Wednesday, March 10, 2004

Mid-day Update

S&P 500 1,134.25 -.55%
NASDAQ 1985.73 -.47%

Leading Sectors
Computer Boxmakers +.28%
Gaming +.17%
Homebuilders +.11%

Lagging Sectors
Drugs -1.57%
Telecom -1.73%
Oil Service -2.13%

Crude Oil 35.75 -1.41%
Natural Gas 5.39 -.79%
Gold 401.20 -.82%
Base Metals 107.40 +.67%
U.S. Dollar 88.90 +.53%
10-Yr. Long-Bond Yield 3.71% -.20%
VIX 16.86 +1.57%
Put/Call .77 -21.43%
NYSE Arms 1.66 -41.61%

Market Movers
THC -12.2% on cash crunch concerns.
PG +4.4% after raising 3Q estimates, raising 04 guidance and announcing 2-for-1 split.
ROK +6.3% after raising 2Q estimates.
KKD -7.8% after meeting 4Q estimates and lowering 1Q guidance. Will have sugar-free doughnut by year-end.
INTV +9.7% after Wedbush Morgan analyst made positive comments and added to recommended list.
MMSI +7.8% after announcing it will be added to the S&P 600 index.
IDCC -19.6% after missing 4Q estimates and lowering 1Q guidance.

Economic Data
Trade Balance came in at -$43.1B in Jan. vs. expectations of -$42.0B.
Wholesale Inventories rose .1% in Jan. vs. expectations of a .4% rise.

MDT raised to Overweight at Morgan Stanley, target $60. CDN raised to Buy at Merrill, target $20. Goldman Sachs reiterating Outperform on GDT. Goldman saying there are a lot of misconceptions right now about pre-clinical service providers and that they are very bullish on the group for 04. GS is raising estimates for ICLR, likes CVD and IRGI best. GS reiterating Outperform on PG, raising estimates. GS thinks DOW is a great buy at current levels. Citi Smith Barney initiating DISH with Buy 1H and $43 target. Citi reiterating Buy on FDRY, thinks market is overreacting. Citi says CSCO is clearly seeing a dramatic increase in enterprise activity around converged IP networks. Jim Cramer, of, is starting to buy right now, saying investors are too focused on the negative, which is wrong. He likes cyclicals a lot and the NASDAQ over the S&P.

Mid-day News
U.S. stocks are falling mid-day as cyclical and pharmaceutical shares fall on concerns the economy is slowing and constant attacks by government, respectively. The SEC plans to propose rules tomorrow that would require mutual fund managers to disclose compensation and their holdings in the funds they control, the Wall Street Journal reported. Harrah's will beat out its competitors for a Chicago-area casino license with a $375M bid, CEO Loveman told CNBC. Microsoft claimed 11% of the business-management software market less than 5 years after beginning to sell the products, SAP said. Nokia and Motorola lost handset market share in the 4th Q to competitors such as Siemens and Samsung, researcher Gartner said. S&P raised Lucent's credit rating to B as telecom industry revenues stabilize. El Paso may restate earnings because part of last month's 41% cut to its assessment of oil and natural gas reserves may be applied to past years. Pennsylvania Attorney General said he will sue several pharmaceutical companies on grounds that they unlawfully inflated prices to capture market share. Pfizer said the Justice Dept. is investigating the company's marketing and sale of its Genotropin and Bextra drugs and some managed-care payments.

BOTTOM LINE: The correction that began with semis and spread throughout the whole tech sector is now engulfing the entire market. The NASDAQ appears to be breaking support in a convincing manner. The Portfolio is flat for the day, however I sold a few longs in the last hour bringing the Portfolio's market exposure down to 25% net long. If weakness persists this afternoon, I will look to add short positions in energy-related stocks as I think Oil has made an intermediate-term top. This should bring the Portfolio to near market neutral. I am not ruling out a late-day reversal to the up-side as I believe this correction is close to running its course.

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