Friday, March 05, 2004

Mid-day Update

S&P 500 1,157.31 +.21%
NASDAQ 2,051.56 -.17%

Leading Sectors
Homebuilders +2.50%
Restaurants +1.80%
Gaming +1.26%

Lagging Sectors
Semis -.61%
Fashion -.71%
Iron/Steel -1.97%

Crude Oil 37.15 +1.39%
Natural Gas 5.43 -.49%
Gold 399.80 +1.68%
Base Metals 109.87 +.48%
U.S. Dollar 88.04 -1.20%
10-Yr. Long-Bond Yield 3.83% -4.70%
VIX 14.28 -.90%
Put/Call .75 +10.29%
NYSE Arms 1.32 +46.7%

Market Movers
AAPL +6.92% on Sony buyout rumors.
SBL -11.7% on continued weakness from 4Q report.
NUE -5.7% on Prudential downgrade to Neutral.
Homebuilders up across the board on a technical gap breakdown in interest rates.

Economic Data
Unemployment Rate came in at 5.6% in Feb., meeting expectations.
Change in Non-farm Payrolls was 21K in Feb. vs. expectations of 130K.
Change in Manufacturing Payrolls was -3K vs. expectations of down 2K.
Average Weekly Hours was 33.8, meeting expectations.

QCOM raised to Buy at Deutshe Bank and has $70 target. KWK cut to In-line at Goldman Sachs. PFCB raised to Buy at Citi Smith Barney, target $60. Citi also saying its sees recent positive trends in INTC's data points and investors should Buy now on weakness. Citi says March CIO Software Survey shows increased spending on applications, with emphasis on ERP, HRMS and CRM. Citi also saying that % of deployed applications that are web-based will grow from 25% today to 70% by 2010, benefiting BEAS and MSFT. Finally, Citi says MU's upcoming earnings report will be strong with outlook strong. Prudential raised BSX target to $53. X cut to Underweight at Prudential, target $28. TLB priced target raised to $43 at Prudential. Prudential also raised price target of MBG to $56. Lehman raised CNXT to Overweight. Raymond James raised BBY to Strong Buy. OSTK rated Strong Buy with $50 target at JMP Securities. Cramer, of, says to buy tech on any short-term weakness from INTC call.

Mid-day News
U.S. stocks are mixed mid-day as they recover from an early morning sell-off. Homebuilders are leading the market again as interest rates broke to the downside on the much weaker-than-expected jobs report. The unemployment rate held steady at 5.6%. The 10-yr long-bond is having its best day since 2001. Flextronics(FLEX) says Qaulcomm's(QCOM) CDMA phone is gaining traction in China, Brazil and India. New York City's Taxi Commission proposal raises fares 26%, NY Daily reported. China's transportation system has bogged down under strains of rapid economic growth, causing delays in deliveries of raw materials and raising a risk of higher inflation, NY Times says. EchoStar would be forced to consider an acquisition or merger should rival Comcast succeed in buying Disney said Chairman Ergen, according to the Denver Post. Sun Microsystems credit rating was cut to "junk" by Standard & Poors.

BOTTOM LINE: While it is disappointing in the short-run that the U.S. isn't creating more jobs, it is actually better for the long-run. The Fed will not raise rates until it sees a couple of good jobs reports, in my opinion. Thus, the longer interest rates stay exceptionally low, the greater the pent-up demand for workers will be down the road. It is likely that the airwaves will be filled with negativity this weekend as media pundits continue to focus on the past instead of the future. These same pundits said that U.S. stocks, specifically technology, would remain in a bear market for a decade after the bubble of the 90's burst. They said corporate scandals would cause investors to flee U.S. stocks permanently. After 9-11, they said the U.S. would see many more attacks on U.S. soil in the near future. They said corporate spending wouldn't improve for years due to the overcapacity created during the 90's. They said a declining dollar would result in foreign selling of U.S. assets. They said U.S. budget and trade deficits would result in a crash in the economy and stock markets. All of these predictions proved to be wrong. Any investors that listened to this negativity likely missed out on the historically strong run we have had in U.S. stocks during the last 18 months. The economy is in very good shape and is getting better. With this improvement, job growth will come. Like I have said before, this recovery is in slow-motion as the U.S. economy continues to burn off the excess capacity created during the 90's bubble. We are close, but not there yet. Investors that focus on the future and all the recent positive developments with respect to the economy will be rewarded by year-end. The Portfolio is up today as I added a couple of interest-rate sensitive positions on the morning weakness and homebuilders continue to generate stunning profits. The Portfolio is now 100% net long.

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