Tuesday Close

S&P 500 1,177.07 -1.11%
NASDAQ 2,114.66 -1.70%

Leading Sectors
Hospitals +.31%
Drugs -.57%
I-Banks -.58%

Lagging Sectors
Software -2.24%
Iron/Steel -2.84%
Disk Drives -3.14%

Other
Crude Oil 41.53 +.17%
Natural Gas 6.65 +.44%
Gold 452.40 -.29%
Base Metals 117.98 +.62%
U.S. Dollar 81.24 -.05%
10-Yr. T-note Yield 4.22% unch.
VIX 13.67 +3.64%
Put/Call .73 -3.95%
NYSE Arms 1.52 +53.54%

After-hours Movers
STX +10.6% after boosting 2Q estimates substantially.

Recommendations
Goldman Sachs reiterated Outperform on INTC, PFE and HOT.

After-hours News
U.S. stocks finished lower today on profit-taking and worries over global growth. Crude oil fell to the lowest in more than four months on speculation that warm weather and increased refinery production bolstered U.S. heating-oil stockpiles last week, Bloomberg said. The California Public Employees' Retirement System, the largest U.S. pension fund, agreed to disclose the fees it pays to venture capital and hedge fund managers as part of a legal settlement, Bloomberg reported. Texas Instruments narrowed its fourth-quarter sales forecast because industrial customers for its chips continue to reduce inventory, Bloomberg said. Axa SA, Manulife Financial and other global life insurers are preparing for rule changes in China this week that will give them greater access to a $50 billion market that is growth at more than 20% a year, Bloomberg said. General Motors will add rebates on many models starting Dec. 10 to attract buyers after U.S. sales fell 16% in November, Bloomberg reported. Global aluminum prices may rise after China said it will curb output to try to prevent a repeat of power shortages next year, Bloomberg reported. U.S. Representative Allen Boyd became the leading Democrat to endorse President Bush's plan to create private Social Security accounts, Bloomberg reported. The U.S. House of Representatives approved legislation reorganizing the nation's intelligence agencies and creating the job of national intelligence director to oversee efforts to thwart terrorist attacks, Bloomberg said.

BOTTOM LINE: The Portfolio finished lower today and I pared a number of long positions in various sectors, thus lowering market exposure to 50% net long. The tone of the market was poor today as volume increased and the advance/decline line was very weak, finishing at it lows for the day. As well, measures of investor complacency remained elevated. U.S. stocks will likely weaken further in the near-term. However, I do not anticipate a substantial pullback from current levels. As well, I foresee a resumption of the recent rally closer to year-end. Thus, I will look to rebuild long exposure into any near-term weakness.

***Alert***

There will not be a Mid-day Report today as I have a scheduling conflict. The Tuesday Close will be posted at its regular time. Sorry for the inconvenience. I have exited a number of long positions in various sectors as they hit my stops, thus leaving the Portfolio 50% net long. Today's action is negative and I expect further near-term weakness before another rally commences into year-end.

Tuesday Watch

Earnings of Note
Company/Estimate
HOV/2.07
UTIW/.56
SAFM/.22

Splits
None of note.

Economic Data
Final 3Q Non-farm Productivity estimated to increase 2.0% versus a 1.9% prior estimate.
Final 3Q Unit Labor Costs estimated to rise 1.6% versus a 1.6% prior estimate.
Consumer Credit for October estimated at $6.0B versus $9.9B in September.

Recommendations
Goldman Sachs reiterated Outperform on BBY. Goldman reiterated Underperform on PBG, NFB and SLG.

Late-Night News
Asian indices are mostly lower on worries over slowing Chinese growth and a bounce in oil prices. Johnson & Johnson is in advanced talks to buy Guidant Corp. for more than $24 billion, the NY Times reported. China shut 16,400 mining companies after a government investigation uncovered widespread violations of environmental regulations, the China Daily reported. OAO Gazprom, the world's biggest natural gas producer, has received about $4 billion in investment from hedge funds in anticipation that Russian barriers to international investment are about to be eased, the Financial Times said. Lenovo Group Ltd., China's largest computer maker, may say this week it will pay $2.0 billion in cash and stock for IBM's personal-computer business, the Financial Times said. Central bank governor Xiaochuan says China is facing a financial crisis if non-performing loans continue to build up, the China Securities Journal reported. The US is against moves by Taiwan to drop references to China in its official name, saying it would disrupt the status quo in cross-Strait relations, Agence France-Presse reported. Ukraine's President Kuchma said he agreed that a new election law aimed at ending voting fraud must be in effect before the Dec. 26 re-run of the disputed presidential election, Bloomberg reported. Japan will probably extend its troop deployment in Iraq beyond Dec. 14 when authorization for the current mission expires, Chief Cabinet Secretary Hosoda told a news conference in Tokyo.

Late-Night Trading
Asian Indices are -.75%. to unch. on average.
S&P 500 indicated -.04%.
NASDAQ 100 indicated unch.

BOTTOM LINE: I expect U.S. equities to open modestly higher on strength in technology and medical-related shares. The Portfolio is 125% net long heading into tomorrow.

Monday Close

S&P 500 1,190.25 -.08%
NASDAQ 2,151.25 +.15%

Leading Sectors
Disk Drives +2.09%
Boxmakers +1.77%
Utilities +.79%

Lagging Sectors
Iron/Steel -.97%
Foods -1.07%
Airlines -1.64%

Other
Crude Oil 43.08 +.23%
Natural Gas 6.95 +.46%
Gold 454.00 -.42%
Base Metals 117.25 +.04%
U.S. Dollar 81.28 +.37%
10-Yr. T-note Yield 4.22% -.69%
VIX 13.19 +1.77%
Put/Call .76 +10.14%
NYSE Arms .99 -27.74%

After-hours Movers
SNRR +9.6% after reporting strong 3Q results.
CRDN +5.4% after saying it will take the place of INVN in the S&P 600 Index.
IDBE +4.2% after CEO Holler told CNBC the company may be able to capture a fifth of the market for flu vaccines in the U.S. by the end of the decade.
DBRN -8.9% after the company said it plans to issue $100 million in notes convertible to stock.
VSTA -6.7% after meeting 3Q estimates and lowering 05 guidance.

Recommendations
Goldman Sachs reiterated Outperform on MO and UTX. Goldman reiterated Underperform on SAY and NAV. Goldman rated AAPL In-Line seeing FY06 eps of $1.85, above consensus.

After-hours News
U.S. stocks finished quietly mixed today as strength in the technology sector was offset by weakness in consumer-oriented groups. Martha Stewart Living Omnimedia is in final in final discussions with NBC Universal to distribute a new tv show starring the company's imprisoned founder, the Hollywood Reporter said. The prevalence of obesity among 2-to-5 year-olds from low-income families rose between 1989 and 2000, increasing the risk that chronic health problems will afflict them as adolescents and adults, according to a study published in the Archives of Pediatrics & Adolescent Medicine. The dollar rose after Japanese Vice Finance Minister Hosokawa signaled Japan may sell its currency to slow the yen's appreciation, Bloomberg said. Republicans in the U.S. House of Representatives reached agreement on legislation reorganizing U.S. intelligence agencies, clearing the way for a final vote on the bill as early as tomorrow morning, Bloomberg reported. A New York jury agreed with World Trade Center leaseholder Larry Silverstein that the attack on the twin towers by a pair of hijacked plans was two insurable events, requiring nine companies to pay as much as double their policy limits, Bloomberg reported.

BOTTOM LINE: The Portfolio finished unchanged today as gains in my internet and Russian ADR longs offset losses in my retail, restaurant and security longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. Today's action appeared to be a further consolidation of recent gains as volume declined and sector performance was mixed. I continue to expect technology stocks to lead the major US indices higher this week.

Mid-day Report

S&P 500 1,188.73 -.20%
NASDAQ 2,148.71 +.03%

Leading Sectors
Disk Drives +1.24%
Boxmakers +.86%
Software +.41%

Lagging Sectors
Retail -.96%
Foods -1.09%
Airlines -1.31%

Other
Crude Oil 42.95 +1.08%
Natural Gas 6.84 +.72%
Gold 456.10 -.26%
Base Metals 117.25 +.04%
U.S. Dollar 81.11 +.16%
10-Yr. T-note Yield 4.22% -.55%
VIX 13.40 +3.40%
Put/Call .74 +7.25%
NYSE Arms 1.11 -18.98%

Market Movers
CGTK -57.4% after saying a product its developing with BMY to treat vein-graft failure of the heart and leg didn't work in a late-stage trial.
SOL +24.6% after Carl Zeiss AG and EQT Partners AB agreed to buy it for $815 million in cash.
DVA +9.9% after the Wall Street Journal reported it was nearing an agreement to buy the dialysis operations of Gambro AB for about $3 billion.
OSTK +5.0% on short-covering after continuing strong holiday sales.
GYI +3.9% after positive comments about the company on Rukeyser's Wall Street.
IMDC +4.0% after announcing it silicone gel-filled breast implants PMA will be reviewed at an upcoming FDA panel meeting.
SHOP -13.3% after Deutsche Bank rated it Sell, target $20.
LNG -6.3% on profit-taking.

Economic Data
None of note.

Recommendations
-Goldman Sachs reiterated Outperform on COH, ACN, AMLN, BBY, WLP, DDR, NKE, RIO. Goldman upgraded CVRD to Outperform.
-Citi SmithBarney said to Buy CIT, target $50. Citi thinks another bidder for S will emerge. Citi reiterated Buy on VNO, target $79. Citi reiterated Buy on MSFT, target $32. Citi reiterated Buy on UTSI, target $26. Citi reiterated Buy on SANM, target $12. Citi reiterated Buy on HUM, target $32. Citi reiterated Buy on THC, target $17.50. Citi reiterated Buy on HOV, target $73. Citi reiterated Buy on GE, target $38. Citi SmithBarney reiterated Buy on TXN, target 27.
-Merrill Lynch rated D Focus 1 Stock of the Week.
-UBS cut DDS to Reduce, target $23. UBS raised ICOS to Buy, target $36. UBS raised MFE to Buy, target $36.
-Deutsche Bank raised CHKP to Buy, target $28.
-Prudential cut KWD to Underweight, target $30.

Mid-day News
U.S. stocks are quietly mixed mid-day as optimism over improving fundamentals in the tech sector is offsetting worries over consumer spending and a bounce-back in oil prices. The U.S. Chamber of Commerce has started a weekly newspaper in Illinois as part of a campaign against frivolous lawsuits, the Washington Post reported. The UN nuclear watchdog said it is certain that the nuclear fuel it monitored in North Korea has been turned into four to six nuclear bombs, the NY Times reported. NY Attorney General Spitzer, who will run for governor, hasn't pursued corruption in NY government with the same vigor he has shown in going after corporate wrongdoers, the NY Times said. Accessories for Apple's iPod digital music player amount to a more than $200 million a year business, the San Francisco Chronicle reported. U.S. Senate minority leader Reid said Democrats would oppose any plans by President Bush to create private accounts for Social Security or pick Clarence Thomas to replace William Rehnquist as chief justice if he leaves the Supreme Court, the Washington Post reported. Red Herring magazine founder Tony Perkins plans to introduce a printed "blogzine" in February with an annual subscription rate of $49 to highlight commentary and stories from blog sites, the San Jose Mercury News said. Best Buy is offering two new lines of electronics under its own Insignia and Geek Squad brands, Bloomberg reported. Cisco formed an alliance with Fujitsu to increase sales to Japanese telephone carriers, Bloomberg said. Crude oil is rising from a three-month low after an attack on the U.S. Consulate in Jeddah, Saudi Arabia, boosted concern that a revival of terrorist attacks might threaten oil shipments form the world's biggest oil exporter, Bloomberg said.

Bottom Line: The Portfolio is unchanged mid-day as strength in my internet and Russian ADR longs is offsetting weakness in my retail and security longs. I have not traded this morning and the Portfolio is still 125% net long. The tone of the market is weaker today, but improving. I view it as a positive that oil is only slightly higher, notwithstanding its recent fall and the news today. The rally in bonds is also a positive, especially considering all the recent talk that the declining dollar would send interest rates substantially higher. I expect U.S. stocks to rise modestly into the close on short-covering and strength in the technology sector.

Monday Watch

Earnings of Note
Company/Estimate
CC/-.04
JOSB/.24
NAV/1.80

Splits
None of note.

Economic Data
None of note.

Weekend Recommendations
Wall Street Week w/Fortune had guests that were positive on CD, IACI, PCLN and TSG. Forbes on Fox had guests that were positive on BAY, JNJ, CSCO and mixed on AMLN. Cashin' In had guests that were positive on SYK, EBAY, WTR, mixed on MNST and negative on TZOO. Bulls and Bears had guests that were positive on BBY, BCF, ET, HD, MSFT, TASR, UPS, PBY, GTN, VIAB, mixed on DLTR, PIR, CY, KRI, JRC and negative on SIRI. Barron's had positive comments on MON, SYT, ELY. Goldman Sachs reiterated Outperform on EBAY, IR, NSM, AMGN, DNA, RIG, DO, SII, BHI, SLB and Underperform on EW.

Weekend News
North Korea has asked for 10,000 tons of emergency fuel oil as a condition for resuming six-party talks on its nuclear program, the Sankei newspaper reported. Sales of Abbott Labs' Mobic, which is used to treat arthritis, more than doubled in October after Merck's recall of Vioxx, the Chicago Tribune reported. Colombia agreed to extradite to the US Gilberto Rodriguez Orejuela, the former leader of the Cali cocaine cartel, the NY Times reported. The European Union wants to send up to 800 observers to the Ukraine to monitor the Dec. 26 re-run of last month's presidential election, the Frankfurter Allgemeine Sonntagszeitung reported. Officials from the U.S. and Canada agreed to a plan to clean up the Great Lakes and the major waterways that flow into them, the NY Times reported. Sanofi-Aventis SA's experimental anti-craving drug rimonabant, described in news reports and by word of mouth as a "miracle drug" to treat obesity, is viewed with some skepticism in the medical community, the NY Times reported. Food manufacturers are selling fewer low-carb products because of decreasing demand by diet conscious consumers, the NY Times reported. Pfizer filed a suit Friday against a new German drug price law because state-owned health insurers won't have to refund the full price of its cholesterol drug to users, Reuters said. Ford Motor CEO Bill Ford Jr. plans to revive his push to make the automaker more environmentally friendly now that he no longer has to deal with a financial crisis, Newsweek reported. The ratio between how much stock company insiders sell versus what they buy is skewed toward sales because shares purchased when insiders exercise stock options aren't usually counted, the NY Times said. Half of all U.S. parents are expected to purchase video games as gifts during the Christmas season, the Entertainment Software Association said. European online travel companies may become subject to takeovers as U.S. companies seek to boost their revenue, the Financial Times reported. Apple Computer will probably raise purchases of computers and other parts in Taiwan by about 25% to $5 billion next year, the Economic Daily News reported. An announcement about IBM's sale of is pc unit to Lenovo Group may be made as early as tomorrow, the Wall Street Journal reported. Goldcorp, Canada's fourth-largest gold producer, has agreed to buy Wheaton River Minerals for $1.8 billion in stock, CEO McEwen said. OPEC is likely to keep production at a 25-year high to prevent shortages during the U.S. winter and lower prices, OPEC officials said.

Late-Night Trading
Asian indices are mostly mixed, -.75% to +.50% on average.
S&P 500 indicated unch.
NASDAQ 100 indicated +.09%.

BOTTOM LINE: I expect US stocks to open modestly higher on gains in tech stocks, optimism over weekend retail sales, declining energy prices and a stabilizing dollar. The Portfolio is 125% net long heading into tomorrow.