Mid-day Report

S&P 500 1,184.62 -.47%
NASDAQ 2,081.24 -.75%

Leading Sectors
Broadcasting +.29%
HMOs +.24%
Energy +.21%

Lagging Sectors
Biotech -1.63%
Iron/Steel -1.97%
Semis -2.37%

Other
Crude Oil 45.65 +.71%
Natural Gas 6.05 -1.85%
Gold 422.30 +.62%
Base Metals 120.49 +1.29%
U.S. Dollar 82.97 -.46%
10-Yr. T-note Yield 4.24% -.55%
VIX 13.21 -.15%
Put/Call .90 +16.88%
NYSE Arms 1.87 +96.84%
ISE Sentiment 218.00 +36.25%

Market Movers

Economic Data
None of note.

Recommendations
-Goldman Sachs: Reiterated Outperform on MCK, GILD and UTX. Reiterated Underperform on UTX.
-Banc of America: Downgraded CHIR, target $30, and REGN, target $4, to Sell. Rated APH Buy, target $41.
-UBS: Cut AMD to Reduce, target $12. Rated DRL Buy, target $60.
-Legg Mason: Raised AT to Buy, target $65.
-CSFB: Raised DF to Outperform, target $37.
-Morgan Stanley: Cut HPQ to Sell.
-Raymond James: Raised SLNK to Strong Buy, target $21.
-Thomas Weisel: Raised DVA to Outperform. Raised RCI to Outperform.
-Deutsche Bank: Raised ROK to Buy, target $55.
-Merrill Lynch: Raised NTAP to Buy, target $40. Raised GCT to Buy, target $14.50.
-JP Morgan: Cut AWA to Underweight.

Mid-day News
U.S. stocks are lower mid-day on weakness in technology shares and continued profit-taking in small-caps. About 43% of individuals with investable assets of more than $10 million lack a will, the Wall Street Journal reported, citing a study of 792 affluent Americans. Ameritrade Holding is offering a basic trading program for $5, about half its regular fee, Dow Jones Newswires reported. The discovery of oil in an area of the Gulf of Mexico controlled by Cuba could help Fidel Castro’s government as it tries to use hard currency for more than buying oil from abroad, the NY Times reported. Shares of Apollo Investment Corp.(AINV), which buys loans, debt and stock in private companies, have risen 11% this year as the company takes advantage of parent Apollo Advisors, the NY Daily News reported. Phelps Dodge Corp. temporarily shut a copper-rod facility in Norwich, Connecticut, after a fire at the plant, American Metal Market reported. President Bush has picked federal appeals court judge Michael Chertoff to be the new secretary of the US Homeland Security Department, the AP reported. Vail Resorts has collected about $50 million in deposits from about 500 buyers interested in 52 condominiums planned for construction at Vail Mountain, the Denver Post reported. The US Supreme Court let a circuit court decision stand that will permit victims of a 1999 shooting at a Jewish community center in California to sue the manufacturers of the perpetrator’s guns, the LA Times reported. Canada has found its third case of mad cow disease, Reuters reported. Nortel Networks completed a restatement of results from 2001 to 2003 and said 12 executives will repay the company about $8.6 million in bonuses they got based on the incorrect figures, Bloomberg said. The 12 South Asian nations hit by the Dec. 26 earthquake and tsunami have enough food to meet emergency needs of an estimated two million people, the UN said. Israeli Prime Minister Sharon spoke today by telephone with Mahmoud Abbas, the newly elected Palestinian Authority president, reviving a dialogue between Israelis and Palestinians that broke down in summer 2003, Bloomberg said. Relief efforts are successfully preventing outbreaks of disease in the aftermath of last month’s Asian tsunami disaster, Bloomberg reported. Harvard Management, which manages $22.6 billion for Harvard University, said CEO Meyer will leave the company and form a private investment firm, Bloomberg reported. The storms battering California have dumped more than 8 feet of snow on the Sierra Nevada since the weekend, the most to fall on the mountains in almost 90 years, closing highways and increasing fears of an avalanche, Bloomberg said. Health spending in the US rose at the slowest rate in seven years in 2003, Bloomberg reported. Apple Computer CEO Jobs introduced the first Macintosh computer priced under $500 in the machine’s 21-year history to expand sales of the line, Bloomberg said. The NYSE received a dual blow as seat prices dropped below $1 million and American International Group, one of its biggest companies, said it will also list its shares on an all-electronic market, Bloomberg reported.

Bottom Line: The Portfolio is slightly lower mid-day as losses in my networking, retail and internet longs are more than offsetting gains in my steel and auto parts shorts. I exited a few longs this morning, bringing the Portfolio back to 50% net long. The tone of the market is poor again today as the advance/decline line is weak and the major indices break down through their recent trading range. Steel stocks are underperforming and I expect this to continue in the intermediate-term. The market’s reaction to Intel’s report after the close will tell a lot about psychology. After recent declines, semis should at least bounce on this report. If not, further losses for the major indices should be expected. US stocks will likely trade mixed-to-weaker into the close.

Tuesday Watch

Earnings of Note
Company/Estimate
INTC/.31
NT/-.04
MTB/1.59

Splits
CMC 2-for-1
MDC 13-for-10

Economic Data
None of note.

Recommendations
None of note.

Late-Night News
Asian indices are mostly higher on strength in automaker shares in the region. US Treasury Secretary Snow said the Bush administration believes the dollar's value should be set by markets, according to Reuters. Shanghai's power shortages may worsen this year as electricity demand will continue to rise, while new power plants won't start operating until next year, National Business Daily reported. Man GroupPlc, the world's largest publicly traded hedge-fund company, may issue a quarterly trading statement tomorrow, the Financial Times said. Israeli Prime Minister Sharon will meet Mahmoud Abbas, who won the Jan. 9 election for Palestinian Authority president, in the next few days, Haaretz reported. Yahoo! will release a related program to scan personal computers for documents and e-mail, following Google and Microsoft, Bloomberg said. China's exports rose 33% to a record in December, widening the trade surplus to an all-time high, as consumers in the US, Europe and Japan bought more Chinese-made clothes, cell phones and computers, Bloomberg reported.

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

BOTTOM LINE: I expect U.S. equities to open modestly lower in the morning on a continuation of today's afternoon weakness. However, stocks should rise later in the day on lower energy prices, short covering and bargain-hunting. The Portfolio is 75% net long heading into tomorrow.

Monday Close

S&P 500 1,190.25 +.34%
NASDAQ 2,097.04 +.40%

Leading Sector
Homebuilders +2.04%
HMOs +1.93%
Biotech +1.17%

Lagging Sectors
Gaming -.79%
Telecom -.80%
Airlines -.97%

Other
Crude Oil 45.39 +.13%
Natural Gas 6.23 +1.15%
Gold 420.40 +.17%
Base Metals 118.95 -.08%
U.S. Dollar 83.35 -.30%
10-Yr. T-note Yield 4.27% +.09%.
VIX 13.23 -1.93%
Put/Call .77 -18.95%
NYSE Arms .95 -24.6%
ISE Sentiment 218.00 +36.25%

After-hours Movers
SCSS +6.71% after boosting 4Q guidance.
ROK +8.02% after substantially boosting 1Q guidance.
TSRA +8.5% after raising 4Q estimates.
DNA -4.2% after missing 4Q estimates.

Recommendations
Goldman Sachs reiterated Outperform on DNA, FSH, CMX, TRI and DTV.

After-hours News
U.S. stocks finished modestly higher today as oil prices fell and homebuilding stocks rose. After the close, Ford Motor CEO Padilla told CNBC that incentives by auto sellers have become a "way of life" and show no signs of ending any time soon. Huawei Technologies, China's top phone-equipment maker, plans to quadruple its annual sales overseas to $10 billion by 2008 through expansion and acquisitions, the Financial Times reported. Overweight people sleep almost two hours less each week than their slimmer counterparts and the conditions appear to be related, according to a study in today's edition of the Archives of Internal Medicine. Alcoa, the world's biggest aluminum maker, said fourth-quarter profit fell 7.9% because of costs to sell some businesses and the weaker US dollar, Bloomberg reported. Genentech said fourth-quarter profit rose 63%, boosted by its Avastin cancer drug, Bloomberg said. Lenovo Group won US antitrust approval to acquire IBM's personal computer business to become the world's No. 3 PC manufacturer, Bloomberg said.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my internet, semiconductor and homebuilding longs. I did not trade in the afternoon, thus leaving the Portfolio 75% net long. The tone of the market deteriorated again this afternoon, however the major indices were able to maintain gains. The major US indices have stabilized over the last 4 days. While I expect stocks to stage a rally over the next few days, I am not ruling out another push lower as complacency remains high. I will remain flexible and trade accordingly.

Monday Watch

S&P 500 1,190.25 +.34%
NASDAQ 2,097.04 +.40%

Leading Sector
Homebuilders +2.04%
HMOs +1.93%
Biotech +1.17%

Lagging Sectors
Gaming -.79%
Telecom -.80%
Airlines -.97%

Other
Crude Oil 45.39 +.13%
Natural Gas 6.23 +1.15%
Gold 420.40 +.17%
Base Metals 118.95 -.08%
U.S. Dollar 83.35 -.30%
10-Yr. T-note Yield 4.27% +.09%.
VIX 13.23 -1.93%
Put/Call .77 -18.95%
NYSE Arms .95 -24.6%
ISE Sentiment 218.00 +36.25%

After-hours Movers
SCSS +6.71% after boosting 4Q guidance.
ROK +8.02% after substantially boosting 1Q guidance.
TSRA +8.5% after raising 4Q estimates.
DNA -4.2% after missing 4Q estimates.

Recommendations
Goldman Sachs reiterated Outperform on DNA, FSH, CMX, TRI and DTV.

After-hours News
U.S. stocks finished modestly higher today as oil prices fell and homebuilding stocks rose. After the close, Ford Motor CEO Padilla told CNBC that incentives by auto sellers have become a "way of life" and show no signs of ending any time soon. Huawei Technologies, China's top phone-equipment maker, plans to quadruple its annual sales overseas to $10 billion by 2008 through expansion and acquisitions, the Financial Times reported. Overweight people sleep almost two hours less each week than their slimmer counterparts and the conditions appear to be related, according to a study in today's edition of the Archives of Internal Medicine. Alcoa, the world's biggest aluminum maker, said fourth-quarter profit fell 7.9% because of costs to sell some businesses and the weaker US dollar, Bloomberg reported. Genentech said fourth-quarter profit rose 63%, boosted by its Avastin cancer drug, Bloomberg said. Lenovo Group won US antitrust approval to acquire IBM's personal computer business to become the world's No. 3 PC manufacturer, Bloomberg said.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my internet, semiconductor and homebuilding longs. I did not trade in the afternoon, thus leaving the Portfolio 75% net long. The tone of the market deteriorated again this afternoon, however the major indices were able to maintain gains. The major US indices have stabilized over the last 4 days. While I expect stocks to stage a rally in the near-term, I am not ruling out another push lower as complacency remains high. I will remain flexible and trade accordingly.

Mid-day Report

S&P 500 1,194.36 +.69%
NASDAQ 2,110.65 +1.06%

Leading Sectors
Homebuilders +2.76%
Disk Drives +2.51%
Biotech +2.16%

Lagging Sectors
Gaming -.30%
Telecom -.70%
Airlines -.74%

Other
Crude Oil 46.80 +3.02%
Natural Gas 6.34 +5.65%
Gold 419.80 +.05%
Base Metals 118.95 -.08%
U.S. Dollar 83.29 -.37%
10-Yr. T-note Yield 4.28% +.28%
VIX 13.03 -3.41%
Put/Call .84 -11.58%
NYSE Arms .84 -33.33%
ISE Sentiment 221.00 +38.13%

Market Movers
FOX +9.4% after News Corp. offered to buy out minority holders of Fox Entertainment for $5.86 billion to solidify control over its largest US asset.
TASR -10.2% on continuing worries over accounting, safety and insider selling.
APPX +33.9% after the make of generic injectable medicines won US approval to sell a new form of a drug for advanced breast cancer.
STIY +11.0% after announcing Roy C. Cuny, former President and CEO of Smith & Wesson, has joined Stinger Systems as President and will serve on the Board.
DJO +14.1% after raising 4Q guidance.
ALNY +14.0% after scientists demonstrated positive in vivo efficacy data from the company’s pre-clinical program to develop Direct RNAi therapeutics for the treatment of respiratory syncytial virus infection.
PPC +11.33% after boosting 1Q estimates.
DECK -6.5% on profit-taking after boosting 4Q guidance.
NGPS -9.68% on continued profit-taking.
*Homebuilders up across the board on positive comments from multiple firms on underlying fundamentals.

Economic Data
Wholesale Inventories for November rose 1.1% versus estimates of a .7% increase and a 1.1% rise in October.

Recommendations
-Goldman Sachs: Reiterated Outperform on BBY, HD, BAX, AMT, WLP, AMGN, DNA and GILD.
-Citi SmithBarney: Is negative on Autos and Auto Suppliers heading into Detroit Auto Show, lowered estimates on GM, AXL, DCN and DPH. Upgraded PAY to Buy, target $30. Reiterated Buy on BAC, target $57. Reiterated Buy on BK, target $37. Reiterated Buy on WB, target $60. Said pullback in semi-equipment stocks is buying opportunity, favorites are LRCX and AMAT. Rated NRGY Buy, target $32. Reiterated Buy on DE, target $82. Reiterated Buy on WMT, target $65. Upgraded SPRT to Buy, target $8.50. Rated PBI Buy, target $51. Reiterated Buy on CMCSK, target $34. Citi reiterated Sell on SNDK, target $21.
-Banc of America: Upgraded JNY to Buy, target $44. Rated WRNC Buy, target $26.
-UBS: Downgraded TEU to Reduce, target $12. Rated HOV Buy, target $67. Raised AINV to Buy, target $18.
Bear Stearns: Raised SYNA to Outperform.
Thomas Weisel: Raised FLSH to Outperform.
Legg Mason: Rated AINV Buy, target $19.

Mid-day News
U.S. stocks are higher mid-day on a bounce from last week’s sell-off and strength in the homebuilding sector. Comcast plans to market an Internet phone service to 15 million homes by the end of this year, marking one of the biggest challenges so far to US phone companies, the Wall Street Journal said. US dentists have started to earn more money than doctors by avoiding some of the limitations imposed on physicians’ fees by health insurance and by marketing cosmetic and other optional care, the Wall Street Journal reported. Campbell Soup, General Mills and Kraft Foods are among US foodmakers who are trying to cut sugar content, and add vitamins or whole grain to products in hopes of convincing parents to buy their processed foods, the Washington Post said. Alltel Corp. CEO Ford told CNBC the company will become the largest wireless provider in rural parts of the US with its $4.42 billion purchase of Western Wireless, Bloomberg reported. General Motors has attracted a broader customer base, including younger buyers, with its “red hot” Cadillac brand, CEO Wagoner told CNBC. The apartment vacancy rate improved somewhat in 4Q as the low cost of mortgages encouraged people to buy instead of rent and much construction caused an oversupply, the Wall Street Journal reported. The cost of goods leaving British factories fell .4% in December, the biggest monthly drop since 2001, led lower by prices for scrap metal, computers and petroleum products, Bloomberg said. Crude oil is jumping to its highest level in six weeks after stormy weather forced Royal Dutch/Shell to halt output at a North Sea field, bringing Norway’s idled production to 12% for a fourth day, Bloomberg said. Movie Gallery agreed to buy Hollywood Entertainment for $13.25 a share, or about $850 million, Bloomberg said. Microsoft is offering a 25% license-fee discount to PeopleSoft customers who sign up for Microsoft’s Business Solutions services, Bloomberg reported. UnitedHealth Group, Humana and other health insurers lost a US Supreme Court bid to stop a class-action lawsuit that claims 600,000 doctors were underpaid for treating patients, Bloomberg said. Viacom’s CBS said it fired four employees for a September report by news anchor Dan Rather questioning President Bush’s National Guard Service, according to a statement issued by the network. UN officials ignored early warnings that humanitarian goods shipped to Iraq were given cursory inspections, a condition that US investigators say may have helped Saddam Hussein siphon large sums of money from the effort, Bloomberg reported. Saudi Arabia cut the amount of crude oil allocated for February shipments to companies that operated global refining systems, compared with supplies for January, Reuters reported.

Bottom Line: The Portfolio is higher mid-day on gains in my homebuilding, internet and semiconductor longs. I added a few new longs from various sectors this morning, thus bringing the Portfolio to 75% net long. One of my new longs is GS and I am using a $103 stop-loss on the position. The tone of the market is better today as advancers are handily outpacing decliners. Small-caps and tech are outperforming. However, volume is below levels seen during last week’s sell-off. As well, investor anxiety measures are falling again and energy prices are rising into mild weather, which are negatives. I expect US stocks to trade mixed-to-higher into the close.

Monday Watch

Earnings of Note
Company/Estimate
AA/.41
DNA/.22

Splits
LSTR 2-for-1
MTH 2-for-1

Economic Data
Wholesale Inventories for November estimated up .7% versus a 1.1% rise in October.

Weekend Recommendations
Wall Street Week w/Fortune had guests that were positive on WFMI and DF. Bulls and Bears had guests that were positive on C, PKX, CX, TWX, GS, FITB, mixed on NKE, TTF, DE and negative on PFE. Forbes on Fox had guests that were positive on JWN, WMT, DG, EL, COST and WAG. Cashin' In had guests that were positive on KO, UTSI and mixed on SIRI. Barron's had positive comments on DBD and BLK. Goldman Sachs reiterated Outperform on INTC, WLP and MUR. Goldman reiterated Underperform on DE. Business Week had a negative article on the New York Times(NYT).

Weekend News
JetBlue Airways, a low-fare carrier, may offer shuttle flights between Boston and New York, challenging Delta Air Lines and US Airways Group, the Boston Globe reported. Molson Inc. and Adolph Coors executives are planning last-minute meetings with investors next week to muster votes for the companies' proposed merger, the Globe and Mail reported. Procter & Gamble, Estee Lauder and Unilever are turning to new technology to enable their skin care products to get around the body's resistance to chemicals and foreign objects, the NY Times reported. Barclays Plc and Wells Fargo held merger talks in October and November and may resume them after a break for Christmas, Reuters said. Nissan Motor of Japan will start making gasoline-electric hybrid sedans in the US next year, the Wall Street Journal reported. The BBC's share of the UK's television audience fell 4.5% in 2004 to its lowest level in years, the Observer reported. Mittal Steel, set to become the world's largest steel maker, may buy steel mills in Turkey, India, the Czech Republic, Poland and China, South Africa's Business Times reported. Virgin Group Ltd. may make as much as $1 billion through the sale of shares in its US mobile-phone unit Virgin Mobile USA, the Sunday Telegraph said. A stock exchange for trading shares in companies of six Arab states will open in the second quarter near Cairo, said Egypt's Business Monthly. Microsoft Chairman Gates will visit Egypt on Jan. 29 to study the participation of his company in a project to offer government services on line, Al-Ahram reported. The UK will announce that it is sending 650 more troops to Iraq to provide extra security before elections scheduled for Jan. 30, the Sunday Telegraph reported. The UK government has contacted US companies Bechtel Group and Lockheed Martin about buying British Nuclear Group, the Independent reported. UN internal reviews of the program to use Iraqi oil revenue to buy food and medicine found a former aide to Secretary General Kofi Annan didn't monitor closely enough the companies hired to inspect the oil leaving and the goods going into the country, the NY Times reported. Hines Interests LP plans to build a 50-story office tower in downtown Chicago, a move that may contribute to increasing office vacancies in the city, the Chicago Tribune reported. US IPOs last year almost equaled the previous three years combined, the NY Times reported. Palestine Liberation Organization Chairman Mahmoud Abbas won 66% of the vote in today's presidential election, the AP reported. Blackstone Group LP's Columbia House unit, the biggest US distributor of home videos, will start an adult-video club at the end of this month to increase sales in the adult-video industry that has $5 billion in annual sales, the NY Post reported. Teco Electric & Machinery forecast prices for liquid-crystal display televisions will fall about 28% this year, the Commercial Times reported. High oil prices were of a temporary nature and the market's insecurity is now over, the London-based Times said, citing an interview with BP Plc CEO Browne. Marsh & McLennan may be near to agreeing a $1 billion settlement with US regulators in connection with charges that it defrauded clients, the Independent said. News Corp. Chairman Rupert Murdoch is expected to say today that he will buy out shareholders of his Fox properties for about $7 billion, the NY Times reported. United Airlines reached a tentative agreement with its flight attendants' union yesterday that keeps the employee pension plan intact, Bloomberg said. Toyota, Nissan and Honda are aiming to sell more pick-up trucks, sport-utility vehicles and so-called crossovers in the US this year to increase share, Bloomberg reported. Eastman Kodak's new EasyShare-One camera, the first that can send photos without a computer, will appeal to a small number of consumers at first because of its $800 price, Bloomberg said. China's economy will probably expand this year at its slowest pace since 2001 as the government curbs lending and raises interest rates to cool industrial expansion, Bloomberg reported. Ford Motor plans to expand its fleet of gasoline-electric hybrid vehicles as part of CEO Ford's renewed efforts to make cleaner vehicles, Bloomberg said. The price paid for ships to be scrapped and turned into recycled steel rose to a record in Bangladesh last week on expectations reconstruction following the Dec. 26 Tsunami may boost steel demand, Bloomberg said.

Late-Night Trading
Asian indices are high, +.25% to +.50% on average.
S&P 500 indicated +.14%.
NASDAQ 100 indicated +.16%

BOTTOM LINE: I expect U.S. stocks to open modestly higher in the morning on a bounce after last week's sell-off. The Portfolio is 50% net long heading into the week.