Mid-day Report

S&P 500 1,172.29 -.42%
NASDAQ 2,071.72 -.65%

Leading Sectors
Oil Service +2.33%
Energy +1.13%
Restaurants +1.00%

Lagging Sectors
Broadcasting -.99%
Semis -1.14%
Biotech -1.18%

Other
Crude Oil 49.93 +2.65%
Natural Gas 6.82 +.93%
Gold 448.40 -.11%
Base Metals 118.79%
U.S. Dollar 82.86 -.40%
10-Yr. T-note Yield 4.14% -.87%
VIX 12.86 -.85%
Put/Call .86 +21.13%
NYSE Arms 1.14 +15.15%

Market Movers

Economic Data
Existing Home Sales for October were 6.75M versus estimates of 6.72M and 6.75M in September.

Recommendations

Mid-day News

Bottom Line: The Portfolio is modestly higher mid-day on strength in my security, internet, retail, oil service and Chinese ADR longs. I have not traded today and the Portfolio is still 125% net long. I will be looking to add semi, semi-equipment and networking stocks on any near-term weakness as these areas should outperform over the intermediate-term. The underlying tone of the market is mildly positive today considering losses in the major indices. I expect U.S. shares to rise modestly into the close on optimism over future economic growth.

Tuesday Watch

Earnings of Note
Company/Estimate
ADI/.33
DE/.99
DLTR/.28
EV/.52
HRB/-.16
HNZ/.59
MIK/.30
SEAC/.12
WIND/.03
TECD/.55

Splits
STJ 2-for-1
VIP 3-for-1

Economic Data
Existing Home Sales for October estimated at 6.72M versus 6.75M in September.

Recommendations
Goldman Sachs reiterated Outperform on EMC, GE, NUE, X, XRX and Underperform on MMC, ELX.

Late-Night News
Asian indices are higher, led by Hong Kong shares, as cyclicals in the region are advancing. Cendant Corp., the U.S. lodging and travel group, will build mid-priced hotels in Russia and other former Soviet Union states, the Financial Times said. Porsche AG has asked Toyota Motor for its gasoline-electric hybrid technology to use with its Cayenne sport-utility vehicles, the Asahi newspaper said. The Chicago Mercantile Exchange may be interested in buying Reuters Group Plc's Instinet Group, the Financial Times reported. The U.S. said terrorist attacks on U.S. interests may be "imminent" in the Indian cities of Mumbai and New Delhi, Agence France-Presse reported from Washington. McDonald's said CEO and President Charlie Bell has resigned, Bloomberg reported. U.K. authorities foiled a plan by al-Qaeda to carry out an attack on London's Canary Wharf similar to the Sept. 11, 2001 attacks on the World Trade Center, the Sun reported.

Late-Night Trading
Asian Indices are +.25% to +1.25% on average.
S&P 500 indicated +.08%.
NASDAQ 100 indicated +.10%

BOTTOM LINE: I expect U.S. equities to open higher in the morning on declining energy prices, a strong home sales report and more optimism. The Portfolio is 125% net long heading into tomorrow.

Monday Close

S&P 500 1,177.24 +.59%
NASDAQ 2,085.19 +.70%

Leading Sectors
Boxmakers +2.59%
Utilities +1.78%
Iron/Steel +1.42%

Lagging Sectors
Drugs +.12%
Biotech +.04%
Telecom -.38%

Other
Crude Oil 48.30 -.70%
Natural Gas 6.67 -1.29%
Gold 449.20 +.04
Base Metals 117.39 -.97%
U.S. Dollar 83.10 -.25%
10-Yr. T-note Yield 4.17% -.60%
VIX 12.97 -3.93%
Put/Call .71 -11.25%
NYSE Arms .99 -20.80%

After-hours Movers
SGTL +6.0% after boosting 4Q estimates.
CMNT +18.7% after substantially beating 3Q estimates.
DY -20.5% after missing 1Q estimates and lowering 2Q guidance.

Recommendations
Goldman Sachs reiterated Underperform on HMT, MHX and IHR.

After-hours News
U.S. stocks finished modestly higher today on optimism over future U.S. economic growth, short-covering and bargain-hunting. After the close, New York Democratic Attorney General Spitzer has told people that he plans to run for governor in 2006, the AP reported. BT Group Plc would de-list from the U.S. stock market due to the "great burden" of the cost of the Sarbanes-Oxley corporate governance legislation, the Financial Times reported. Viacom Chairman and CEO Redstone said he has "reason to believe" other suitors may be interested in buying video-game maker Midway Games, Bloomberg reported. Childhood obesity leads to enlarged heart muscles and a higher risk for heart failure later in life, according to a study published today by the American Heart Assoc. Citigroup agreed to sell its transportation-finance business to GE for about $4.4 billion in cash, Bloomberg reported. Owens-Illinois said its biggest shareholder, KKR, plans to sell all or some of its shares in the company "shortly", Bloomberg said. ABC's "Desperate Housewives" drama, featured in a promotion before last week's "Monday Night Football" that is being reviewed by the FCC, drew the best big-city ratings in its seven-episode history last night, Bloomberg reported. Marsh & McLennan may settle claims of rigged bids and kickbacks with a month, CEO Cherkasky said. Oracle said it is at an impasse with PeopleSoft, signaling the two software makers will wage a proxy battle to resolve Oracle's $8.8 billion takeover bid, Bloomberg reported.

BOTTOM LINE: The Portfolio finished slightly higher today on strength in my steel, internet and nanotechnology longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. The tone of the market improved throughout the day as and finished near their best levels. As well, small-caps and cyclicals outperformed and interest rates fell. Economic data should begin to exceed expectations over the next few weeks on more optimism, hurricane rebuilding, an end to the depressing effects of the election, larger year-end bonuses, lower commodity prices, pent-up demand, year-end budget flushes and corporate spending before tax incentives expire. I continue to expect U.S. stocks to rally at least through year-end with minor pullbacks along the way.

Mid-day Report

S&P 500 1,175.00 +.40%
NASDAQ 2,077.68 +.34%

Leading Sectors
Boxmakers +2.21%
Transports +1.36%
Iron/Steel +1.31%

Lagging Sectors
Semis -.14%
Telecom -.17%
Biotech -.33%

Other
Crude Oil 48.60 -.59%
Natural Gas 6.79 -4.57%
Gold 448.50 +.43%
Base Metals 117.39 -.97%
U.S. Dollar 83.16 -.18%
10-Yr. T-note Yield 4.16% -.83%
VIX 13.21 -2.15%
Put/Call .71 -11.25%
NYSE Arms 1.15 -8.0%

Market Movers
KKD -17.6% after missing 3Q estimates and BB&T downgrade to Underweight.
SIRI +11.0% on continued optimism over the hiring of Karmazin.
AAPL +10.3% after Piper Jaffray reiterated Outperform and raised target to $100 from $52.
AGIX -13.4% after the company said an experimental drug was ineffective in one of two tests.
TASR -6.8% on continued selling from worries over insider selling.
FRX -7.4% after BofA downgrade to Sell.
PCSA +22.4% after Alamosa Holdings offered to buy it for about $354.3 million in stock.
PTZ +15.2% after the company said it's considering a possible sale.
BTU +6.6% on continued optimism over demand for coal.
INCX +12.6% after announcing that it has licensed its Local Direct search and advertising platform to Internet Yellow Pages provider, MyePages.
ADBL +11.7% on Piper Jaffray upgrade to Outperform, target $35.
ACI +5.6% on continuing optimism over coal demand.

Economic Data
None of note.

Recommendations
-Goldman Sachs reiterated Outperform on AA and AMGN.
-Banc of America downgraded FRX to Sell, target $34.
-Citi SmithBarney reiterated Sell on SUP and GNTX. Citi reiterated Buy on BWA. Citi reiterated Buy on AIQ, target $12. Citi reiterated Sell on WOOF, target $18. Citi removed PBG, WMT and MDT from Recommended List and added JNJ, VIAB, L, DE and MAY. Citi reiterated Buy on DIS, target $31. Citi reiterated Sell on MYG, target $14. Citi reiterated Buy on UNM, target $20. Citi reiterated Attractive view of Oil Service sector, favorites remain RIG, DO, SII, SLB and BHI. Citi upgraded Semi/Semi Equipment sectors to Market Weight and raised Media sector to Overweight.
-UBS reiterated Reduce on GOOG.
-JP Morgan raised FO to Overweight.
-Deutsche Bank raised GCI to Buy, target $90. Deutsche rated HURN Buy, target $24.

Mid-day News
U.S. stocks are modestly higher mid-day on strength in computer and cyclical shares. Growth in U.S. employers' health-care costs rose 7.5% in 2004, the smallest such rise in five years, and may slow next year, the Wall Street Journal reported. U.S. local-telephone companies and satellite tv companies have been able to win customers from cable with packages combining phone and satellite service, the NY Times reported. NY's port is reversing a decades-long decline as Chinese imports increase, with container traffic up 65% from 1998, the NY Times reported. AOL will focus on increasing Internet ad revenue by promoting its free AOL.com Web site instead of primarily trying to build a subscriber base, the NY Times reported. EBay has begun using a direct-mail catalog to lure new customers to its Web site, hoping to duplicate the success of retailers such as Ice.com, which sells jewelry on the Internet, the NY Times reported. Advertising companies are expected to account for about $5.2 trillion, or 20%, of the U.S. economy in 2005, the Wall Street Journal reported. PIMCO last week sold some of its German government debt and bought U.S. Treasuries, Barron's reported. The third quarter's average one-way U.S. business airfare of $217, which is the lowest in five years of quarterly tracking, is also 11% less than the average fare for 2003, USA Today reported. Eastman Kodak shipped 990,000 consumer digital cameras in the third quarter, only 10,000 fewer than Sony, the U.S. market leader, the AP reported. California Democratic lawmakers plan to reintroduce bills to legalize same-sex marriages and allow illegal immigrants to get drivers' licenses when the legislative session begins Dec. 6, the San Jose Mercury News reported. Pfizer's Liptor, Merck's Zocor and Bristol-Myers' Pravachol carry low risk of a deadly side effect that led to the withdrawal of Bayer's Baycol, a FDA study found. The pentagon will open to new bidders a contract to provide aerial-refueling tankers to the U.S. Air Force after Congress withdrew an earlier proposal worth $23 billion to Boeing, Bloomberg reported.

Bottom Line: The Portfolio is slightly higher mid-day on gains in my steel, wireless and internet longs. I added some new security, internet, semi and networking longs this morning, bringing the Portfolio's market exposure to 125% net long. I added to my long TASR position and I am using a stop-loss of $48.15 on my new shares. The tone of the market has improved substantially from the open and I now feel the recent correction has run its course. I expect U.S. stocks to rise into the close on short-covering, bargain hunting and optimism over future U.S. economic growth.

Monday Watch

Earnings of Note
Company/Estimate
BRCD/.06
CPB/.52
KKD/.13
TIVO/-.43
TOY/-.15

Splits
None of note.

Economic Data
None of note.

Weekend Recommendations
Louis Rukeyser's Wall Street had guests that were positive on MMM, CSCO, WFMI, GE, SAP, INTC, MSFT, DISH and AIG. Forbes on Fox had guests that were positive on JWN, COH, GM and mixed on FD, MAY, ACE. Cashin' In had guests that were positive on GWR, MEE, CWT, PNX, PKZ, ELN, FRO, negative on AIG, KKD and mixed on EV. Barron's had positive comments on JNJ, PFE, MRK, NOC, HL, HZO, NEM and SAP. Goldman Sachs reiterated Outperform on BBY, CAL, EBAY and Underperform on BA.

Weekend News
The Paris Club group of creditor governments agreed to write off about 80% of Iraqi debt, Agence France-Presse reported. Rofin-Sinar Technologies, a laser maker trading in Germany and the U.S., may make acquisitions as it adds products and expands in markets including Asia, CEO Wirth told the Boersen-Zeitung. Television production in the LA-area has risen 29% this year from the year-earlier period, helped by an increase in reality and cable-tv shows, the LA Times reported. European leaders have appeared optimistic to news Condoleezza Rice will replace Colin Powell as U.S. secretary of state, the NY Times reported. Coal production is increasing amid U.S. concern supplies of natural gas, electricity's other main fuel source, won't keep pace with demand, the NY Times reported. U.S. casino companies, such as Las Vegas Sands Inc., boosted by strong results in their Las Vegas markets, will likely perform even better as more ventures open in Macau and draw gamblers from Asia, Barron's reported. Mobile phone companies' revenue from carrying voice calls will fall 70% to 80% by 2010 as customers switch to using cheaper voice over Internet technology, the Sunday Times newspaper reported. State governments are seeking to cut the costs of purchasing drugs for Medicaid patients through a variety of initiatives, setting the stage for a showdown with the pharmaceutical industry, the NY Times reported. Ford sold 5,500 of its new model Focus car in Germany in the first seven days it was for sale, Automobilwoche said. The Port of Seattle's cargo volume is soaring this year and may set a record because of traffic congestion at Southern California waterway entries and the nation's trade with China, the Seattle Times said. More than 700 union officials representing New Jersey and Pennsylvania workers were paid more than $100,000 last year, the Philadelphia Inquirer said. NTT DoCoMo is focused on reviving its flagging stock price with a new pricing plan and technological innovations, Barron's reported. Foreigners have been taking advantage of a weaker dollar to buy up NYC real estate, reported Crain's New York Business. A slowdown in China's economy may benefit steelmakers because it would make over-investment in new projects less likely, the Financial Times reported. China, which has more mobile phone subscribers than the U.S. population, may fuel growth in the telecom industry as the country upgrades its networks, Bloomberg reported. President Bush said he is committed to a "strong dollar" and cutting the U.S. budget deficit, Bloomberg said. China, the world's largest coal producer and user, plans to spend $10 billion over the next decade on plants that turn coal into motor fuel, Bloomberg reported. Oil inventories should begin to rise soon, as refinery capacity comes back online, resulting in falling crude prices, the EIA said. General Electric won a contract valued at $200 million over eight years to provide digital imaging systems to more than 70 U.K. National Health Service hospitals and clinics, the Wall Street Journal reported.

Late-Night Trading
Asian indices are lower, -2.25% to -.50% on average.
S&P 500 indicated -.28%.
NASDAQ 100 indicated -.51%.

BOTTOM LINE: I expect U.S. stocks to open modestly lower in the morning on continued profit taking, losses in Asia and rising energy prices. The Portfolio is 75% net long heading into tomorrow.

Chart of the Week

CPI/PPI

Bottom Line: While some measures of inflation have spiked recently, due mainly to the effects of the hurricanes, they are not even to levels seen in 2000. As well, it is highly unlikely the CRB index, the broadest measure of commodity prices, will continue to rise near recent rates. The rise in commodity prices has been the main source of inflation thus far. Unit labor costs, which account for more than 70% of inflation, have remained well-contained.