua agreed to destroy its entire arsenal of portable antiaircraft missiles, which Pentagon officials say are prized by terrorists, the NY Times reported. U.S. toy retailers, including Toys "R" Us and Wal-Mart have begun dropping prices in a bid to attract more shoppers heading into the holiday season, the Washington Post reported. Schering-Plough has told its 30,500 employees it will resume paying bonuses and end a salary freeze due to its improved financial results, the Star-Ledger reported. Most technology stocks may face a slowdown in consumer and corporate demand for their products next year amid higher interest rates and oil prices, Barron's reported. Saudi Arabia's royal family has warned the U.K. it will not deal with Britain's arms industry again if its members are embarrassed by a fraud inquiry, the Sunday Telegraph reported. Fomento de Construcciones y Contratas, a Spanish builder, won a $31 million 10-year contract from the city of Boston to design and manage bus stops, Spanish newspaper ABC reported. Apple Computer faces competition in Britain to its iPod from a device build by Medion AG that will sell in a U.K. supermarket, the Business newspaper reported. U.S. Senator Harry Reid of Nevada, who is set to become the Democratic leader in the Senate, takes stands on some issues that are closer to Republicans than most members of his own party, the NY Times reported. Venture capital investments in Silicon Valley companies slid 35% in the third quarter compared with the second quarter, the San Jose Mercury News reported today. Palestinian leader Arafat allegedly diverted $2 million a month from gasoline trade in the Palestinian territories, Time magazine reported. Microsoft Chairman Gates wants to dominate the market for digital portable music in which Apple Computer set the standard with the iPod, the NY Times reported. Iran has agreed to a full suspension of uranium enrichment, Agence France-Presse reported. Inco and Phelps Dodge are considering bids for WMC Resources, the Australian Financial Review reported. New Internet-based employment services such as Monster.com may provide better insight into job growth in the U.S. than traditional economic indicators, the NY Times reported. Coca-Cola plans to make China its third-biggest market by 2008, the International Finance News reported. The number of U.S. inmates sentenced to death fell to a 30-year low last year, the AP reported. Global sales of semiconductors will growth 9.6% next year, the Economic Daily reported. China's central bank Governor Xiaochuan said the economy has avoided a hard landing, with monetary indicators returning to normal and growth remaining fast, the China Securities Journal reported. Nearly twice as many companies were subject to shareholder litigation in the third quarter of 2004 than last year, the Financial Times reported. British Prime Minister Blair will use a foreign policy speech to urge Europe to unite with the U.S. under the banner of democracy to defeat global terrorism, the Financial Times said. Dow Jones agreed to buy MarketWatch.com for about $486 million, the NY Times said. California Governor Schwarzenegger and other immigrants should be allowed to run for president, according to tv commercials that will begin airing next week, the LA Times reported. The U.S. and China have the closest relationship in more than 30 years, Secretary of State Colin Powell said. Shipping rates for oil tankers hauling crude from the Middle East to refineries worldwide may rise to records this week because of a lack of vessels for December cargoes, Bloomberg said. De Beers foresees rising prices for diamonds as production falls short of demand, Bloomberg said. China's retail sales rose 14.2% last month at their fastest pace in five months, climbing to a record as rising incomes made cars, cell phones and computers more affordable, Bloomberg reported. Perrigo agreed to buy Israel-based Agis Industries for $818 billion in cash and stock, Bloomberg said. U.S. companies including GM, DuPont and Xerox are cutting carbon dioxide emissions to remain competitive in European countries, Bloomberg reported.

Late-Night Trading
Asian indices are higher, +.25% to +1.50% on average.
S&P 500 indicated +.11%.
NASDAQ 100 indicated +.13%.

BOTTOM LINE: I expect U.S. stocks to open modestly higher in the morning on gains in Asia, falling energy prices and short-covering. The Portfolio is 125% net long heading into tomorrow.