Mid-day Report

Indices
S&P 500 1,195.52 +.47%
Dow 10,642.83 +.47%
NASDAQ 2,071.34 +.67%
Russell 2000 633.02 +.59%
DJ Wilshire 5000 11,780.21 +.52%
S&P Barra Growth 574.39 +.36%
S&P Barra Value 616.83 +.59%
Morgan Stanley Consumer 588.18 +.05%
Morgan Stanley Cyclical 760.74 -.14%
Morgan Stanley Technology 470.61 +.92%
Transports 3,582.24 +.08%
Utilities 351.58 +.84%
Put/Call .76 -11.63%
NYSE Arms 1.01 -19.20%
Volatility(VIX) 11.36 -3.65%
ISE Sentiment 144.00 -15.29%
US Dollar 84.28 +.42%
CRB 281.60 unch.

Futures Spot Prices
Crude Oil 46.65 +.43%
Unleaded Gasoline 125.80 -.82%
Natural Gas 6.15 +.02%
Heating Oil 128.25 +.35%
Gold 416.10 -.57%
Base Metals 120.19 -.74%
Copper 137.20 -1.19%
10-year US Treasury Yield 4.05% -2.57%

Leading Sectors
Homebuilders +3.76%
Semis +2.72%
Papers +2.41%

Lagging Sectors
Oil Service -.14%
Commodity -.35%
Iron/Steel -.37%

Market Movers
ASKJ -5.1% after missing 4Q revenue estimates slightly, reiterating 1Q/05 guidance and JP Morgan reiterated Overweight.
TXN +5.0% on Prudential upgrade to Overweight.
GOOG -3.6% on worries over upcoming lock-up expiration.
GRU +22.22% on continuing optimism over its search technology.
TIN +15.7% after announcing 2-for-1 split, 6M share buyback and notice from regulators that Carl Icahn and his hedge fund each filed to buy between $100M-$500M of its stock.
TSCO +12.94% after beating 4Q estimates and raising 05 guidance.
MATK +10.56% after announcing that it has entered into a 15 year, non-exclusive docosahexaenoic acid license and supply agreement with a Fortune 500 consumer food products company.
RMD +12.64% after beating 2Q estimates and multiple upgrades.
ASCA +8.73% after beating 4Q estimates and raising 1Q guidance.
LNY +10.0% after agreeing to buy the Golden Nugget Casino in Las Vegas for $140 million to enter the gaming industry.
SHOP -20.45% after meeting 4Q estimates and lowering 1Q/05 guidance.
SEAC -15.3% after cutting 4Q forecast.
SAXN -8.52% after missing 4Q estimates.
ADBL -8.1% on jitters ahead of 4Q report.
*Homebuilders up across the board on falling long-term interest rates.

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

Economic Data
-The Unemployment Rate for January fell to 5.2% versus estimates of 5.4% and 5.4% in December.
-Average Hourly Earnings for January rose .2% versus estimates of a .2% increase and a .1% gain in December.
-The Change in Non-farm Payrolls for January was 146K versus estimates of 200K and a downwardly revised 133K in December.
-The Change in Manufacturing Payrolls for January was -25K versus estimates of 5K and a downwardly revised -7K in December.
-Average Weekly Hours for January fell to 33.7 versus estimates of 33.8 and 33.8 in December.
-Final Univ. of Michigan Consumer Confidence for January fell to 95.5 versus estimates of 96.0 and a prior estimate of 95.8.

Recommendations
-Goldman Sachs: Reiterated Outperform on KO, EPD, GLK, HEW, SBC and NEM. Reiterated Underperform on MCRL and PBG. Downgraded CTL to Underperform.
-Citi SmithBarney: Upgraded ROP to Buy, target $70. Downgraded WHR to Sell, target $55. Reiterated Buy on THC, target $16. Reiterated Buy on ACE, target $53. Reiterated Sell on MEDI, target $19. Reiterated Buy on SPF, target $103. Reiterated Buy on PEP, target $65. Reiterated Buy on ASCL, target $20. Reiterated Buy on FON, target $27. Reiterated Buy on PHM, target $87. Reiterated Buy on ACLS, target $9.50. Reiterated Buy on MCRL, target $13. Reiterated Buy on AES, target $18. Reiterated Buy on PHS, target $76.
-Deutsche Bank: Downgraded GT to Sell, target $10. Raised CFC to Buy, target $43.
-UBS: Rated MTW Buy, target $44. Raised SQM to Buy, target $74.
-CIBC: Downgraded IP to Sector Underperform, target $42.
-Prudential: Raised Semiconductor industry to Favorable from Unfavorable. Raised TXN to Overweight, target $29. Cut LLTC to Underweight, target $44. Cut G to Underweight, target $50. Raised GPS to Overweight, target $24. Cut XLNX to Underweight, target $30. ALTR cut to Underweight, target $20. Raised ANN to Overweight, target $26.
-Morgan Stanley: Rated ITG Underweight, target $16.
-Legg Mason: Downgraded DRI to Sell. Raised OSTK to Buy, target $61.

Mid-day News
US stocks are higher mid-day on falling interest rates, short-covering and a stabilizing US dollar. Barclay Shipping, a company controlled by Evangelos Marinakis, plans to be the second Greek ship-owner to sell shares in New York this year, shipping weekly TradeWinds reported. General Electric may expand its operation in Turkey to take advantage of the improvements in the country as it prepares to join the European Union, Milliyet reported. Buraq Air, a Libyan carrier, has agreed to buy as many as six 737-800 jets from Boeing to boost market share in the region, the Wall Street Journal reported. Qwest Communications’ CEO met MCI’s CEO on Wednesday in Chicago to discuss Qwest’s possible $6.3 billion offer for MCI, the Wall Street Journal said. Google, Yahoo! and other companies are reaping the benefits of technology that enables computer users to click directly to an advertiser’s Web site as Internet ads come of age, the NY Times reported. OAO Yukos Oil expects to repay all the tax fines that have been upheld by Russian courts within three months, Interfax reported. Iran agreed “in principle” to let UN arms inspectors have another look at a military complex that may be used for nuclear weapons research, the AP reported. Intrawest Corp. and closely held Aspen Skiing won voter approval to develop a skiing village in Snowmass Village, Colorado, which is intended to compete with Vail and other resorts, the Denver Post reported. The St. Regis Hotel, which will open this summer in San Francisco, will be the city’s first new luxury hotel in four years, the San Francisco Chronicle reported. Crude oil prices may decline next week as temperatures rise in the US, cutting demand for heating oil in the world’s biggest energy-consuming nation, according to a Bloomberg survey. Support for German Chancellor Schroeder’s government fell this week as voters reacted to a surge in unemployment to the highest since WW II, a monthly poll for ARD tv found. The US dollar’s decline and fiscal restraint by the Bush administration may soon begin to reduce the US current account deficit, Fed Chairman Greenspan said. Barr Pharmaceuticals said it filed suit against the US FDA to challenge the agency’s policy of awarding exclusive rights on generic drugs on a patent-by-patent basis, Bloomberg reported. Qwest Communications executives, in talks to buy MCI, are betting the deal would help the company save $2.5 billion to $3 billion in annual costs, Bloomberg reported. The US dollar advanced to a three-month high against the euro after Fed Chairman Greenspan said the US current-account deficit could narrow, Bloomberg said. US employers added 146,000 workers in January, recouping all the jobs lost since the start of the last recession, sending the unemployment rate down to 5.2%. US Treasury notes rose, pushing the yield on the benchmark 10-year security to a three-month low, after a government report showed the economy added fewer jobs than forecast in January, Bloomberg reported. Equity funds reported net cash inflows totaling $4.294 billion in the week ended 2/2/05, according to AMG Data. The DJ US Real Estate Index fund and Russell 2000 Index iShares saw the largest inflows, at $681M and $630M respectively.

BOTTOM LINE: The Portfolio is higher mid-day on gains in my homebuilding, alternative energy, semiconductor and networking longs. I added to a few of my technology longs and oil service shorts this morning, thus leaving the Portfolio 100% net long. I added to my long MSTR and I am using a stop-loss of $70 on this position. I continue to believe that commodity prices will decline or remain neutral in 05. While current price levels remain very profitable for most companies, the consensus is that commodity prices will continue to rise. Thus, a correction in the stocks is highly probable in the near future. I also continue to believe the yield on the 10-year T-note will test the lows set in March of last year at 3.68% sometime during the first half of this year. This should continue to spur outperformance in homebuilding stocks. I expect US stocks to rise modestly into the close on lower long-term interest rates, weakening energy prices, a stabilizing US dollar, increasing fund inflows and possible merger activity.

Friday Watch

Late-Night News
Asian indices are higher on optimism over the recent declines in energy prices and strength in commodity-related stocks in the region. The SEC will be asked for an extension to 2006 of the deadline for non-US companies to comply with Sarbanes Oxley legislation on accounting and corporate governance, the Financial Times said. India's foreign direct investment is expected to nearly double to $10 billion in the year ending March 31 from $5.6 billion a year earlier, the Financial Express said. President Bush's administration notified Congress today that it will provide an initial $41 million in aid to the Palestinians through the US Agency for International Development, Reuters reported. Devon Bank, a Chicago-based community bank, is working with Fannie Mae on developing home mortgages for Muslims who adhere to the law of the Koran, which forbids interest payments, Business Week reported. Sportingbet Plc, a London-based online gambling company, is helping to fund gambling portal Casino City's lawsuit against the US Justice Department, Business Week reported. The head of the UN/Iraqi Oil-for-food program from 1996 to 2003 created a "grave" conflict of interest by soliciting oil purchases on behalf of a trading company, Bloomberg reported. Sony Corp. will delay the European debut of its hand-held PlayStation Portable game player until after March, Bloomberg said. Rio Tinto Group, the world's third-largest mining company, may spend as much as $6 billion during the next two years as it expands iron ore, coal and copper mines to meet surging demand from China, Bloomberg reported. Japan Airlines, Asia's largest air carrier by sales, said it will buy up to 40 of the next generation of 737 aircraft made by Boeing, to replace its fleet of 737-400 planes and McDonnell Douglas models, Bloomberg reported.

Late Recommendations
-Goldman Sachs: Reiterated Outperform on IP. Reiterated Underperform on DCLK and PSS.

Night Trading
Asian Indices are +.25 to +.75% on average.
S&P 500 indicated +.16%.
NASDAQ 100 indicated +.13%.

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
BOBJ/.18
CAH/.77
CYBX/-.11
NTE/.22
NEM/.32
R/.79
TWX/.16

Splits
None of note.

Economic Data
-Unemployment Rate for January is estimated at 5.4% versus 5.4% in December.
-Average Hourly Earnings for January is estimated to rise .2% versus a .1% increase in December.
-Change in Non-farm Payrolls for January is estimated at 200K versus 157K in December.
-Change in Manufacturing Payrolls for January is estimated at 5K versus 3K in December.
-Average Weekly Hours for January is estimated at 33.8 versus 33.8 in December.
-Final Univ. of Mich. Consumer Confidence for January is estimated to rise to 96.0 versus a prior estimate of 95.8.

BOTTOM LINE: I expect US equities to open modestly higher in the morning on a better-than-expected employment report and below-expectations consumer confidence report. This will likely send long-term interest rates and the US dollar higher. Stocks should improve on gains later in the day on more optimism, short-coving and bargain-hunting as a week filled will uncertainty ends. The Portfolio is 100% net long heading into tomorrow.

Thursday Close

Indices
S&P 500 1,189.89 -.28%
Dow 10,593.10 -.03%
NASDAQ 2,057.64 -.84%
Russell 2000 629.32 -.42%
DJ Wilshire 5000 11,718.93 -.28%
S&P Barra Growth 572.34 -.30%
S&P Barra Value 613.24 -.25%
Morgan Stanley Consumer 587.89 -.07%
Morgan Stanley Cyclical 761.80 -.32%
Morgan Stanley Technology 466.32 -1.66%
Transports 3,579.48 -.69%
Utilities 348.64 +.22%
Put/Call .86 +17.81%
NYSE Arms 1.25 +47.06%
Volatility(VIX) 11.79 +1.11%
ISE Sentiment 170.00 +39.34%
US Dollar 83.92 -.01%
CRB 281.61 -.48%

Futures Spot Prices
Crude Oil 46.67 +.47%
Unleaded Gasoline 127.30 +.36%
Natural Gas 6.13 -.23%
Heating Oil 128.05 +.31%
Gold 418.70 +.05%
Base Metals 121.09 +.14%
Copper 139.00 +.11%
10-year US Treasury Yield 4.16% unch.

Leading Sectors
Retail +.65%
Iron/Steel +.56%
Energy +.56%

Lagging Sectors
Semis -1.26%
Internet -2.07%
Networking -2.88%

After-hours Movers
SNDA +13.95% after beating 4Q estimates.
ASCL +11.78% after beating 4Q estimates and raising 1Q guidance.
CELL +7.65% after beating 4Q estimates.
TSCO +6.59% after beating 4Q estimates and raising 05 guidance.
APCC +4.76% after beating 4Q estimates.
BCSI +4.99% after boosting 3Q estimates.
SEAC -15.4% after cutting 4Q forecast.
SHOP -10.13% after meeting 4Q estimates and lowering 1Q/05 guidance.
ASKJ -4.83% after missing 4Q revenue estimates slightly and reiterating 1Q/05 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 IR, K, STR and CAT. Reiterated Underperform on KFT. Initiated Packaged Food Sector with Cautious rating.
-Banc of America: Upgraded NE to Buy, target $61. Upgraded ESV to Buy, target $45. Upgraded RDC to Buy, target $34. Upgraded THE to Buy, target $25.
-UBS: Rated OMX Buy.
-Business Week: Brooktrout(BRKT) may benefit from the growing use of Voice-Over-Internet protocol. Imax Corp.(IMAX), the world’s biggest maker of giant-screen film projection systems, is benefiting as more theaters sign up for its screens.

After-hours News
US stocks finished modestly lower today on worries over slowing economic growth and weakness in technology shares. After the close, Intel may have to buy Texas Instruments or Qualcomm to boost its cell-phone business, Business Week said. Needham fund manager Vincent Gallagher, who helps manage $1 billion, told CNBC that he likes Ceradyne, MEMC Electronic Materials and Digitas as growth stocks. Mercury Interactive CEO Landan told CNBC he hopes the company will make acquisitions rather than be bought, as the computer-software industry continues to consolidate, Bloomberg said. The value of products using nanotechnology, in which particles a few billionths of a meter wide are applied to improve quality, will increase more than 20-fold by the end of the decade, Business Week reported. Citigroup may face a 30-day trading suspension on Eurex AG if German regulators conclude the bank manipulated the market for European government bonds and futures last August, the London-based Times said. US President Bush will present the most frugal spending proposal of his presidency, one designed to help cut the deficit in half by 2009, White House budget director Bolten said. Sun Microsystems and Archipelago Holdings plan to build the world’s first online exchange to buy and sell computing power like electricity to reduce technology costs for customers, Bloomberg said. Alberto Gonzales won Senate confirmation to be US attorney general over the objection of Democrats, Bloomberg reported.

BOTTOM LINE: The Portfolio finished higher today on gains in my internet, retail, software and gaming longs. I added a few new longs from various sectors in the afternoon, thus leaving the Portfolio 100% net long. I added to my SINA long after-hours and I am using a $26 stop-loss on this position. The tone of the market was weaker today, however it improved into the close. The advance/decline line finished near its daily highs, volume improved and several sectors rose. As well, measures of investor anxiety mostly increased, the US dollar maintained gains and interest rates fell modestly. The CRB declined and is approaching its uptrend line which has been in place since October of 2001. I expect this index to finally break this uptrend in the near future.

Mid-day Report

Indices
S&P 500 1,187.68 -.46%
Dow 10,569.01 -.26%
NASDAQ 2,054.20 -1.0%
Russell 2000 627.58 -.70%
DJ Wilshire 5000 11,697.15 -.47%
S&P Barra Growth 571.56 -.44%
S&P Barra Value 611.89 -.47%
Morgan Stanley Consumer 586.45 -.31%
Morgan Stanley Cyclical 760.16 -.54%
Morgan Stanley Technology 465.05 -1.91%
Transports 3,577.43 -.74%
Utilities 347.28 -.17%
Put/Call .74 +1.37%
NYSE Arms 1.33 +56.47%
Volatility(VIX) 11.89 +1.97%
ISE Sentiment 182.00 +49.18%
US Dollar 84.02 +.57%
CRB 281.19 -.63%

Futures Spot Prices
Crude Oil 46.15 -1.20%
Unleaded Gasoline 125.90 -2.67%
Natural Gas 6.14 -3.70%
Heating Oil 126.75 -2.27%
Gold 418.50 -1.06%
Base Metals 121.09 +.14%
Copper 139.00 -.25%
10-year US Treasury Yield 4.16% +.57%

Leading Sectors
Iron/Steel +.92%
Telecom +.51%
Retail +.45%

Lagging Sectors
Semis -1.64%
Internet -2.18%
Networking -3.02%

Market Movers
AMZN -18.9% after beating 4Q revenue estimates, missing 4Q earnings estimates, raising 1Q/05 revenue guidance and multiple downgrades.
CYBX +33.5% after saying the FDA is close to approving an implanted device that treats depression by electrically stimulating patients’ nerves and multiple upgrades.
SBUX -7.9% after saying same-store-sales rose 7% during January and Citi SmithBarney downgrade to Hold.
JNPR -5.1% on ALA report.
KONG +23.3% after beating 4Q estimates and raising 1Q guidance.
DHC +20.68% on continuing optimism over recent purchase of American Ref-Fuel Holdings to expand its waste-to-energy business.
AMSC +11.36% after substantially beating 3Q estimates and raising 05 guidance.
SPF +6.81% after beating 4Q estimates, raising 1Q estimates and increasing 05 guidance.
GETI +9.89% after saying it plans to pay $320 million to shareholders in the form of a special dividend.
MERQ +8.93% after beating 4Q estimates, raising 1Q guidance, boosting 05 outlook and multiple upgrades..
KMX +13.3% after boosting 4Q estimates and Fulcrum Global upgrade to Buy.
ANF +8.35% after reporting substantially better-than-expected same-store-sales for January.
FLR +4.2% after beating 4Q estimates and raising 05 guidance.
MNT +8.43% after beating 3Q estimates and raising 05 outlook.
FEIC +12.71% after beating 4Q estimates, widening 1Q guidance and Needham upgrade to Buy.
BMC -13.76% after missing 3Q estimates, lowering 4Q guidance and Legg Mason downgrade to Hold.
AZR -12.74% after missing 4Q estimates and multiple downgrades.
ALA -12.5% after missing 4Q estimates, lowering 05 guidance and multiple downgrades.
NEW -8.49% after meeting 4Q estimates and lowering 05 outlook.
AMSG -12.28% after meeting 4Q estimates and lowering 05 guidance.
DIGE -8.84% after missing 2Q estimates, widening 3Q outlook and lowering 05 guidance.
TMO -9.97% after meeting 4Q estimates, lowering 1Q guidance and JP Morgan downgrade to Neutral.

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

Economic Data
-Preliminary 4Q Non-farm Productivity rose .8% versus estimates of a 1.5% increase and a 1.8% gain in 3Q.
-Preliminary 4Q Unit Labor Costs rose 2.3% versus estimates of a 2.0% gain and a 1.6% increase in 3Q.
-Initial Jobless Claims for last week fell to 316K versus estimates of 330K and 325K the prior week.
-Continuing Claims fell to 2696K versus estimates of 2765K and 2812K prior.
-Factory Orders for December rose .3% versus estimates of a .6% increase and a 1.4% gain in November.
-ISM Non-Manufacturing for January fell to 59.2 versus estimates of 61.5 and a reading of 63.9 in December.

Recommendations
-Goldman Sachs: Reiterated Outperform on ALL, HEP, GILD, IP, MERQ, ROH, DD, MDT and HOT. Reiterated Underperform on AZR, BMC and KZL.
-Banc of America: Upgraded BA to Buy, target $60. Upgraded SALM to Buy, target $28.
-Citi SmithBarney: Said to Buy TOY now, target $27. Reiterated Buy on ATVI, target $29. Reiterated Buy on ERTS, target $76. Reiterated Buy on UNM, target $20. Reiterated Sell on BA, target $40. Reiterated Buy on SPF, target $98. Reiterated Buy on PNR, target $52. Reiterated Buy on PHM, target $86. Reiterated Buy on QSFT, target $18. Reiterated Buy on MERQ, target $58.
-Bear Stearns: Downgraded AZR to Underperform.
-JP Morgan: Raised SBC to Overweight. Raised CAH, MCK to Overweight. Rated IBI Overweight.
-Lehman Brothers: Raised HPQ to Overweight, target $25.
-Prudential: Cut AXL to Underweight, target $24.
-UBS: Raised COO to Buy, target $95. Raised XJT to Buy, target $15.75. Raised STZ to Buy, target $65.

Mid-day News
US stocks are lower mid-day on losses in the technology sector and worries over slowing economic growth. Qwest Communications is holding talks to buy MCI Inc. for about $6.3 billion, the Wall Street Journal reported. General Motors, Ford and other automakers are allowing hundreds of thousands of potential buyers to test drive cars on racing tracks to boost sales, the Wall Street Journal reported. German Interior Minister Otto Schily pledged to expand German aid to reconstruct Iraq at a meeting with President Bush yesterday, Der Spiegel reported. Dinakar Singh’s hedge fund, TPG-Axon Capital, is the latest hedge fund being started by former employees of Goldman Sachs Group, many of whom worked for Robert Rubin, the NY Times reported. A group of 30 companies, including Mattel and Eastman Chemical, are forming a group to monitor the pharmacy benefit managers that most businesses use to obtain discounted drugs, the NY Times reported. Galena, Alaska, is considering using a Toshiba Corp. nuclear reactor to power the town’s electricity, the NY Times reported. Boston workers said they are more optimistic about job opportunities than they were in the summer and fall, the Boston Globe reported. Partial election results from six of Iraq’s 18 provinces indicate that the list endorsed by top Shiite Muslim cleric Ali al-Sistani has the most votes so far, the AP reported. Demand for homes priced at $1 million and above in the San Francisco Bay area rose 73% in 2004, the San Francisco Chronicle reported. The Palestinians will announce a cease-fire in hostilities with Israel when the two sides meet next week in Eqypt, Bloomberg reported. Sales gains at US retailers including Wal-Mart and May Department Stores slowed for a third consecutive month in January, hurt by blizzards and a climb in fuel costs, Bloomberg said. Michael Price, who had one of the best records in the mutual fund industry during the 80s and 90s, is bullish on shares of Sears and Unocal, Bloomberg reported. A bill to move most class-action lawsuits against companies from state to federal courts was approved by a US Senate committee, Bloomberg said. The US dollar is advancing against the euro after European Central Bank President Trichet said inflation is contained, suggesting the bank will keep its benchmark interest rate at a 60-year low, Bloomberg reported.

BOTTOM LINE: The Portfolio is higher mid-day on gains in my internet, retail and steel longs. I have not traded today and the Portfolio remains 75% net long. The tone of the market is weaker today as decliners outpace advancers, most sectors are lower and volume is decent. However, significant losses are mainly confined to the technology sector and energy prices are falling. As well, the US dollar appears to be breaking out to the upside of its recent trading range. Measures of investor anxiety are mostly higher. The labor market looks to have gained some momentum recently. An above-expectations employment report tomorrow would likely send stocks higher along with long-term interest rates. I expect US stocks to rise into the close on more optimism over US reforms, declining energy prices, low long-term interest rates, bargain-hunting and short-covering ahead of tomorrow’s economic data.

Thursday Watch

Late-Night News
Asian indices are mostly higher on strength in commodity-related stocks in the region. Taiwan President Chen Shui-bian invited China's top cross-strait negotiator to visit Taiwan to reopen political talks, the state-run China Daily reported. Citigroup's Citibank, Bank of America and other financial institutions are streamlining the application process to open accounts online, the Wall Street Journal reported. Time Warner and Comcast plan to merge Time Warner's cable unit into Adelphia Communications if their joint bid for the company's cable-television assets succeeds, the Wall Street Journal reported. Blockbuster today raised its offer to buy competitor Hollywood Entertainment to $14.50 a share, or about $883 million, topping a bid from Movie Gallery, Bloomberg reported. President Bush, pressing Congress to solve the coming Social Security crisis, offered some details of his plan to create private accounts and said he's open to "any good idea" for shoring up the system, Bloomberg reported. China won't be swayed into changing its currency policy by proposed US legislation that would impose tariffs on the nation's exports unless the yuan is allowed to appreciate, a Chinese government economist said.

Late Recommendations
Goldman Sachs: Reiterated Outperform on DVN, CBG and MUR. Reiterated Underperform on EQR and UNM.

Night Trading
Asian Indices are unch. to +.50% on average.
S&P 500 indicated -.12%.
NASDAQ 100 indicated -.16%.

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
APCC/.25
ASKJ/.32
AVID/.62
BMC/.21
CDN/.25
CERN/.54
CMCSA/.11
G/.42
IP/.43
MEDI/.17
PEP/.58
RTN/.46
SNDA/.28
FON/.32
HOT/.45

Splits
FLIR 2-for-1

Economic Data
-Preliminary 4Q Non-farm Productivity is estimated to rise 1.5% versus a 1.8% gain in 3Q.
-Preliminary 4Q Unit Labor Costs are estimated to rise 2.0% versus a 1.8% increase in 3Q.
-Initial Jobless Claims for last week are estimated to rise to 330K versus 325K the prior week.
-Continuing Claims are estimated to fall to 2765K versus 280K prior.
-Factory Orders for December are estimated to rise .6% versus a 1.2% gain in November.
-ISM Non-Manufacturing for January is estimated to fall to 61.5 versus 63.9 in December.

BOTTOM LINE: I expect US equities to open modestly lower in the morning on weakness in technology and retail stocks. However, shares may move modestly higher later in the day on more optimism over US reforms, low long-term interest rates, short-covering and bargain hunting. The Portfolio is 75% net long heading into tomorrow.

Wednesday Close

Indices
S&P 500 1,193.19 +.32%
Dow 10,596.79 +.43%
NASDAQ 2,075.06 +.31%
Russell 2000 631.98 +.61%
DJ Wilshire 5000 11,752.25 +.37%
S&P Barra Growth 574.08 +.45%
S&P Barra Value 614.77 +.19%
Morgan Stanley Consumer 588.31 +.51%
Morgan Stanley Cyclical 764.28 +.52%
Morgan Stanley Technology 474.17 -.23%
Transports 3,604.17 -.04%
Utilities 347.87 +.72%
Put/Call .73 -18.89%
NYSE Arms .85 -11.46%
Volatility(VIX) 11.66 -3.08%
ISE Sentiment 122.10 -32.60%
US Dollar 83.54 +.11%
CRB 282.96 -.33%

Futures Spot Prices
Crude Oil 46.69 unch.
Unleaded Gasoline 129.10 -.19%
Natural Gas 6.42 +.77%
Heating Oil 129.95 +.19%
Gold 423.60 +.14%
Base Metals 120.92 -.49%
Copper 139.40 +.04%
10-year US Treasury Yield 4.14% +.05%

Leading Sectors
Airlines +1.86%
Iron/Steel +1.85%
Oil Service +1.83%

Lagging Sectors
I-Banks -.68%
Computer Hardware -.76%
HMOs -1.02%

After-hours Movers
AMZN -14.64% after beating 4Q revenue estimates, missing 4Q earnings estimates and raising 1Q/05 revenue guidance.
CNET -11.35% after missing 4Q estimates, lowering 1Q estimates and widening 05 guidance.
GETI +16.42% after saying it plans to pay $320 million to shareholders in the form of a special dividend.
MNT +6.87% after beating 3Q estimates and raising 05 outlook.
DIGE -17.66% after missing 2Q estimates, widening 3Q outlook and lowering 05 guidance.
TSRA -10.28% after meeting 4Q estimates and lowering 05 guidance.
SBUX -5.02% after saying same-store-sales rose 7% during January.
OSTK -4.47% on AMZN report.
STLD -4.86% after missing 4Q estimates.
MERQ +3.96% after beating 4Q estimates, raising 1Q guidance and boosting 05 outlook.

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 NSM, MERQ and ALL. Reiterated Underperform on BA. Upgraded MCHP to Outperform. Downgraded MCRL to Underperform.

After-hours News
US stocks finished modestly higher today on good earnings reports, lower energy prices and Fed comments that met expectations. After the close, Walt Disney plans to build a new computer animation unit to develop sequels to films it made during its partnership with Pixar, including Toy Story, Bloomberg reported. Lenovo Group CEO Yuanqing said the company’s plan to buy International Business Machines’ personal computer unit wouldn’t post a security threat to the US, the Financial Times reported. The Irish Republican Army says it is withdrawing from the decommissioning of weapons process established under the terms of the Northern Ireland Good Friday peace agreement, Bloomberg said. Iran say the European Union has not delivers promised “incentives” in return for its pledge to suspend its uranium enrichment activities, the Financial Times said. PIMCO is “bearish” on corporate bonds, said Paul McCulley, a managing director at the firm. Martha Stewart will star in a new version of Donald Trump’s “The Apprentice,” after she completes her jail sentence for obstructing justice, Bloomberg said. China would have to ease controls on its currency within six months or face a 27.5% tariff on exports to the US under legislation to be introduced in the Senate tomorrow, Bloomberg reported. A Missouri jury ordered Brown & Williamson Tobacco to pay $20 million in punitive damages to the husband of a woman who died of heart disease after decades of smoking Kool cigarettes, Bloomberg said. US Senators McCain and Feingold won over Senator Lott, who is joining them in a proposal to restrict donations to political groups like MoveOn.org and Swift Boat Veterans for Truth, Bloomberg reported. Federal Reserve policy makers raised the benchmark US interest rate a quarter-point to 2.5% and restated a plan to make future increases at a “measured” pace to keep inflation in check, Bloomberg said.

BOTTOM LINE: The Portfolio finished higher today on gains in my telecom, internet and steel longs. I exited a few technology longs in the afternoon as they hit stop-losses, thus leaving the Portfolio 75% net long. The tone of the market improved modestly into the close as the advance decline line finished at its daily highs and volume increased. Small-caps outperformed and measures of investor anxiety mostly fell. I expect US stocks to trade mixed-to-higher through week’s end on more optimism, good earnings/economic reports and lower energy prices.