Stocks Mixed Mid-day Ahead of Fed Minutes

Indices
S&P 500 1,254.20 -.05%
DJIA 10,815.32 -.05%
NASDAQ 2,245.00 +.15%
Russell 2000 678.83 -.02%
DJ Wilshire 5000 12,539.67 -.03%
S&P Barra Growth 601.26 -.04%
S&P Barra Value 648.57 -.06%
Morgan Stanley Consumer 591.60 -.34%
Morgan Stanley Cyclical 766.16 -.23%
Morgan Stanley Technology 530.09 +.41%
Transports 4,140.56 -.38%
Utilities 395.81 -.48%
Put/Call 1.11 +40.51%
NYSE Arms .75 -4.51%
Volatility(VIX) 10.78 -.46%
ISE Sentiment 165.00 -26.99%
US Dollar 91.97 -.08%
CRB 315.26 +.52%

Futures Spot Prices
Crude Oil 58.80 +1.91%
Unleaded Gasoline 147.40 +1.15%
Natural Gas 11.55 +1.93%
Heating Oil 175.00 +2.37%
Gold 492.70 +.65%
Base Metals 140.15 -1.73%
Copper 184.70 -3.35%
10-year US Treasury Yield 4.46% +.04%

Leading Sectors
Disk Drives +1.72%
Oil Service +1.56%
Semis +1.0%

Lagging Sectors
Wireless -.92%
Steel -1.90%
Airlines -2.29%

BOTTOM LINE: The Portfolio is higher mid-day as gains in my Internet longs, Medical longs, Semi longs and Retail longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly negative as the advance/decline line is modestly lower, most sectors are declining and volume is about average. Measures of investor anxiety are mixed. Overall, today’s market action is slightly negative considering yesterday’s late afternoon gains and today’s rise in energy prices. The Johnson Redbook same-store sales index rose 3.8% year-over-year last week vs. a 3.8% rise the prior week. This week's gain is up from a 1.5% increase in late April and the 29th week in a row the index has risen 3% or more. Retail sales should remain strong into the holidays on colder weather, rising stock prices, a healthy job market, better sentiment and lower-than-expected energy costs. I expect US stocks to trade modestly higher from current levels into the close on short-covering, lower long-term interest rates and more optimism.

Today's Headlines

Bloomberg:
- The National Retail Federation raised its sales forecast to 6% from an estimate of 5% two months ago, citing strong October gains and a decline in gas prices.
- Nokia Oyj and Motorola, the world’s two largest mobile-phone makers, widened their lead over smaller competitors in the third quarter on demand in emerging markets.
- French consumer spending on manufactured goods unexpectedly fell for a second month in October, suggesting momentum in Europe’s third-largest economy is slowing further.
- Crude oil and heating oil rose for a second day as speculation increased that demand is rising because of colder weather in the US and Europe.
- Microsoft released its Xbox 360 video-game console across the US, a machine Chairman Bill Gates says will let the company wrest control of the $28.5 billion industry from Sony Corp.
- Value Capital LP, a $570 million hedge fund backed by billionaire investor Warren Buffett, may report an annual loss for the first time in seven years after making a bad bet on US interest rates.

Wall Street Journal:
- Time Warner’s AOL unit wants to use instant messaging to boost traffic to AOL’s other Web sites on which it carries advertising.
- IAC/Interactive Corp., Time Warner’s AOL and other US companies are investing in Brightcove, a startup company developing technology to make television on the Internet easier.
- US manufacturers can’t find enough skilled workers and the shortfall is disrupting their ability to supply customers.
- Many US physicians have stopped issuing prescriptions for the Ortho Evra contraceptive patch since the FDA warned this month of increased hormone exposure for women who use it.
- Many US investors see rosy prospects for pharmacy shares, given the aging population and the proliferation of generic pharmaceuticals that are cheaper for individuals and more profitable for drugstores.

AP:
- Representative Tom DeLay’s lawyers will ask a judge for dismissal of conspiracy and money-laundering charges.

National Post:
- Almost half of Canadians say they should be allowed to buy health-care services from private companies to bypass waiting lists at public hospitals, citing a new poll.

NY Times:
- JPMorgan Chase is starting a mutual fund that will be accessible to investors with $10,000 and will be managed by its hedge fund unit.
- Russian Muslims are being monitored by an agency reminiscent of the Soviet era, as Islamic faith and militancy are on the rise.
- More US colleges now offer formal programs in video game design and the academic study of games.
- Goldman Sachs Group has set out an environmental policy that commits itself to investing $1 billion in alternative energy projects and would spend $5 million to set up a research center on the free market and the environment.

San Francisco Chronicle:
- Visa USA is offering a medical debit card for members of participating Blue Cross and Blue Shield Association companies to use with their flexible savings or health savings accounts.

Dow Jones:
- Newmont Mining is mulling a takeover offer for Placer Dome that may rival an unsolicited $9.2 billion bid last month by Barrick Gold.

Economic Releases

- None of note

Links of Interest

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Tuesday Watch

Late-Night Headlines
Bloomberg:
- Target Corp. said November sales may rise 2% to 3%, half its earlier forecast.
- Berkshire Hathaway owned 44.7 million shares of Anheuser-Busch Cos. as of Sept. 30.
- Wal-Mart will open stores an hour earlier this year on Black Friday and match any competitors’ price to win holiday sales after a lackluster season last year.
- Chinese industrial companies’ profits grew at a slower pace in October as competition drove down prices of products including steel, cell phones and cars, and higher energy prices boosted manufacturers’ costs.
- The death toll from Hurricane Katrina, totaling 1,306 so far, may rise as 6,644 people are still unaccounted for, USA Today reported.
- London Metal Exchange CEO Heale said a China Daily report that China had to deliver 200,000 tons of copper into exchange-approved warehouses by Dec. 21 was “market rumor and speculation.”

Wall Street Journal:
- A group led by Russell Glass, a former Icahn Associates president and chief investment officer, offered to buy the New York Knicks and Rangers for $700 million.

Financial Times:
- Shopping on the Internet will rise by over 40% in the UK during this year’s holiday period, compared with a year earlier.
- Internet hackers are targeting desktop software such as anti-viruses, after operating systems and e-mail systems tightened security.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on EBAY, COH and SGMS.

Night Trading
Asian Indices are -1.0% to -.25% on average.
S&P 500 indicated -.10%.
NASDAQ 100 indicated -.21%.

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Earnings of Note
Company/EPS Estimate
ABS/.27
BSG/.17
CWTR/.20
DE/.78
DG/.19
DLTR/.27
EV/.30
FLS/.28
HNZ/.54
MIK/.37
PETC/.26
TECD/.45
WIND/.07

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- The Richmond Fed Index for November is estimated to fall to 10 versus a reading of 12 in October.

2:00 pm EST
- Minutes of Nov. 1 FOMC Meeting

BOTTOM LINE: Asian indices are lower, dragged down by losses in semiconductor companies in the region. I expect US equities to open modestly lower and to rally later in the afternoon. The Portfolio is 100% net long heading into the day.

Stocks Finish at Session Highs on Increasing Optimism

Indices
S&P 500 1,254.85 +.53%
DJIA 10,820.28 +.50%
NASDAQ 2,241.67 +.66%
Russell 2000 678.96 +1.0%
DJ Wilshire 5000 12,543.34 +.60%
S&P Barra Growth 601.49 +.56%
S&P Barra Value 648.98 +.50%
Morgan Stanley Consumer 593.61 +.04%
Morgan Stanley Cyclical 767.96 +.43%
Morgan Stanley Technology 527.92 +.30%
Transports 4,156.48 +.38%
Utilities 397.69 +.31%
Put/Call .79 +27.42%
NYSE Arms .77 +5.45%
Volatility(VIX) 10.82 -2.70%
ISE Sentiment 226.00 +24.86%
US Dollar 92.04 +.11%
CRB 313.63 +.28%

Futures Spot Prices
Crude Oil 57.68 -.03%
Unleaded Gasoline 145.73 -.32%
Natural Gas 11.40 +.65%
Heating Oil 170.95 +.78%
Gold 491.90 +.47%
Base Metals 142.62 +1.0%
Copper 190.75 -.18%
10-year US Treasury Yield 4.46% -.48%

Leading Sectors
Steel +3.78%
Oil Service +2.74%
Gold & Silver +2.55%

Lagging Sectors
Computer Services -.94%
Airlines -1.59%
Disk Drives -1.91%

Evening Review
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In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on GNW.

Afternoon/Evening Headlines
Bloomberg:
- Vice President Dick Cheney said the administration won’t set a timetable for withdrawing US troops from Iraq and that Iraqi forces are making progress toward securing the country on their own.
- Sprint Nextel, the third-largest US mobile phone provider, agreed to buy affiliate Alamosa Holdings for $3.4 billion to end a legal dispute and gain almost 1.5 million direct customers.
- Palm’s third-largest shareholder is demanding the maker of Treo phones and Palm handheld devices take steps to boost its stock price, including a share buyback or a possible sale of the company.
- Pfizer may pay Incyte as much as $803 million for rights to experimental medicines against diseases including rheumatoid arthritis.
- Robert Johnson, who became a billionaire after selling Black Entertainment Television, is starting a hedge-fund venture with Deutsche Bank AG in his aim to develop the largest money manager owned by black Americans.

BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, Retail longs, Medical longs and Homebuilding longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, almost every sector rose and volume was about average. Measures of investor anxiety were mixed into the close. Overall, today's market action was positive. As I predicted last week, the S&P 500 is making a new 52-week high. I am beginning to sense some panic in the short-selling community as the averages grind higher on little news during a holiday-shortened week. Take a look at Overstock.com (OSTK) for evidence. This controversial stock, with 62% of the float sold short, is breaking up through its 200-day moving average and has gained 28% in less than a month on above-average volume.