Thursday Close

Indices
S&P 500 1,174.55 +.04%
Dow 10,467.40 -.30%
NASDAQ 2,047.15 +.05%
Russell 2000 616.90 +.05%
DJ Wilshire 5000 11,550.59 +.05%
S&P Barra Growth 565.40 +.11%
S&P Barra Value 604.86 -.03%
Morgan Stanley Consumer 582.96 +.05%
Morgan Stanley Cyclical 747.90 -.05%
Morgan Stanley Technology 470.03 +.50%
Transports 3,554.12 +.47%
Utilities 339.44 +.61%
Put/Call .84 +5.0%
NYSE Arms .92 -19.30%
Volatility(VIX) 13.24 -1.49%
ISE Sentiment 184.00 -8.91%
US Dollar 83.36 -.08%
CRB 285.50 -.79%

Futures Spot Prices
Crude Oil 48.50 -.59%
Unleaded Gasoline 135.19 unch.
Natural Gas 6.29 -.96%
Heating Oil 139.03 -.47%
Gold 428.40 unch.
Base Metals 121.07 +.02%
Copper 142.75 +.04%
10-year US Treasury Yield 4.20% unch.

Leading Sectors
Oil Service +1.18%
Defense +1.17%
HMOs +1.10%

Lagging Sectors
Boxmakers -.84%
Homebuilders -.86%
Telecom -1.31%

After-hours Movers
SNDK +16.6% after beating 4Q estimates.
OSTK -13.1% on profit-margin worries after beating 4Q estimates.
MSTR +17.60% after beating 4Q estimates.
MCK +7.1% after beating 3Q estimates and reiterating forecast.
WDC +7.4% after beating 2Q estimates.
RHI +9.8% after beating 4Q estimates.
XRTX +10.2% after boosting 1Q estimates substantially.
TPX +5.2% after beating 4Q estimates and raising 05 guidance.
GILD +5.1% after beating 4Q estimates.
IRF -4.1% after missing 2Q revenue estimate and lowering 3Q guidance.

Detailed Market Summary
Market Wrap CNBC Video(bottom right)
Futures Recap
NASDAQ 100 After-hours Indicator
Real-time/After-hours Stock Quote

Afternoon Recommendations
-Goldman Sachs: Reiterated Outperform on GILD, MSFT, PG and MO. Reiterated Underperform on DJ, JBLU and RAI.
-Prudential Equity: Downgraded DJ to Underweight, target $36.
-Business Week: Kroger(KR) shares may rise as much as 39% within the next year as the No.1 US grocery store chain begins to sell non-food items with higher profit margins. Shares of Biosite(BSTE), a diagnostics company whose tests are used in half of US hospitals, could rise about $70 in a year. Arrowhead Research’s(ARWR) shares may reach $6 in a year.

After-hours News
US stocks finished mixed today as gains in energy-related stocks were offset by losses in homebuilders and telecom shares. After the close, the European Union will suspend its 18-month-old sanctions against Cuba next week, following moves by Fidel Castro’s government to renew contacts with all EU countries earlier this month, Agence France-Presse reported. Chinese central bank adviser Yu Yongding said now is the time for the People’s Bank of China to revalue the yuan, Dow Jones reported. Counterfeiting of brand-name products accounts for 5% to 7% of the global merchandise trade, or lost sales of as much as $512 billion last year, Business Week reported. Ahmad Chalabi, a prominent candidate in the Iraqi elections, told Reuters the country should be divided into three self-governing regions, including a Shiite Arab south containing oil fields. Wal-Mart’s expansion into financial services is worrying banks that fear they may not be able to compete with the world’s largest retailer, Business Week reported. Defibrillators made by companies including Medtronic and Guidant will get health insurance coverage for a third more heart-failure patients in the Medicare program, US health officials said. Private accounts should be set up as an addition to Social Security rather than a partial replacement, said Senator Ben Nelson of Nebraska, a key Democrat considering revisions to the retirement system, Bloomberg reported. Tribune co. and three television networks tomorrow plant to appeal a court ruling that blocked media companies from acquiring more local TV stations and newspapers, Bloomberg reported. President Bush will ask Congress for $3.2 billion in AIDS-related funding in his fiscal 2006 budget recommendation, maintaining a commitment to a five-year outlay of $15 billion, Bloomberg reported. Microsoft said second-quarter profit doubled on lower stock-based compensation costs, sales of Windows for corporate networks and the Xbox video console, Bloomberg reported.

BOTTOM LINE: The Portfolio finished slight lower today as losses in my Internet and homebuilding longs more than offset gains in my restaurant and networking longs. I exited a couple of telecom and homebuilding longs in the afternoon and added a few new technology and retail longs, thus leaving the Portfolio 100% net long. One of my new longs is URBN and I am keeping a $39.25 stop-loss on this position. The tone of the market improved modestly on the close and stocks are responding well after-hours to positive news. I continue to believe that a tradable rally has begun and will likely intensify next week. I will likely add market exposure tomorrow on any extreme weakness related to the GDP report or fears related to the Iraqi elections.

Mid-day Report

Indices
S&P 500 1,172.82 -.11%
Dow 10,448.78 -.48%
NASDAQ 2,042.89 -.16%
Russell 2000 617.43 +.12%
DJ Wilshire 5000 11,533.60 -.09%
S&P Barra Growth 563.87 -.17%
S&P Barra Value 604.37 -.12%
Morgan Stanley Consumer 581.58 -.18%
Morgan Stanley Cyclical 745.87 -.33%
Morgan Stanley Technology 468.22 +.15%
Transports 3,536.99 -.01%
Utilities 338.30 +.27%
Put/Call .83 +3.75%
NYSE Arms .91 -20.18%
Volatility(VIX) 13.20 -1.79%
ISE Sentiment 205.00 +1.49%
US Dollar 83.43 +.16%
CRB 286.13 -.57%

Futures Spot Prices
Crude Oil 49.05 +.55%
Unleaded Gasoline 135.60 -.24%
Natural Gas 6.43 +.74%
Heating Oil 140.00 -.24%
Gold 426.40 -.14%
Base Metals 121.07 +.02%
Copper 142.60 -.66%
10-year US Treasury Yield 4.21% +.37%

Leading Sectors
HMOs +.91%
Defense +.88%
Hospitals +.46%

Lagging Sectors
Software -.81%
Boxmakers -.84%
Telecom -1.24%

Market Movers
VRSN +12.81% on profit-taking after beating 4Q estimates, missing whisper and Citi SmithBarney downgrade to Hold.
TZOO -9.0% on continued profit-taking.
BSTE -5.0% after beating 4Q estimates and Wachovia downgrade to Market Perform.
LSTR -7.95% after beating 4Q estimates and lowering 1Q outlook.
SWIR -36.0% after missing 4Q estimates, lowering 1Q outlook and multiple downgrades.
ORCT +38.9% after beating 4Q estimates and raising 05 guidance substantially.
OXPS +21.5% on strong demand for IPO.
GCOR +22.97% after Danisco A/S, whose products are used in half the world’s ice cream, agreed to buy Eastman Chemical’s 42% stake in it for $419 million.
HRS +14.6% after meeting 2Q estimates and raising 05 guidance.
AFFX +12.99% after beating 4Q estimates and lowering 1Q guidance.
GRU +11.74% after the Wall Street Journal reported it has developed an Internet search service that directly answers questions instead of providing a list of Web sites.
WBSN +7.2% after beating 4Q estimates and raising 1Q guidance.
GMR +9.98% after saying it will pay a dividend based on most of its cash flow starting in the second quarter of this year and Morgan Stanley upgrade to Overweight.
DRIV +9.18% after beating 4Q estimates and raising 1Q/05 guidance.
CL +5.21% after beating 4Q estimates and JP Morgan upgrade to Overweight.
DLX +7.97% after beating 4Q estimates, raising 1Q guidance and boosting dividend.
CVD +8.48% after beating 4Q estimates and reiterating 05 guidance.
DRCT -32.0% after cutting 4Q outlook and multiple downgrades.
CCMP -8.84% after missing 1Q estimates.
PHTN -11.85% after missing 1Q estimates and lowering 2Q guidance substantially.
NAVR -11.38% on profit-taking after beating 3Q estimates.

Market Internals
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
-Durable Goods Orders for December rose .6% versus estimates of a .7% increase and a 1.8% gain in November.
-Durable Goods Less Transportation for December rose 2.1% versus estimates of a 1.3% rise and a .9% fall in November.
-Initial Jobless Claims for last week rose to 325K versus estimates of 332K and 318K the prior week.
-Continuing Claims for last week were 2840K versus estimates of 2683K and 2698K prior.

Recommendations
-Goldman Sachs: Reiterated Outperform on X, UPS, NUE, CAT, BC, DTV, SBC, CVD, CL and AMGN. Reiterated Underperform on T, ABY, ANTO, APU, FSS, KMG, AMCC and LSI.
-C: Raised C to Outperform, target $55.
-JP Morgan: Raised CL to Overweight.
-UBS: Raised GLW to Buy, target $14.
-Citi SmithBarney: Downgraded EAT to Sell, target $36.
-CSFB: Raised ABY to Outperform, target $8.
-Merrill Lynch: Rated KOMG Buy, target $22. Cut SWIR to Sell.
-CIBC: Raised EBAY to Sector Outperform, target $105.

Mid-day News
US stocks are modestly lower mid-day on rising concerns ahead of this weekend’s election in Iraq. China’s state assets regulator said it will make an announcement on the telecom industry tomorrow, amid speculation that the agency is considering breaking up China United Telecom, the nation’s second-biggest mobile-phone company, Bloomberg reported. Government agencies and local governments around the world are using the availability of Linux-based open-source software to force Microsoft to cut its prices, the Wall Street Journal reported. Comcast and major television networks including CBS, ABC, NBC and Fox remain unable to reach an agreement over video-on-demand for some of the most popular television shows, the Wall Street Journal reported. The Palestinian Authority banned its citizens from carrying weapons in the area it controls, the AP reported. The City of Port Gibson, Mississippi urged Entergy Corp. to build a nuclear reactor nearby, in contrast to some other municipalities that are trying to shut down their neighboring nuclear plants, the NY Times reported. Federal Reserve Governor Gramlich, a liberal Democrat who headed a Social Security advisory commission during the Clinton administration, says the US retirement system should be fixed now, before the need to do so becomes urgent, the Wall Street Journal reported. Computer Associates International CEO-elect Swainson expects the software industry to further consolidate after the combination of Oracle and PeopleSoft, CNBC reported. OAO Yukos Oil won’t export crude in February because it can’t pay export duties after its accounts were frozen, Bloomberg reported. US durable goods orders rose in December, helping produce the biggest annual increase in a decade for makers of appliances, autos and other long-lasting items, Bloomberg reported. Israel agreed “in principle” to withdraw from West Bank cities and give Palestinians policing authority over those areas, Reuters reported.

Bottom Line: The Portfolio is slightly lower mid-day on losses in my internet and homebuilding longs. I have not traded today, thus the Portfolio remains 100% net long. The tone of the market is not that bad today considering losses in the major indices. A number of sectors are higher, small-caps and tech are mostly unchanged and the advance/decline line is mildly negative. It is also a positive that oil is unable to penetrate the 50$/bbl. level ahead of the possibility of extreme violence in Iraq, further OPEC production cuts and continuing problems at OAO Yukos. As well, the AAII% Bulls fell 21.48% this week to 26.43%. This is the lowest level since the market began an exceptional run higher in February of 2003. I will look to add market exposure tomorrow on any further weakness related to rising apprehension ahead of the weekend. I expect US stocks to rise modestly from current levels into the close on short-covering, stable energy prices and optimism over earnings.

Thursday Watch

Late-Night News
Asian indices are mostly higher on gains in transportation and financial stocks in the region. As many as 25 European companies may be ready to leave the US stock exchanges due to the costs of complying with the Sarbanes-Oxley regulations, the London-based Times said. The Shanghai branch of China's central bank asked lenders to be more vigilant about loans after new mortgages increased by $12 billion in the city last year, the Oriental Morning Post reported. European subsidies for aircraft development must be ended to prevent conflict in the World Trade Organization, the Financial Times reported, citing Boeing Senior VP for Intl. Relations Pickering. Russia forgave Syria almost three quarters of its $9.8 billion debt as the former Soviet state seeks to revive its influence in the Middle East, Lebanon's Daily Star reported. Huawei Technologies, China's largest phone-equipment maker, won the contract to build a CDMA mobile network in Thailand, beating rivals Motorola and Ericsson, China Daily reported. GE, IBM and other companies are teaming up to sponsor a range of low-cost health insurance plans, the NY Times reported. Energy Transfer Partners LP, which owns more than 7,000 miles of natural-gas pipelines in the US, purchased pipelines and other assets in Texas formerly owned by Enron Corp. for about $1 billion, Bloomberg reported. A Saudi charity that has collected more than $100 million for Palestinians made payments to the relatives of suicide bombers through Arab Bank Plc, which has a branch on New York's Madison Avenue, according to a lawsuit. Copper prices may fall more than 7% in 2005 according to a recent Bloomberg survey of 22 analysts, the first annual drop in four years, as mining companies including Phelps Dodge boost production. SBC Communications is in discussions to acquire AT&T Corp. for more than $16 billion, the NY Times reported. US Fed officials will discuss next week whether they should set an explicit numerical target for inflation and, if so, what that should be, the Wall Street Journal said.

Late Recommendations
Goldman Sachs reiterated Outperform on AHC, MO, FSL, SBC, CVD, X and Underperform on MKL, RNWK.

Night Trading
Asian Indices are -.50% to +1.0% on average.
S&P 500 indicated -.01%.
NASDAQ 100 indicated unch.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Analyst Actions
Macro Calls
CNBC Guest Schedule

Earnings of Note
Company/Estimate
AMGN/.61
ANDW/.09
APA/1.58
BAX/.56
BZH/4.36
BMY/.33
BRCM/.22
CAT/1.63
CL/.59
DOW/.71
EL/.57
GDT/.66
ITW/1.20
LMT/.74
MCK/.45
MSFT/.33
NE/.36
NVLS/.24
NUE/1.99
OSTK/.08
PD/3.53
PMCS/.01
RBK/.52
SNDK/.27
SEBL/.08
UPS/.76
VRTS/.25
VZ/.64
YELL/1.22

Splits
None of note.

Economic Data
-Durable Good Orders for December estimated to rise .7% versus a 1.4% increase in November.
-Durable Goods Less Transportation for December estimated to rise 1.3% versus a 1.4% fall in November.
-Initial Jobless Claims for last week are estimated to rise to 332K versus 319K the prior week.
-Continuing Claims are estimated to fall to 2683K versus 2694K prior.
-Help Wanted Index for December is estimated to rise to 37 versus 36 in November.

BOTTOM LINE: I expect US equities to open modestly higher in the morning on optimism over earnings reports, merger activity and good economic reports. The Portfolio is 100% net long heading into tomorrow.

Wednesday Close

Indices
S&P 500 1,174.07 +.48%
Dow 10,498.59 +.35%
NASDAQ 2,046.09 +1.29%
Russell 2000 616.57 +1.66%
DJ Wilshire 5000 11,544.35 +.61%
S&P Barra Growth 564.78 +.35%
S&P Barra Value 605.03 +.62%
Morgan Stanley Consumer 582.64 -.01%
Morgan Stanley Cyclical 748.27 +.36%
Morgan Stanley Technology 467.70 +1.94%
Transports 3,537.40 +.20%
Utilities 337.39 +1.69%
Put/Call .80 unch.
NYSE Arms 1.14 +35.71%
Volatility(VIX) 13.44 -4.41%
ISE Sentiment 202.00 +57.81%
US Dollar 83.30 -.82%
CRB 287.77 +.44%

Futures Spot Prices
Crude Oil 49.06 +.57%
Unleaded Gasoline 136.25 +.24%
Natural Gas 6.41 +.34%
Heating Oil 140.96 +.45%
Gold 426.70 -.05%
Base Metals 121.04 +1.30%
Copper 143.50 -.03%
10-year US Treasury Yield 4.19% +.09%

Leading Sectors
Semis +2.61%
Software +2.30%
Biotech +2.17%

Lagging Sectors
Foods +.04%
Restaurants -.03%
Boxmakers -.84%

After-hours Movers
SWIR -30.4% after missing 4Q estimates and lowering 1Q outlook.
VRSN -11.30% on profit-taking after beating 4Q estimates.
PHTN -13.66% after missing 1Q estimates and lowering 2Q guidance substantially.
OPEN -7.47% after announcing it intends to commence an offering of senior subordinated convertible notes.
NAVR -8.8% on profit-taking after beating 3Q estimates.
JDSU -6.94% after missing 2Q estimates and lowering 3Q outlook substantially.
GNSS -5.87% after missing 3Q revenue estimate and lowering 4Q guidance range.
NETL +20.37% on strong 4Q results.
DRIV +8.49% after beating 4Q estimates and raising 1Q/05 guidance.
SWFT +5.57% after substantially beating 4Q estimates.
RBAK +7.52% after beating 4Q estimates.
PSSI +4.59% after beating 3Q estimates and raising 05 guidance.
GMR +4.77% after saying it will pay a dividend based on most of its cash flow starting in the second quarter of this year.

Detailed Market Summary
Market Wrap CNBC Video(bottom right)
Futures Recap
NASDAQ 100 After-hours Indicator
Real-time/After-hours Stock Quote

Afternoon Recommendations
Goldman Sachs reiterated Outperform on N, GCI, COH, IBM and GILD. Goldman reiterated Underperform on AKS, ABY and NFB.

After-hours News
US stocks finished higher today, led by gains in technology and small-cap shares. China’s first priority is to broaden the exchange rate for its currency from the US dollar to a more flexible basket of currencies, said Fan Gang, director of the National Economic Research Institute in Beijing. The European Union may offer to train as many as 800 high-level civilian personnel, including administrators and judges, to build up Iraq’s institutions, the Financial Times reported. Crude oil fell for the first day in four after a government report showed an unexpectedly large rise in US inventories last week and OPEC’s president signaled that the group wouldn’t cut production, Bloomberg reported. Starbucks said first-quarter earnings rose 31% after it raised prices and added sandwiches and flavored coffees, Bloomberg reported.

BOTTOM LINE: The Portfolio finished unchanged today as gains in my internet longs offset losses in my software shorts. I added a few new longs in the afternoon, thus leaving the Portfolio 100% net long. One of my new longs is FFIV and I am using a $47 stop-loss on this position. The tone of the market improved throughout the afternoon as tech and small-caps outperformed, the advance/decline line finished at its highs, almost all sectors participated, good news was rewarded and volume increased. While stocks may consolidate a bit on rising apprehension ahead of the weekend, I anticipate further gains next week on a relatively successful Iraqi election and increasing optimism over President’s Bush’s ability to pass meaningful reforms.

Mid-day Report

Indices
S&P 500 1,172.75 +.37%
Dow 10,497.18 +.34%
NASDAQ 2,034.01 +.70%
Russell 2000 610.31 +.63%
DJ Wilshire 5000 11,516.65 +.37%
S&P Barra Growth 564.96 +.38%
S&P Barra Value 603.87 +.43%
Morgan Stanley Consumer 582.99 +.05%
Morgan Stanley Cyclical 745.03 -.05%
Morgan Stanley Technology 465.25 +1.40%
Transports 3,524.67 -.15%
Utilities 336.20 +1.33%
Put/Call .87 +8.75%
NYSE Arms 1.16 +38.10%
Volatility(VIX) 13.45 -4.34%
ISE Sentiment 204.00 +59.38%
US Dollar 83.13 -1.02%
CRB 288.03 +.52%

Futures Spot Prices
Crude Oil 49.00 -1.19%
Unleaded Gasoline 135.35 +.67%
Natural Gas 6.42 +.27%
Heating Oil 141.80 -.34%
Gold 427.20 +1.21%
Base Metals 121.04 +1.30%
Copper 143.50 +.42%
10-year US Treasury Yield 4.17% -.33%

Leading Sectors
Semis +1.77%
Software +1.75%
Biotech +1.58%

Lagging Sectors
Iron/Steel -.17%
Oil Service -.67%
Boxmakers -.84%

Market Movers
FLEX +9.2% after beating 3Q estimates, raising 4Q/05 guidance and Southwest Securities upgrade to Long-Term Buy.
TXN +5.2% after beating 4Q estimates, raising 1Q guidance and raising stock buyback by $2B.
MHR +10.6% after Cimarex Energy said it agreed to acquire it for $1.5 billion in stock.
CPWR +20.8% after substantially beating 3Q estimates.
GFIG +20.7% on strong demand for IPO.
SGTL +16.1% after reporting strong 4Q results and giving positive 1Q guidance.
INSP +19.53% after beating 4Q estimates and raising 1Q/05 guidance.
PLB +19.33% after beating 1Q estimates and raising 05 guidance.
TSAI +17.18% after beating 1Q estimates and raising 05 forecast.
HOLX +17.53% after beating 1Q estimates.
SSNC +10.83% after beating 4Q estimates and raising 1Q/05 guidance.
IFIN +8.15% after beating 4Q estimates, making positive comments on 05 and raising dividend.
APPB +8.74% after better-than-expected January same-store-sales and Morgan Keegan upgrade to Outperform.
XEC -11.1% on MHR acquisition.

Market Internals
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
None of note.

Recommendations
-Goldman Sachs: Reiterated Outperform on SYK, MO, HEP, AIG, ALL, ENH, RE, BBBY, ACS, BE and SBC. Reiterated Underperform on ASH, UIS and INFA. Upgraded GNW to Outperform.
-CIBC: Downgraded IDR to Sector Underperform, target $21.
-JP Morgan: Cut FBN, LEXR to Underweight.
-Morgan Stanley: Cut PPP to Underweight.
-UBS: Raised THE to Buy, target $25.50.
-Bear Stearns: Rated GE Outperform, target $40.
-Merrill Lynch: Named DNA Focus 1 stock of the week. Raised EMC to Buy, target $15.50. Rated XRTX Buy, target $20.
-Prudential: Downgraded PPP to Underweight. Rated MCHP Overweight, target $29.
-CSFB: Raised COT to Outperform, target $31.
-Raymond James: Raised EAT to Strong Buy, target $46.50.

Mid-day News
US stocks are higher mid-day on strength in technology shares as a result of positive earnings reports. Insiders at Commercial Metals, a steelmaker and recycler, sold almost $28 million worth of stock since mid-December, the Wall Street Journal said. Research in Motion has seen its subscribers double in the past year, to more than two million, and some observers say the best times might still lie ahead, the Wall Street Journal reported. Wholesale electricity prices in some US Eastern states have dropped since four big Midwestern utilities joined a regional power market, the Wall Street Journal reported. Delta Air Lines’ move to cut fares has spread to business fares, lowering them by a third, even on routes that Delta doesn’t directly compete with other airlines, the Wall Street Journal reported. Bacardi will begin selling in April a flavored rum that it says has half the calories of regular rum or vodka, the NY Times reported. Real estate investment trust executives such as Vornado Realty Trust’s Roth are selling more shares as many stocks have reached or neared 52-week highs in the past three months, the Wall Street Journal reported. XM Satellite Radio and Sirius Satellite Radio are holding talks over a possible merger, the NY Post reported. IBM, Intel and six other companies agreed to back the use of a single technology standard to create a national health information network, the NY Times reported. NY Senator Clinton is taking centrist positions on issues such as religion and abortion, in what Republicans see as an effort to moderate her liberal image ahead of a possible presidential campaign in 2008, the Washington Times reported. Tyco International CEO Breen expects to make acquisitions toward the end of this year and double research and development for the company’s health-care unit, CNBC reported. Janus Capital Group plans to link the pay of its portfolio managers and other executives to the performance of the company’s mutual funds, the Rocky Mountain New reported. The Fed will stop raising its target interest rate between 2.5% and 3% to avoid slowing the economy, said Paul McCulley of PIMCO. Google added a Firefox Web browser programmer to its staff, raising speculation that the search-engine company may be building a browser to rival Internet Explorer, the LA Times reported. Oracle said profit will rise more than analysts expected next fiscal hear, helped by its $10.3 billion purchase of PeopleSoft, Bloomberg reported. The US Senate confirmed President Bush’s choice of Condoleezza Rice as secretary of state, Bloomberg said. A helicopter crash in western Iraq possibly caused by adverse weather killed 31 Marines, in the single deadliest incident suffered by the US military since the 2003 liberation of Iraq, Bloomberg reported.

Bottom Line: The Portfolio is slightly lower mid-day on losses in my software and semiconductor shorts. I exited a few shorts as they hit stop-losses and added a few new longs this morning, bringing the Portfolio to 75% net long. The tone of the market is better today and improving. The fact that oil is falling ahead of the possibility of extreme violence in Iraq is also a positive. It appears as though the tradable rally in the major indices has begun, barring an unforeseen catastrophic event in Iraq over the weekend. I expect US stocks to trade modestly higher into the close on short-covering, falling energy prices and optimism over earnings.

Wednesday Watch

Late-Night News
Asian indices are higher as the stocks of exporters gain in the region. Fantom Co.'s golf balls, equipped with radio transmitters for tracking, perform on par with products from Nike Inc. and rivals, Silicon Strategies reported. Taiwan's new premier won't push for controversial proposals, such as dropping references to China in the island's official name, China Times reported. Comcast Corp. and Time Warner Inc. may make a joint bid for Adelphia Communications Corp.'s cable assets after ruling out separate bids for other parts of the company, the Financial Times said. A new US tax law that encourages companies to repatriate profits from abroad has helped to send the US dollar to a two-month high against the euro, the Wall Street Journal reported. In a recent survey, PricewaterhouseCoopers LLP found that 91% of 1,391 CEOs around the globe were "very" or "somewhat" confident about the next 12 months. Pricewaterhouse called the figure "astonishing." Global economic growth will probably reach 4.2% this year following a 5% increase in 2004, which was the best since 1976, Bloomberg reported. McDonald's Corp. must face a suit by New York teenagers who claim the company hid the health risks of Chicken McNuggets and other foods and made them obese, an appeals court ruled. Merrill Lynch will soon agree to set up a venture with Huaan Securities, a representative from the Chinese brokerage said. Rambus Inc. filed a patent infringement lawsuit against Hynix Semiconductor, Infineon Technologies AG and two other companies, Bloomberg said. SAP AG forecast license revenue will increase 10-12% this year as it wins more business in the US and focuses on taking customers from Oracle Corp., Bloomberg reported. Indonesia's National Information Agency said the number of dead and missing from the Dec. 26 earthquake and tsunami increased to 229,593, Bloomberg reported. SK Telecom of South Korea will form a $400 million joint venture with Earthlink to offer mobile phone services in the US, the NY Times reported.

Late Recommendations
Goldman Sachs reiterated Outperform on SYK, ZION, DD, BLS, SLB, XRX and Underperform on CR, SLG, TLAB, PBG, AAII.

Night Trading
Asian Indices are unch. to +1.0% on average.
S&P 500 indicated +.17%.
NASDAQ 100 indicated +.33%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Analyst Actions
Macro Calls
CNBC Guest Schedule

Earnings of Note
Company/Estimate
MO/1.06
BDK/1.57
CHIR/.10
COP/3.07
DBD/.89
DRIV/.35
ET/.22
LLY/.73
EK/.65
GCI/1.47
GD/1.63
HSY/.66
IMCL/.38
JDSU/-.01
SBC/.33
SIRI/-.16
SBUX/.34
VRSN/.20
WBSN/.31

Splits
CPO 2-for-1

Economic Data
None of note.

BOTTOM LINE: I expect US equities to open modestly higher in the morning on optimism over earnings reports and gains in Asia. I will closely monitor the quality of any rally before increasing market exposure. I still believe it is likely weakness will resurface ahead of the weekend. The Portfolio is market neutral heading into tomorrow.