Mid-day Report

S&P 500 1,211.50 +.55%
NASDAQ 2,168.65 +.67%

Leading Sectors
Homebuilders +1.39%
Restaurants +1.19%
Biotech +1.19%

Lagging Sectors
Gaming +.05%
Hospitals -.17%
Airlines -.20%

Other
Crude Oil 42.10 +1.98%
Natural Gas 6.30 +2.27%
Gold 445.10 -.25%
Base Metals 122.53 +.76%
U.S. Dollar 80.70 -.02%
10-Yr. T-note Yield 4.32% +.50%
VIX 12.09 -.41%
Put/Call .73 -13.10%
NYSE Arms .70 -36.94%

Market Movers
AMZN +6.2% on Bear Stearns upgrade to Outperform.
JUPM +10.7% on optimism over internet stocks.
UNFI +9.6% after announcing a definitive 3-year distribution agreement with Whole Foods Market(WFMI).
UHS -3.7% after cutting 4Q forecast.
*Providers of equipment and technology that help protect against the effects of earthquakes are up across the board.

Economic Data
Consumer Confidence for December soared to 102.3 versus estimates of 94.0 and an upwardly revised reading of 92.6 in November.

Recommendations
-Goldman Sachs reiterated Outperform on JNJ.
-JP Morgan rated ENR Underweight.
-Bear Stearns raised AMZN to Outperform, target $55.

Mid-day News
U.S. stocks are higher mid-day on a strong consumer confidence report. President Bush is likely to delay his proposed overhaul of the US tax code until at least 2006 as his administration focuses on social security and cutting the deficit, the Washington Post reported. US companies plan to boost hiring next year as economic conditions continue to improve, the Wall Street Journal reported, citing a survey by TEC Intl. of small and medium-sized businesses. US culinary schools have boosted enrollment by 40% since 2000, as aspiring chefs hope to duplicate the success of stars such as Emeril Lagasse, the Wall Street Journal reported. Year-end bonuses on Wall Street will likely rise to $15.9 billion this year, the highest amount since $19.5 billion in 2000 at the height of the bubble, the NY Times reported. PSS World Medical, which sells medical supplies to doctors, looks increasingly likely to go on hitting its target of 20% profit growth a year, the Wall Street Journal said. Texas Pacific Group, a buyout firm, expects to make at least three times what it paid for restaurant chain Burger King in the next three years, the Wall Street Journal reported. US Airways' weekend passenger delays and stranded luggage could put the company at risk, as passengers vowed to never again fly on the airline, the Philadelphia Inquirer reported. Home Depot and Lowe's are increasingly selling installation services, as time-constrained homeowners pay the stores to lay carpet and connect appliances, the Wall Street Journal Reported. OAO Yukos Oil missed interest payments yesterday on a $1 billion loan, leading S&P to cut its grade for the oil producer's debt to default, Bloomberg said. Sales at US retailers surged 4.3% during Christmas week, Bloomberg said, citing the Intl. Council of Shopping Centers. Lobbyists spent a record $1.1 billion in the first half of 2004 to influence US politicians, Bloomberg reported. The death toll from the weekend's earthquake and tsunamis in Asia crossed 50,000, making it the deadliest natural disaster in more than a decade, Bloomberg said. The Ukrainian Central Electoral Committee declared Viktor Yushchenko the winner of the Dec. 26 presidential election, Bloomberg said. Blockbuster threatened to make a $700 million hostile takeover offer for Hollywood Entertainment after saying the board refused to cooperate in negotiations, Bloomberg reported. US consumer confidence soared in December, reaching a five-month high and reflecting increased optimism about jobs and incomes, Bloomberg reported. The index of consumer expectations for the next six months rose to 99.9 from 90.2 in November, marking the biggest increase since the liberation of Iraq in May 2003, Bloomberg said.

Bottom Line: The Portfolio is higher mid-day on gains in my internet, biotech and security longs. I added a few new longs from various sectors this morning, thus leaving the Portfolio 125% net long. One of my new longs is NANO and I am using a $14 stop-loss on this new position. As I forecasted a few months ago, Consumer confidence is moving significantly higher on an end to the bitterly negative election, falling energy prices, better labor market, rising stock market, low interest rates, strong housing market and diminishing domestic terrorism fears. This trend should continue in 05 as confidence reaches cycle highs. I expect US stocks to rise modestly into the close on short-covering, year-end positioning and more optimism. I also expect energy prices to resume their fall tomorrow on a better inventory report, decelerating demand from Europe and Asia and mild weather.

Tuesday Watch

Earnings of Note
Company/Estimate
None of note.

Splits
None of note.

Economic Data
Consumer Confidence for December estimated at 94.0 versus 90.5 in November.

Recommendations
None of note.

Late-Night News
Asian indices are higher on a better-than-expected industrial production report from Japan and declining energy prices. Deutsche Telekom AG, Europe's biggest telephone company, has ruled out buying regional US companies to expand its T-Mobile USA business, even as two rivals plan to merge, the Financial Times reported. China will take measures to restrict construction of commercial and high-end residential properties, the official Xinhua news agency reported. China Telecom and China Netcom have begun to form strategic alliances with overseas equipment and networking companies including Motorola and Nokia, Beijing Morning Post reported. The US Transportation Dept. Inspector General will begin a review of the nation's airline service triggered by flight and baggage disruptions at US Airways and Comair during Christmas weekend, Bloomberg said. Ford Motor expects to sell a record number of its F-Series large pickup trucks this year, fending off a challenge from Nissan Motor and Toyota Motor in a market that accounts for more than a quarter of the No. 2 US automaker's domestic sales, Bloomberg said. The death toll from the weekend's earthquake and tsunamis in Asia may rise to more than double the current 23,000 estimates as devastation to more remote areas is uncovered and diseases spread, Bloomberg reported.

Late-Night Trading
Asian Indices are +.25% to +.75% on average.
S&P 500 indicated +.13%.
NASDAQ 100 indicated +.12%.

BOTTOM LINE: I expect U.S. equities to open modestly higher on a better consumer confidence reading, declining energy prices, stabilizing US dollar/interest rates, short-covering and year-end positioning. The Portfolio is 100% net long heading into tomorrow.

Monday Close

S&P 500 1,204.92 -.43%
NASDAQ 2,154.22 -.30%

Leading Sectors
Broadcasting +2.17%
Airlines +.64%
Internet +.56%

Lagging Sectors
Homebuilders -1.32%
Energy -1.78%
Oil Service -2.34%

Other
Crude Oil 41.20 -.29%
Natural Gas 6.16 +.02%
Gold 446.40 +.04%
Base Metals 122.53 +.76%
U.S. Dollar 80.72 -.69%
10-Yr. T-note Yield 4.29% +1.81%
VIX 12.14 +8.10%
Put/Call .84 unch.
NYSE Arms .84 +18.09%

After-hours Movers

Recommendations

After-hours News

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my software and internet longs. I took profits in a few technology longs in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was mildly weaker today as stocks consolidated recent gains. Measures of investor anxiety rose and energy prices plunged, likely setting the stage for another push higher into year-end on Wed. and Thur. I do not expect the yield on the 10-yr. T-note to rise above the 4.92% hit in June during the first half of 05.

Mid-day Report

S&P 500 1,208.69 -.12%
NASDAQ 2,154.14 -.29%

Leading Sectors
Airlines +.96%
Drugs +.51%
Internet +.44%

Lagging Sectors
Homebuilders -1.28%
Disk Drives -1.38%
Oil Service -1.74%

Other
Crude Oil 42.00 -4.93%
Natural Gas 6.35 -4.77%
Gold 446.40 +.79%
Base Metals 122.53 +.76%
U.S. Dollar 80.63 -.80%
10-Yr. T-note Yield 4.29% +1.9%
VIX 12.04 +7.21%
Put/Call .81 -3.57%
NYSE Arms .94 unch.

Market Movers
AMZN +6.2% after saying it had its busiest holiday shopping season in its history during which time it set a single-day record with more than 2.8 million units orders, or 32 items per second.
DHB -7.9% on profit-taking after last Thur. rise.
WEB +20.1% on continuing optimism over demand for its tubing products.
NGPS +12.1% on continuing optimism over its GPS products.
DECK +5.22% on short-covering.
CRYP +4.98% on optimism over its on-line poker products.
SHRP -16.6% after cutting 4Q and 05 estimates substantially.
CALM -11.9% on disappointing 2Q results.
ALD -9.2% after saying it received letters from the US Attorney for the District of Columbia requesting information form the company and Business Loan Express in connection with a criminal investigation.
CTRP -5.7% on worries over travel in Asia.
*Oil Tanker stocks down across the board on worries over recent plunge in tanker rates.

Economic Data
None of note.

Recommendations
-Goldman Sachs reiterated Underperform on KSS.
-Citi SmithBarney reiterated Buy on NPSP, target $25.
-Deutsche Bank rated INPC Buy, target $32.

Mid-day News
U.S. stocks are quietly lower mid-day on profit-taking, concerns over the devastation in Asia and worries over rising interest rates. Computer terminals with a restricted number of functions that rely on servers and hard drives provided by companies such as Yahoo! are finding favor again with tech companies, the Wall Street Journal said. The number of leased local access telephone lines in the US rose 7% in the first half of this year as more carriers entered the market, the Wall Street Journal reported. Eastman Kodak's EasyShare digital camera brand has risen to almost 19% of US sales after the world's largest photography company designed and marketed products to women and first-time buyers, the NY Times reported. Plans to reduce pollution at the LA port complex, including fuel restrictions for ships and trucks, will be released this week, the LA Times said. Wal-Mart isn't close to getting its top 100 suppliers to ship goods with RFID tags, the NY Times reported. General Electric and MGM Mirage were among companies that sold $638.8 billion of debt in the US this year, little changed from 2003, as borrowing costs relative to Treasury notes shrank to the slimmest margin in eight years, Bloomberg reported. Amazon.com said consumer electronics outsold books for the first time during the holiday season, Bloomberg said. US Treasury notes are declining on signs holiday retail sales beat expectations, falling energy prices and a decline in the US dollar, Bloomberg reported. Shares of Sirius Satellite Radio and XM Satellite Radio are rising after both companies said they surpassed their subscriber goals for 2004, Bloomberg said. Natural disasters, including US hurricanes and Asian typhoons, made this year the costliest ever for the insurance industry, even before tsunamis struck tourist resorts in Thailand and Malaysia yesterday, Bloomberg said. Crude oil is plunging more than $2/bbl. in NY amid speculation that warmer temperatures in the eastern half of the US will limit heating oil needs, Bloomberg reported.

Bottom Line: The Portfolio is substantially higher mid-day on gains in my semi, software and internet longs. I have not traded today and the Portfolio is still 125% net long. Holiday shopping results, including internet sales and gift cards, were very strong and proved the bears' argument of a "spent-up" US consumer wrong again. Further declines in energy prices, free-elections in Iraq, decelerating inflation, relatively low interest rates, social security/tax reforms, an improving labor market and strong stock market should continue to boost sentiment and spending in 2005. I expect US stocks to rise modestly into the close on more optimism, declining energy prices, year-end positioning and short-covering.

Monday Watch

Earnings of Note
Company/Estimate
NT/-.04

Splits
None of note.

Economic Data
None of note.

Recommendations
Goldman Sachs reiterated Outperform on BBY, BSX and EBAY. Investors should buy Asian computer-related stocks such as Taiwan Semiconductor Manufacturing(TSM), and Japanese shares, said Merrill Lynch's Spencer White.

Late-Night News
Asian indices are mostly lower on concerns over the effects from the earthquake and tsunamis in the region. Stem cells, known for their potential to heal, also are one of the main forces behind cancer, the Boston Globe reported, citing researchers. Massachusetts was the only state in the US to lose residents in 2004, the Boston Globe reported today, citing US Census data. LG Electronics Inc. aims to take the largest share of Taiwan's flat-panel television market, the Commercial Times reported. More than 79% of Chinese individual investors lost money on the stock markets this year, the China Securities Journal reported. The death toll rose to at least 12,300 after the world's most powerful earthquake in 40 years, off the Indonesian island of Sumatra, unleashed waves that flooded coastal towns from Thailand to India, Bloomberg reported. Samsung Electronics, Canon Inc., Flextronics and other electronics makers in Asia said they're assessing whether yesterday's earthquake in Idonesia will hamper regional shipments, Bloomberg said. Brazil is ending its biggest year for IPOs since 1986, and more companies are lining up to go public next year as a rising stock market and a growing economy encourage investment, Bloomberg said. Viktor Yushchenko claimed victory in Ukraine's disputed presidential election before tens of thousands of cheering supporters after he took a clear lead over Prime Minister Viktor Yanukovych, Bloomberg reported. Shanda Interactive, China's biggest provider of Internet games, said it plans to increase its research staff by as much as 50% over the next year to develop more games in-house, Bloomberg reported. New York crude oil futures are falling, extending last week's 5.1% decline, on expectations warmer weather in the US will reduce demand on the country's fuel stockpiles, Bloomberg reported. US stocks are on pace for the largest post-election rally in more than 50 years, Bloomberg reported. US retailers holiday gift-card sales may have risen to more than $20 billion, topping forecasts and boosting after-Christmas shopping, Bloomberg said. US holiday spending this year was 8.1% more than last year, the Wall Street Journal reported. Sales of goods costing more than $1,000 jumped 13.5% while purchases between $500 and $999 rose 6.6%. Spending on apparel and home furnishings increased 9.8% and 9.7%, respectively. Consumer electronics and appliances purchases rose 4.2%, the paper reported. Regionally, spending increased the most in the Great Plains states.

Late-Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated +.11%.
NASDAQ 100 indicated +.15.

BOTTOM LINE: I expect U.S. equities to open modestly higher on better-than-expected holiday shopping results, falling energy prices, short-covering and year-end positioning. The Portfolio is 125% net long heading into tomorrow.

Have a Happy and Safe Holiday!