Wednesday, March 24, 2004

Mid-day Update

S&P 500 1,094.33 +.02%
NASDAQ 1,916.79 +.78%

Leading Sectors
Gaming +2.94%
Semis +2.86%
Software +.97%

Lagging Sectors
I-Banks -1.03%
Oil Service -1.58%
Iron/Steel -2.08%

Crude Oil 37.15 -.80%
Natural Gas 5.44 -1.63%
Gold 417.40 -.62%
Base Metals 111.80 +.84%
U.S. Dollar 88.78 +1.14%
10-Yr. Long-Bond Yield 3.71% +.56%
VIX 19.84 -4.21%
Put/Call .85 +26.87%
NYSE Arms 1.01 -17.21%

Market Movers
NOVL +13.1% after announcing joint agreement with HPQ and multiple upgrades.
SNTO +17.6% after announcing that C. Lloyd Mahaffey joined board.
ENDP +13.6% after the drug-maker won U.S. approval for a generic version of the OxyContin painkiller.
CTB +7.8% after saying it may sell its auto-parts unit to focus on expanding its main business in emerging markets such as China.
PCSA -13.3% after announcing resignation of CFO.
GS -2.18% after negative Heard on the Street column in Wall Street Journal.
Gaming stocks up across the board on positive comments from Deutsche Bank.

Economic Data
Durable Goods Orders for February +2.5% vs. expectations of +1.5%.
Durable Goods Less Transportation for February -.3% vs. expectations of +1.0%.
New Home Sales for February 1163K vs. expectations of 1100K.

Recommendations says companies are using coal bed methane to boost natural gas production. Companies that are focusing on this method are APC, BR, DVN, ECA, EVG, KWK and MHR. Cramer of is saying that the high Put/Call ratio, Investors Intelligence drop in bulls, the oversold oscillator reading and low valuations in many stocks should provide the catalyst for at least a short-term bottom. TMB, TSU, EAGL and HOT raised to Overweight at JP Morgan. BBBY and BBY raised to Outperform at CSFB. TWX raised to Sector Outperform by CIBC. SLB, BNI and NSC raised to Overweight at Morgan Stanley. CSX and UNP cut to Underweight at Morgan Stanley. SPLS raised to Overweight at Prudential. RSAS rated Buy at Citi Smith Barney. NRP raised to Buy at Citi. Citi says to use recent weakness in MAR, HLT and FHR to Buy. Citi says to Buy MSFT, target $34. Citi reiterates 1M on GTK. Citi reiterates 1H on GS, raised target to $127. Goldman Sachs says recreational boat season stronger than expected, reiterates Outperform on BC. GS reiterating Outperform on MSFT.

Mid-day News
U.S. stocks are mostly higher in the afternoon as strength in gaming and semiconductor companies more than offset terrorism fears in Europe. Many U.S. companies and politicians are criticized for exporting jobs outside the U.S., while the fact that foreign companies are creating jobs here almost goes unnoticed, the Wall Street Journal reported. France's embassy in Djibouti said today it received a letter from an Islamic extremist threatening French interests due to its ban on religious clothing in public schools, Agence France-Presse reported. An unexploded bomb with several detonators was found today in France on the rail line linking Paris and the Swiss city of Basel, AFP reported. The U.S. economy is strengthening as business investment picks up and that will force the Fed to raise rates at some point, said Fed Bank of Atlanta President Jack Guynn. U.S. durable goods orders rose a larger-than-expected 2.5% in February on strength in computers, vehicles and aircraft. New Home Sales were the third-fastest on record, reported Bloomberg. Crude oil fell after an Energy Dept. report showed inventories rose to their highest level in 4 months.

BOTTOM LINE: The Portfolio is up today as one of my longs is up substantially and my shorts are unchanged. I added a few beaten up tech long positions this morning, raising market exposure to 50% net long. It is too early to tell if the countertrend rally has begun, but outperformance by semis is a positive development. A move up through 467 on the Morgan Stanley High-tech Index will likely lead me to add another 25% long exposure.

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