Monday, March 15, 2004

Mid-day Update

S&P 500 1,106.67 -1.24%
NASDAQ 1,949.22 -1.79%

Leading Sectors
Oil Service +1.05%
HMO's +.49%
Energy +.25%

Lagging Sectors
Biotech -2.56%
Networking -2.60%
Airlines -6.43%

Crude Oil 36.94 +2.07%
Natural Gas 5.68 +1.50%
Gold 399.00 +.86%
Base Metals 109.55 +.88%
U.S. Dollar 88.96 -.19%
10-Yr. Long-Bond Yield 3.75% -.70%
VIX 20.44 +11.69%
Put/Call .94 -8.74%
NYSE Arms 2.23 +457.50%

Market Movers
INVN +19.7% after takeover by GE.
PDLI +8.08% after saying its phase II trial for its daclizumab treatment for asthma was effective in tests on humans.
DAL -14.8% after it warned 1Q losses will be larger-than-expected on high fuel costs and terrorism concerns.
KDE -11.26% after disappointing 4Q results.
NTES -8.7% after saying it received SEC "Wells Notice" for restatement that occurred 2 1/2 years ago under previous management.
NT -14.0% after putting CFO and controller on paid leave.

Economic Data
Empire Manufacturing came in at 25.33 in March vs. expectations of 38.0.
Industrial Production for Feb. rose .7% vs. expectations of a .4% rise.
Capacity Utilization for Feb. was 76.6% vs. expectations of 76.4%.

Goldman Sachs is reiterating its Outperform on PAYX ahead of Thur. report. GS raising ALK to Outperform. GS says concern over an inventory build in notebooks and seasonally mixed PC data points from Taiwan are fully priced into semi stocks. They reiterate Outperform rating on ATYT and INTC. GS remains bullish on tower stocks, favorites are AMT and CCI. GS reiterating Underperform on EDS. GS reiterating Outperform on KMT. GS says HRB continues to lose market share. GS reiterating Underperform on BMY. GS reiterating Outperform on KRB. Goldman says to Overweight select Financial sub-sectors, focus on IT for alpha, consider indexing consumer staples, healthcare offers the best combination of growth and value and energy is their highest ranked sector for EPS revisions. Bank of America upgrading MNST to Buy. Citi Smith Barney is reiterating Buy on GE. GR and UTX raised to Buy at Deutsche Bank. APOL raised to Sector Outperform at CIBC. MRK raised to Outperform at Thomas Weisel. ATYT raised to Buy at Bear Stearns.

Mid-day News
U.S. stocks are down mid-day on terrorism concerns and rising energy prices. GE agreed to buy bomb-detection company InVision Technologies for $900M in cash. Hotel chains are investing more money in their own web sites and guaranteeing that clients will find the same room prices on their sites as elsewhere, the NY Times reported. GlaxoSmithKline will run commercials on U.S. primetime t.v. that promote the difficult work of its scientists to seek to ease public anger at drugmakers, the Philadelphia Inquirer reported. Nortel(NT) put its CFO and controller on paid leave, pending completion of an accounting review. Crude Oil rose after oil ministers from Venezuela and Qatar said that OPEC will proceed with a production cut in April, Bloomberg reported. Martha Stewart resigned from Martha Stewart Living Omnimedia's board and from her role as Chief Creative Officer, Bloomberg reported. U.S. industrial production rose a larger-than-forecast .7% in February as companies made more cars, electronics and business equipment. This strong showing followed a .8% rise in January, resulting in the strongest 2 month performance since 1999.

BOTTOM LINE: The Portfolio, with 75% net long exposure, is down as the markets hover near their lows for the day. I am selectively adding a few long positions here as I think the selling is overdone short-term, however if today's lows do not hold I will sell longs and lower market exposure to 25%. The markets are testing the levels hit a couple of days ago. If they can hold these levels, a short-term rally will likely ensue. However, if the markets break through those lows convincingly, further weakness is likely in the short-term.

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