Wednesday Watch

Late-Night News
Asian indices are mixed as gains in India are being offset by losses in Australia. KPMG Intl., Ernst & Young Intl., PricewaterhouseCoopers LLP and Deloitte & Touche LLP have doubled their audit fees with US clients due to the requirements of Sarbanes-Oxley legislation, the Financial Times said. The outlook for the US economy this quarter improved on signs of faster income growth and more corporate investment in equipment, according to results form a monthly survey by Bloomberg. The economy is projected to expand at a 3.6% annual pace from January through March, according to the median estimate of 74 economists surveyed. Profits at US companies, including ConocoPhillips and US Steel, climbed 18% in the fourth quarter, capping the biggest annual rise in a decade, Bloomberg reported. Earnings increased about 19.5% in all of 2004, based on results from the 384 member companies of the S&P 500 that have reported so far, Bloomberg said. DaimlerChrysler AG is finding that growth at the company's Chrysler unit is being set back by a slump in profit in sales by Mercedes, the Wall Street Journal reported. ING Groep NV is promoting its Internet-only bank, ING Direct, as the best way of expanding in a fragmented European banking market without mergers and acquisitions, the Wall Street Journal reported. Israeli Defense Minister Shaul Mofaz approved an easing of restrictions on Palestinians after a truce was declared by the two parties in a summit held in an Egyptian resort, Haaretz reported.

Late Recommendations
-Goldman Sachs: Reiterated Outperform on GNW and HEW. Reiterated Underperform on NFS, PPS and TCO.

Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated +.07%.
NASDAQ 100 indicated +.10%.

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
RKY/1.13
AIG/1.11
BYD/.37
CI/1.61
CAM/.53
DO/.13
ERES/.12
TKLC/.16
ZBRA/.44

Splits
None of note.

Economic Data
Wholesale Inventories for December are estimated to rise .9% versus a 1.1% increase in November.

BOTTOM LINE: I expect US equities to open slightly lower in the morning on mild weakness in technology shares. However, stocks may rise later in the day on optimism over declining energy prices, low interest rates, increasing fund flows and short-covering. The Portfolio is 125% net long heading into tomorrow.

Tuesday Close

Indices
S&P 500 1,202.30 +.05%
Dow 10,724.63 +.08%
NASDAQ 2,086.68 +.22%
Russell 2000 638.72 +.33%
DJ Wilshire 5000 11,848.39 +.08%
S&P Barra Growth 577.52 +.07%
S&P Barra Value 620.46 +.02%
Morgan Stanley Consumer 591.59 +.04%
Morgan Stanley Cyclical 763.98 +.05%
Morgan Stanley Technology 474.84 -.21%
Transports 3,609.87 +.21%
Utilities 353.19 +.39%
Put/Call .78 +8.33%
NYSE Arms 1.12 -8.94%
Volatility(VIX) 11.60 -1.11%
ISE Sentiment 154.00 -22.61%
US Dollar 85.15 +.05%
CRB 281.46 +.09%

Futures Spot Prices
Crude Oil 45.45 +.38%
Unleaded Gasoline 121.62 +.33%
Natural Gas 6.18 +3.62%
Heating Oil 124.60 +1.25%
Gold 414.10 -.31%
Base Metals 119.66 -.42%
Copper 139.00 +.11%
10-year US Treasury Yield 4.02% -.77%

Leading Sectors
Semis +2.19%
Homebuilders +1.49%
Networking +1.47%

Lagging Sectors
Hospitals -.76%
Software -1.12%
Airlines -1.28%

After-hours Movers
VSTA +14.9% after substantially beating 1Q estimates and raising 05 guidance.
ISRG +13.7% after substantially beating 4Q estimates.
UTSI +6.5% after meeting 4Q estimates and raising 1Q guidance.
NFI -10.0% on continuing weakness from 4Q report.
SNIC -9.99% after beating 3Q estimates and lowering 4Q outlook.
BOBE -8.33% after cutting 3Q estimates.

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 K and MSFT.

After-hours News
US stocks finished modestly higher today as long-term interest rates declined again, spurring further gains in homebuilding stocks. Semiconductors also outperformed ahead of Cisco’s report. After the close, Deutsche Telekom, Siemens and IBM have missed a deadline for submission of offer proposals for the Herkules project, Germany’s biggest public-private venture, Financial Times Deutschland said. Huawei Technologies, China’s top phone-equipment maker, posted a 22% gain in full-year profit as orders surged 46%, the Financial Times reported. Cisco Systems said second-quarter profit almost doubled amid demand for devices that help consumers connect home offices to the Internet, Bloomberg said. The scientist who cloned “Dolly” the sheep in 1996 today was granted the second British license to clone human embryos for medical research, Bloomberg reported. Boeing CEO Stonecipher said the second-biggest US defense contractor may use its growing cash reserves to buy “small” military intelligence businesses, increase its dividend or buy back stock, Bloomberg reported. Pfizer said it is considering job cuts as it faces the loss of patent protection on several key drugs, Bloomberg said.

BOTTOM LINE: The Portfolio finished higher today on gains in my homebuilding, semiconductor, networking and software longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. The tone of the market remained mildly positive into the close as volume rose and the advance/decline line stayed slightly higher. As well, long-term interest rates finished at their lows for the day. Measures of investor anxiety were mixed. Overall, today’s action appeared to be another healthy consolidation from recent gains. The market’s after-hours reaction to Cisco’s mildly disappointing report looks muted so far, which is a positive.

Mid-day Report

Indices
S&P 500 1,201.91 +.01%
Dow 10,722.41 +.06%
NASDAQ 2,085.64 +.17%
Russell 2000 636.89 +.04%
DJ Wilshire 5000 11,842.07 +.02%
S&P Barra Growth 577.32 +.04%
S&P Barra Value 620.39 +.01%
Morgan Stanley Consumer 591.24 -.02%
Morgan Stanley Cyclical 762.58 -.13%
Morgan Stanley Technology 475.60 -.05%
Transports 3,590.69 -.32%
Utilities 353.57 +.50%
Put/Call .80 +11.11%
NYSE Arms .96 -21.95%
Volatility(VIX) 11.57 -1.36%
ISE Sentiment 166.00 -16.58%
US Dollar 85.00 -.14%
CRB 281.40 +.07%

Futures Spot Prices
Crude Oil 45.15 -.29%
Unleaded Gasoline 121.50 +.23%
Natural Gas 6.07 +1.78%
Heating Oil 123.50 +.36%
Gold 414.90 -.12%
Base Metals 119.66 -.42%
Copper 138.70 -.11%
10-year US Treasury Yield 4.03% -.43%

Leading Sectors
Semis +1.91%
Networking +1.34%
Homebuilders +.81%

Lagging Sectors
Gaming -.97%
Software -.99%
Airlines -1.54%

Market Movers
SINA -15.6% after beating 4Q estimates, lowering 1Q guidance and multiple downgrades.
TASR -11.80% after missing 4Q estimates, declining to give forward guidance and Morgan Keegan downgrade to Underperform.
ABCO +17.7% after beating 3Q estimates and raising 4Q guidance.
CUTR +16.6% after substantially beating 4Q estimates and raising 1Q outlook.
BMHC +14.97% on strong 4Q results.
IVGN +5.48% after agreeing to acquire closely held Dynal Biotech for about $379M to gain technology for cell research.
BOBJ +12.36% after beating 4Q estimates, raising 1Q outlook and multiple upgrades.
RSTI +6.15% on strong 1Q report.
DIOD +7.70% after beating 4Q estimates and raising 1Q guidance.
GRU -11.34% on profit-taking.
HANS -9.75% on profit-taking.
NFI -6.91% after missing 4Q forecast.
SLM -5.3% on Friedman, Billings, Ramsey downgrade to Market Perform.
ELNK -10.49% after missing 4Q estimates and lowering 1Q guidance.

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 DELL, SYK and PFE. Reiterated Underperform on LVLT.
-Citi SmithBarney: Reiterated Buy on PFCB, target $69. Reiterated Sell on EAT, target $36. Reiterated Buy on CEY, target $43. Reiterated Buy on EEFT, target $33. Reiterated Buy on EFD, target $26. Reiterated Buy on EOG, target $92. Lowered CSK to Sell, target $21. Reiterated Buy on JNPR, target $36. Reiterated Buy on JBL, target $33. Reiterated Buy on MXRE, target $24. Reiterated Buy on HAS, target $24. Reiterated Buy on LZ, target $48. Reiterated Buy on PRE, target $71. Reiterated Buy on NPSP, target $25. Reiterated Buy on PFG, target $45. Reiterated Buy on INTC, target $26.50. Reiterated Sell on EDS, target $17. Reiterated Buy on ATVI, target $29. Reiterated Buy on LPX, target $33.
-Bear Stearns: Raised TS to Outperform, target $61.50. Raised BIIB to Outperform, target $79.
-Deutsche Bank: Rated DELL Buy, target $48. Rated IBM Buy, target $110.
-CSFB: Raised QLGC to Outperform, target $48. Downgraded HYDL to Underperform, target $54.
-Oppenheimer: Rated DIIB Buy, target $45.00. Raised VYYO to Buy.
-Prudential: Raised TIN to Overweight, target $71.
-Raymond James: Raised ATW to Strong Buy, target $75.

Mid-day News
US stocks are mostly unchanged mid-day as worries over slowing earnings growth are being offset by declining interest rates. The US dollar may strengthen to 110 yen, the strongest since October, in the coming two months as Japanese investors are lured by the higher yields offered on US Treasury securities, according to Morgan Stanley. Kenneth Langone, a Wall Street investment banker, is to quit as a director of GE to defend his actions when he was head of the NYSE’s compensation committee, the Wall Street Journal reported. BNP Paribas SA, France’s second biggest bank by assets, was struck off the list of financial companies recommended by the state of Missouri to investors in its pension fund because of concern over its involvement in the UN/Iraq oil-for-food scandal, La Tribune reported. The sales growth of large pickup trucks in 2004 outpaced sport utility vehicles for the first time in a decade, the NY Times reported. China’s coal production rose 13% to 1.96 billion tons in 2004 compared with a year ago, the Tex Report said. Timothy Roemer, the only remaining challenger to Howard Dean’s bid to become chairman of the Democratic National Committee, dropped out of the race, paving the way for the former Vermont governor to take the post, the NY Times reported. Microsoft will release the first full trial version of its big Windows computer software by the end of June, CNet News reported. Acting New Jersey Democratic Governor Codey is considering a tax on 401K retirement plans to help close the state’s budget deficit, the Star-Ledger reported. Pennsylvania reached an agreement with the state’s four Blue Cross and Blue Shield health plans to pay about $1 billion for six years to cover cost for the uninsured, the Philadelphia Inquirer reported. President Bush’s $2.57 trillion budget is an attempt to send a message to supporters in the US, on Wall Street and to overseas investors that the administration is committed to reducing the nation’s budget deficit, the NY Times said. A Japanese food safety panel accepted US data assuring that a specific grade and age of beef would be free of mad cow disease, moving Japan one step closer to lifting a 13-month ban on US imports, the AP reported. SAP AG said it doesn’t plan larger acquisitions and will instead focus on smaller purchases this year to enhance its product offering, Sueddeutsche Zeitung reported. EBay said it will now pay only cash for Rent.com instead of a combination of cash and stock after its shares fell since announcing the deal, Bloomberg reported. Microsoft said it will buy Sybari Software, a provider of anti-virus programs, Bloomberg reported. Saudi Arabia will keep pumping 9M barrels a day to help maintain stable oil prices and meet world demand for crude, Bloomberg said. Gold prices in NY fell to the lowest in almost four months as a gain in the value of the US dollar eroded the appeal of the metal as an alternative against US stocks and bonds, Bloomberg reported. Sears, Roebuck, which agreed to be bought by Kmart Holding, will open a new type of store called Sears Essentials to compete with Target and Kohl’s, Bloomberg said. US 10-year T-notes are rising in NY trading as proposed pension plan reform and speculation inflation will remain in check is boosting demand for longer-maturity debt securities, Bloomberg said.

BOTTOM LINE: The Portfolio is slightly higher mid-day on gains in my homebuilding, semiconductor and networking longs. I have not traded today, thus the Portfolio remains 125% net long. The tone of the market is mildly positive as sector performance is mixed, volume is increasing and the advance/decline line is slightly positive. The strength in semis is also a positive. I will closely monitor the market’s reaction to Cisco’s report after the close before shifting the Portfolio’s composition. I anticipate a positive reaction. I also expect US stocks to rise modestly into the close on short-covering, lower interest rates, a stabilizing US dollar and weaker energy prices.

Tuesday Watch

Late-Night News
Asian indices are mixed as shares of exporters are rising and healthcare stocks are declining in the region. Altria Group, parent of Philip Morris and Kraft Foods, may separate into two or three units "sooner rather than later," the Financial Times said. The Athens Exchange may set up a freight futures clearing house to settle bets on the direction of shipping rates, shipping daily Lloyd's List said. Almost one-fifth of the world's shipping fleet is Greek owned, Bloomberg said. News Corp.'s Fox network coverage of yesterday's Super Bowl drew 1 percent lower television audience ratings than last year's game, Bloomberg reported. Israeli Prime Minister Ariel Sharon and Palestinian Authority President Mahmoud Abbas will declare their intent to halt violence at a summit today in Egypt, Bloomberg reported. Fujitsu Ltd. will increase investment in semiconductors by about 80% next business year to meet demand for its smaller and low-power chips used in digital cameras, computer servers and other electronics, Bloomberg said. The falling unemployment rate is approaching a level that could cause an acceleration of inflation and pressure central bankers to keep raising the benchmark interest rate, said Bruce Kasman, head of economic research at JP Morgan. The US dollar is rising against the yen after Federal Reserve Governor Bies said the US is attracting "a tremendous amount" of overseas investment to help offset deficits, Bloomberg reported. Iran's rejection of a $2.25 billion cell-phone project led by Turkey's Turkcell Iletisim Hizmetleri AS signals a growing hostility to foreign investment that may undermine European efforts to avoid a confrontation over the country's nuclear ambitions, the Wall Street Journal reported.

Late Recommendations
-Goldman Sachs: Reiterated Outperform on AGN, MSFT, SYK, DELL and FSL.

Night Trading
Asian Indices are -.25% to +.25% 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
AL/.52
CAKE/.24
CSCO/.22
CSC/.80
MAR/.75
TASR/.10
TOL/1.08

Splits
None of note.

Economic Data
None of note.

BOTTOM LINE: I expect US equities to open modestly lower in the morning on continuing worries over future earnings growth. However, stocks may rise later in the afternoon on lower energy prices and interest rates. I am looking to add to my GOOG long in the $187-$192 area before the widely publicized lock-up expiration on Feb. 14. The Portfolio is 125% net long heading into tomorrow.

Monday Close

Indices
S&P 500 1,201.72 -.11%
Dow 10,715.76 unch.
NASDAQ 2,082.03 -.22%
Russell 2000 636.62 -.13%
DJ Wilshire 5000 11,839.19 -.12%
S&P Barra Growth 577.09 -.19%
S&P Barra Value 620.33 -.03%
Morgan Stanley Consumer 591.37 -.11%
Morgan Stanley Cyclical 761.-.15%
Morgan Stanley Technology 475.84 +.01%
Transports 3,602.13 +.12%
Utilities 351.81 -.28%
Put/Call .72 -1.37%
NYSE Arms 1.23 +25.51%
Volatility(VIX) 11.73 +4.64%
ISE Sentiment 199.00 +48.51%
US Dollar 85.12 +.87%
CRB 281.21 -.02%

Futures Spot Prices
Crude Oil 45.26 -.04%
Unleaded Gasoline 121.29 +.06%
Natural Gas 5.98 +.27%
Heating Oil 123.10 +.03%
Gold 414.60 -.19%
Base Metals 120.17 -.02%
Copper 138.80 -.04%
10-year US Treasury Yield 4.05% -.62%

Leading Sectors
Airlines +2.13%
Defense +.93%
Gaming +.78%

Lagging Sectors
Wireless -.97%
Oil Service -1.82%
HMOs -1.91%

After-hours Movers
SINA -21.0% after beating 4Q estimates and lowering 1Q guidance.
CUTR +12.37% after substantially beating 4Q estimates and raising 1Q outlook.
BOBJ +11.64% after beating 4Q estimates and raising 1Q outlook.
PDLI -6.02% after disappointing 05 guidance.
SNDA -5.79% on SINA report.
EDS -6.42% after beating 4Q estimates and lowering 1Q/05 guidance.
NTES -7.58% on SINA report.

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 HOT, AMLN, PFE and AAP.

After-hours News
US stocks finished slightly lower today as worries over future earnings growth more than offset falling interest rates and energy prices. After the close, Skype Technologies SA, which offers free software for making Internet voice calls, will join with Hutchinson Global Communications to promote Internet telephone services in Hong Kong, Bloomberg reported. US consumer borrowing increased less than expected in December after the Fed raised interest rates five times in the last half of 2004, Bloomberg reported. IBM, Sony and Toshiba released the details of a new chip that’s faster than Intel’s personal-computer processors and seeks to capture sales in the home entertainment market, Bloomberg reported. Sprint Corp. may sell some cellular phone towers to Global Signal for about $1.2 billion to raise cash that could be used for network upgrades, Bloomberg said. Ex-WorldCom finance chief Scott Sullivan implicated his old boss, Bernard Ebbers, in the $11 billion fraud that drove the company into bankruptcy, testifying that they and other officials falsified financial statements, Bloomberg said. President Bush’s job approval rating rose to its highest level in 13 months, following his second inauguration, the State of the Union address and elections in Iraq, according to a poll by CNN, USA Today and the Gallup Organization. Primedia, a specialist magazine publisher, is seeking to sell the Web site About.com, the Daily Deal reported.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my alternative energy, entertainment, telecom longs and oil service shorts. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. The tone of the market improved modestly into the afternoon. However, volume was light and measures of investor anxiety were mixed. Today’s action appeared to be a healthy consolidation after recent gains. I continue to expect crude oil to head to around the $35-$40/bbl. level over the next few months and energy-related stocks to underperform over the near-term. However, I do not expect a collapse in oil prices and expect these stocks to become better intermediate-term investments later this year.

Mid-day Report

Indices
S&P 500 1,200.81 -.19%
Dow 10,710.38 -.05%
NASDAQ 2,079.95 -.32%
Russell 2000 637.12 -.05%
DJ Wilshire 5000 11,831.03 -.19%
S&P Barra Growth 567.47 -.30%
S&P Barra Value 619.96 -.09%
Morgan Stanley Consumer 591.53 -.09%
Morgan Stanley Cyclical 764.02 -.10%
Morgan Stanley Technology 475.21 -.12%
Transports 3,604.62 +.18%
Utilities 351.44 -.39%
Put/Call .72 -1.37%
NYSE Arms 1.16 +18.37%
Volatility(VIX) 11.49 +2.50%
ISE Sentiment 207.00 +54.48%
US Dollar 85.10 +.84%
CRB 280.91 -.12%

Futures Spot Prices
Crude Oil 45.20 -2.75%
Unleaded Gasoline 121.10 -3.93%
Natural Gas 5.98 -1.90%
Heating Oil 123.10 -3.39%
Gold 415.20 -.24%
Base Metals 120.17 -.02%
Copper 138.80 +1.24%
10-year US Treasury Yield 4.05% -.62%

Leading Sectors
Airlines +1.81%
Gaming +.85%
Broadcasting +.81%

Lagging Sectors
Disk Drives -1.40%
HMOs -1.70%
Oil Service -2.45%

Market Movers
RNWK +19.8% on positive comments in Barron’s.
ORCT +15.33% on continuing optimism over recent 4Q report.
GOSHA +14.6% on a report that it put itself up for sale.
ANTP +16.11% after announcing a subsidiary was recently awarded a $3.7M contract from BAE for the production of 270 Low Band Antenna Matching Unit Assemblies.
MATK +4.2% after Citi SmithBarney reiterated Buy.
WPSC +8.99% after positive comments on Barron’s.
LZ +7.72% after beating 4Q estimates and raising 1Q guidance.
IMCL +5.53% after saying in a SEC filing that billionaire financier Icahn boosted his stake in the company to 6.1%.
DIOD +7.85% after beating 4Q estimates.
RSTI -17.03% on disappointing 1Q results.
SYNA -11.96% on comments from Bear Stearns that Apple Computer has begun using some of its own products in one of its notebook computers, replacing those made by Synaptics.
SOHU -10.8% after meeting 4Q estimates and lowering 1Q guidance.
AGN -5.94% after beating 4Q estimates and lowering 1Q/05 guidance.

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 EBAY, CAT, AGN, INTC, WLP,GD and KO.
-Citi SmithBarney: Raised their WTI Oil estimate to $40/bbl. for 2005 from $36/bbl. Raised AHC to Buy, target $109. Reiterated Buy on MRO, target $47. Reiterated Buy on MCD, target $37. Reiterated Buy on MXRE, target $24. Reiterated Buy on MATK, target $90. Reiterated Buy on SCH, target $14.50. Reiterated Buy on BWA, target $61. Reiterated Buy on TWX, target $22. Reiterated Buy on WMT, target $65. Reiterated Buy on EMC, target $16.50. Reiterated Buy on UNM, target $20. Reiterated Buy on PCG, target $38.50. Reiterated Sell on SNDK, target $22. Reiterated Buy on PRU, target $60.
-UBS: Raised PAYX to Buy, target $37.
-Bear Stearns: Raised SM to Outperform, target $58. Raised CAH to Outperform, target $75.
-Thomas Weisel: Rated DNEX Outperform.
-Legg Mason: Raised SWBT to Buy, target $22.
-Prudential: Downgraded AG to Underweight, target $20.
-Oppenheimer: Raised CHUX to Buy, target $25.
-Morgan Stanley: Raised MDT to Overweight, target $60.

Mid-day News
US stocks are modestly lower mid-day on earnings worries due to slowing US government spending and a rising US dollar. China’s central bank governor Zhou Ziaochuan said the yuan is not undervalued, state-run Xinhua News said. Webroot Software, a closely held software company, received $1008 million in venture capital to help expand its anti-spyware technology, the Wall Street Journal said. The Bush administration today will ask for a 4.8% increase in defense spending to $419.3 billion for 2006 that will little change the Army’s budget, the Wall Street Journal reported. Morningstar increased the number of mutual funds it grades on how well they govern themselves and today it will issue revised ratings, the Wall Street Journal reported. Activision and Electronic Arts are among video-game makers that may be acquisition targets of big media companies, the NY Times reported. Frontline, the world’s biggest oil-tanker company, may bid for the US-based dry-cargo shipowner Navios, the shipping weekly TradeWinds reported. Walt Disney’s ABC Television has ordered a reality-tv program called “Miracle Workers,” which will seek to provide medical care to people who can’t afford it, the NY Times reported. Nokia Oyj is working to develop advanced mobile phones with computer-like functions that are simple to use in order to boost demand for the devices, CEO Ollila said. The UN suspended the former head of its Iraq oil-for-food program and another senior official after an interim report by an independent commission criticized the conduct of both mean, the NY Times reported. Time Warner would likely control most of Los Angeles’s cable-television market if it wins the bidding for Adelphia Communications, the LA Times reported. Walt Disney has told its ABC television unit to come up with possible alternatives for the long-running “Nightline,” possibly signaling the late-night news program’s end, the LA Times reported. Internet radio, considered a commercial failure in the past several years following initial excitement by big media companies, may be making a comeback, the LA Times reported. US Secretary of State Rice praised Palestinian efforts to crack down on attacks against Israel and said the US will provide $40 million during the next three months in aid for the West Bank and Gaza Strip, Bloomberg reported. President Bush invited the leaders of Israel and the Palestinian Authority for separate meetings at the White House and appointed a US general to help Palestinians stop attacks against Israel, Bloomberg reported. Wal-Mart Stores and Target are likely to refinance $2 billion in bonds this month because the cost to borrow for US retailers is at a seven-year low, Bloomberg said. Merrill Lynch and UBS AG vaulted into the top three among merger advisers, joining perennial leader Goldman Sachs, in the hottest US takeover market since 2000, Bloomberg reported. Crude oil is falling to the lowest level in almost four weeks as mild weather reduced demand for heating fuel in the US and refineries increased gasoline stockpiles, Bloomberg said. Military contractors including Boeing, General Dynamics, United Defense Industries and Alliant TechSystems would benefit from President Bush’s proposal to spend $419.3 billion on defense next year, Bloomberg reported.

BOTTOM LINE: The Portfolio is slightly higher mid-day on gains in my alternative energy, entertainment and telecom longs and oil service shorts. I have not traded today and the Portfolio remains 125% net long. The tone of the market is mildly negative today as the advance/decline line weakens. However, volume is lighter and a number of sectors are in positive territory. As I forecasted a couple of months ago, the US dollar continues to stabilize, energy prices are weakening and long-term interest rates are falling. Today’s weakness is likely a result of worries over the impact of decelerating government spending and a rising US dollar on corporate earnings. I expect US stocks to trade mixed-to-higher into the close as falling energy prices, increasing fund flows, more speculation over merger activity and lower interest rates mostly offset worries over slowing earnings growth.