Wednesday Close

Indices
S&P 500 1,181.41 +1.38%
DJIA 10,540.93 +1.30%
NASDAQ 2,005.67 +1.61%
Russell 2000 614.90 +1.70%
DJ Wilshire 5000 11,633.97 +1.37%
S&P Barra Growth 570.87 +1.39%
S&P Barra Value 606.13 +1.37%
Morgan Stanley Consumer 579.59 +1.16%
Morgan Stanley Cyclical 742.92 +1.31%
Morgan Stanley Technology 458.21 +1.91%
Transports 3,736.32 +1.71%
Utilities 354.47 +1.38%
Put/Call .83 -11.70%
NYSE Arms .57 -60.51%
Volatility(VIX) 13.64 -5.87%
ISE Sentiment 149.00 -10.24%
US Dollar 84.33 +.01%
CRB 311.02 +.68%

Futures Spot Prices
Crude Oil 54.11 -.22%
Unleaded Gasoline 159.80 +1.59%
Natural Gas 7.48 +1.12%
Heating Oil 160.20 +2.94%
Gold 428.70 -.19%
Base Metals 128.54 +.54%
Copper 149.00 -.13%
10-year US Treasury Yield 4.54% -.53%

Leading Sectors
Airlines +5.24%
Internet +2.49%
HMOs +2.32%

Lagging Sectors
Broadcasting +.45%
Homebuilders +.32%
Insurance +.19%

After-hours Movers
WDC +11.9% after boosting 3Q results substantially.
ODMO +6.56% after beating 4Q estimates.
MXO +4.82% on WDC news.
ELN -28.4%, BIIB -9.41% after announcing that their ongoing safety evaluation of TYSABRI has led to a previously diagnosed case of malignant astrocytoma being reassessed as progressive multifocal leukoencephalopathy, in a patient in an open label Crohn’s disease clinical trial.

Evening Review
Detailed Market Summary
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
Futures Recap
S&P 500 Gallery View
Timely Economic Charts
PM Market Call
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on AMGN and MSFT.

Afternoon/Evening Headlines
Bloomberg:
- A buyout group led by Texas Pacific Group will invest $350 million in cash for a 12% stake in China’s Lenovo Group Ltd., which is acquiring IBM’s personal computer unit.
- Time Warner plans to test a service called Start Over that lets tv viewers begin a show at any time during its broadcast.
- Johnson & Johnson said today its DePuy Orthopaedics unit received a subpoena from the US Attorney’s Office in Newark, New Jersey, requesting documents on contracts with orthopedic surgeons.
- EBay named Omnicom Group’s BBDO as its ad agency, replacing Goodby, Silverstein & Partners.

CNBC:
- Former Morgan Stanley Chairman S. Parker Gilbert and retired President Robert Scott said they and other former executives might stage a proxy fight to oust CEO Philip Purcell.

Women’s Wear Daily:
- Saks Inc. seeks buyers for its regional department store unit and Belk Inc. is the primary suitor.

BOTTOM LINE: US stocks had their broadest, strongest rally of 2005 today as oil prices declined, long-term interest rates fell and quarter-end window dressing took hold. The Portfolio finished slightly higher as gains in my Internet longs and Networking longs more than offset losses in my Base Metal shorts. I added a few new longs from various sectors in the afternoon, thus leaving the Portfolio 75% net long. One of my new longs is PHM and I am using a $71 stop-loss on this position. The tone of the market strengthened further into the afternoon as the advance/decline line rose to its daily highs, every sector advanced and volume was decent. Small-caps and Tech outperformed and measures of investor anxiety were mostly lower. Overall, today’s market action was positive. I expect US stocks to rally further near-term as long-term interest rates decline over the next 2 days on weaker-than-expected economic data, thus quelling some speculation that the Fed will raise rates 50 basis points at the next meeting. An unexpected rise in long-term interest rates would likely cut any rally short. I also expect oil to remain in a trading range near-term. However, one more push higher in energy prices is possible over the next 6 weeks before steeper declines occur in the second-half of the year.

Mid-day Scoreboard

Indices
S&P 500 1,177.80 +1.07%
DJIA 10,513.00 +1.04%
NASDAQ 1,999.89 +1.32%
Russell 2000 612.25 +1.26%
DJ Wilshire 5000 11,608.82 +1.15%
S&P Barra Growth 569.75 +1.20%
S&P Barra Value 604.96 +1.17%
Morgan Stanley Consumer 579.06 +1.07%
Morgan Stanley Cyclical 740.78 +1.02%
Morgan Stanley Technology 457.75 +1.81%
Transports 3,727.54 +1.46%
Utilities 354.25 +1.31%
Put/Call .87 -7.45%
NYSE Arms .63 -56.40%
Volatility(VIX) 13.72 -5.31%
ISE Sentiment 123.00 -25.90%
US Dollar 84.17 -.18%
CRB 310.28 +.44%

Futures Spot Prices
Crude Oil 52.95 -2.18%
Unleaded Gasoline 155.90 -.89%
Natural Gas 7.45 +.65%
Heating Oil 156.00 +.24%
Gold 429.60 +.21%
Base Metals 128.54 +.54%
Copper 149.20 +1.46%
10-year US Treasury Yield 4.55% -.35%

Leading Sectors
Airlines +4.71%
Internet +2.08%
Semis +1.88%

Lagging Sectors
Broadcasting +.17%
Hospitals +.16%
Insurance -.06%

Links of Interest
Market Internals
Movers & Shakers
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon
Real-time Intraday Chart/Quote

BOTTOM LINE: US stocks are higher mid-day on a technical bounce, end-of-quarter window dressing and lower energy prices. The Portfolio is unchanged as gains in my Homebuilding shorts and Retail longs are offsetting losses in my Chinese ADR shorts and Base Metal shorts. I took profits in a few shorts this morning and added some new longs from various sectors, thus bringing the Portfolio’s market exposure to 50% net long. One of my new longs is OSTK and I am using a $41.50 stop-loss on this position. The tone of the market is positive as the advance/decline line is higher, almost every sector is higher and volume is decent. Technology stocks are outperforming and measures of investor anxiety are mostly lower. Today’s overall market action is positive. I would like to see the major indices hold gains or improve into the close. Stocks should continue bouncing through week’s end on quarter-end window dressing, short-covering, bargain hunting, lower long-term interest rates and declining energy prices. I expect US stocks to trade mixed-to-higher into the close on short-covering, window dressing and bargain hunting.

Today's Headlines

Bloomberg:
- Morgan Stanley Chairman and CEO Philip Purcell says he has the “unanimous” support of his board.
- AIG said a reinsurance contract with Warren Buffet’s Berkshire Hathaway led to the “improper” reporting of financial results.
- GM will spend $44 million to help develop a fleet of vehicles using fuel cells as part of an agreement with the US Department of Energy.
- The US economy expanded at a 3.8% annual rate in the fourth quarter, restrained by a slower building of inventories than the government estimated last month.
- Crude oil is falling more than $1 a barrel to the lowest in almost three weeks after a government report showed that US inventories rose for a seventh straight week.

Wall Street Journal:
- Rising steel prices have made millionaires in some US “Rust Belt” communities such as Fort Wayne, Indiana, that haven’t seen prosperity since the 1950s.
- Berkshire Hathaway Chairman Warren Buffett was told beforehand of a transaction that is central to an investigation into one of its units.
- Short Sellers are finding it more difficult to make money because of increased competition and a less-favorable tax code.
- Citigroup’s Diners Club credit card wants to improve its market share by almost tripling the number of locations where the cards are accepted.

New York Times:
- A review of the UN agency that monitors free elections found management abuses including employees humiliation, misuse of funds and a willingness to tolerate sexual harassment.
- Disney’s Miramax studio and MGM are cutting their production budgets as Hollywood struggles with rising costs of film-making.

Chicago Sun-Times:
- Wm. Wrigley Jr. Co. is opening three facilities around the world to help it meet increasing demand for chewing gum in Asia.

LA Times:
- The Bush administration will announce today it is sending 500 more Border Patrol agents to Arizona to crack down on illegal immigration along the US-Mexican border.

San Francisco Chronicle:
- San Francisco’s Board of Supervisors approved a 45-day moratorium on new medical marijuana clubs until they can devise regulations protecting them from federal law.

Rocky Mountain News:
- Colorado Governor Bill Owens wants the US Congress to revise gaming laws to limit the $20 billion American Indian gambling industry.

China Central Television:
- China called for the scrapping of export rebates on some steel products and curbs on the expansion of steel production.

Financial Times Deutschland:
- Siemens AG and IBM have submitted a joint bid to upgrade the computer system of the German army.

National Post:
- Cognos Inc., Canada’s biggest software maker, plans to increase its workforce 47% to 5,000 by 2008.

Economic Releases

- Final 4Q GDP rose 3.8% versus estimates of a 4.0% rise and a prior estimate of a 3.8% gain.
- Final 4Q GDP Price Deflator rose 2.3% versus estimates of a 2.1% increase and prior estimate of a 2.1% gain.
- Final 4Q Personal Consumption rose 4.2% versus estimates of a 4.3% increase and a prior estimate of a 4.2% gain.
- Summary of Weekly Petroleum Data for the Week Ending March 25, 2005.

Morning Buy/Sell Recommendations

Goldman Sachs:
- Reiterated Underperform on MU and HRB.
- Reiterated Outperform on AIG.

Smith Barney:
- Said to Buy AD.
- Reiterated Sell on MU, target $11.50.

CSFB:
- Raised APOL to Outperform, target $84.
- Reiterated Outperform on TTMI, target $13.

Merrill Lynch:
- Raised AMR to Buy, target $14.
- Raised FRNT to Buy, target $12.
- Raised STON to Buy, target $24.50.
- Raised POT to Buy, target $94.
- Raised KOSP to Buy, target $50.

Morgan Stanley:
- Raised SSI to Overweight, target $64.
- Rated EMC Overweight, target $16.
- Reiterated Overweight on NYT, target $45.
- Reiterated Overweight on APOL, target $87.
- Reiterated Underweight on SLM, target $46.

Banc of America:
- Reiterated Buy on BFAM, target $38.

Jeffries:
- Rated IMA Buy, target $32.
- Rated L Buy, target$14.87.

Prudential:
- Raised SFD to Overweight, target $35.
- Raised SHFL to Overweight, target $35.

Thomas Weisel:
- Rated AKAM, TWW, GRIC Outperform.
- Rated INLD Underperform.

Piper Jaffray:
- Cut SBIB to Underperform, target $12.

Legg Mason:
- Rated DF Buy, target $40.

Chart of Interest