Wednesday, February 25, 2004

Wednesday Watch

Earnings Announcements
Company/Estimate
ADRX/.21
BLI/.65
CLST/.12
TIF/.70
MWY/-.25
TJX/.44
TRK/.25

Splits
None of note

Economic Data
Existing Homes Sales expected at 6.25M for Jan. vs. 6.47M in Dec.

Recommendations
SPOT cut to "Sell" at Merrill.

Late-Night News
The U.S. may keep interest rates low for an "extended period of time" because of continuing signs of disinflation, said the Fed's Broaddus in an interview with Dow Jones Newswires. Broaddus said the Fed's preferred measure of inflation, the personal consumption expenditure index minus food and energy, is still rising at a rate well below 1%. As long as that is the case the Fed can maintain an accommodative policy, he said. He also stated that he expects U.S. GDP growth of between 4.5-5% for 04. The IMF is saying the Japanese economy will growth 3% this year, significantly stronger than previous forecasts. Ukrainian border guards stopped a man trying to take 450 grams of uranium into Hungary, the AP said.

Late-Night Trading
Asian markets are mixed, ranging from -.50% to +.25%.
S&P 500 indicated +.04%.
NASDAQ indicated +.07%.

BOTTOM LINE: It will be interesting to see the market's reaction to the statements made by Broaddus. He replaced the phrase "can be patient" with "extended period of time" again. He also reiterated strong growth forecasts and a pick-up in job growth. Current market valuations are low(S&P 500 P/E=18 on 04 estimates) relative to interest rates at 46-yr. lows, economic growth is at 20-year highs, corporate profitability is near all-time highs, inflation is historically low, job growth is accelerating, significant tax cut stimulus is coming and the Fed is saying they are on hold for "an extended period of time." These are all very postive characteristics of the current investment envionment. I expect the current correction will likely be mild and set the stage for a move through recent highs within a few months.

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