Thursday, March 25, 2004

Mid-day Update

S&P 500 1,106.44 +1.37%
NASDAQ 1,955.34 +2.40%

Leading Sectors
Airlines +4.89%
Networking +3.75%
Software +3.65%

Lagging Sectors
Drugs +.48%
Tobacco +.24%
Energy -.17%

Crude Oil 35.90 -3.0%%
Natural Gas 5.34 -1.64%
Gold 417.20 -.07%
Base Metals 110.43 -1.23%
U.S. Dollar 88.75 -.17%
10-Yr. Long-Bond Yield 3.73% +.66%
VIX 18.13 -8.48%
Put/Call .62 -30.34%
NYSE Arms .42 -66.13%

Market Movers
NANX +19.7% after announcing that it received a $10M investment from Germany's Altana AG to develop paints, plastics and coatings.
GETI +18.6% after selling its phone-gear business for $291M to ADC Telecom.
KVHI +13.9% after Raymond James upgrade to Strong Buy.
VIP +8.0% on strong 4Q earnings report.
AVP +6.7% after raising 1Q guidance substantially.
INFY +4.6% after positive comments from Citi Smith Barney.
ASCA +9.9% after boosting 1Q guidance substantially.
MERX -11.9% after meeting 3Q estimates and lowering 4Q guidance.
IBC -11.6% after lowering 3Q guidance substantially.

Economic Data
Final 4Q GDP was +4.1% vs. expectations of 4.1%.
Initial Jobless Claims last week were 339K vs. expectations of 340K.
Continuing Claims were 3004K vs. 3050K prior.
Existing Home Sales for February were 6.12M vs. expectations of 6.12M.
Help Wanted Index for February was 40 vs. expectations of 39.

Jim Cramer of is positive on cable stocks, favorites are CMCSA, TWX and CHTR. CTXS raised to Outperform at CSFB. CTB raised to Buy at Deutshe Bank. CTAS raised to Overweight at Morgan Stanley. CIBC positive on AUDC, saying it will likely exceed estimates on strong voice-over-internet-protocol sales. MKC raised to Buy at Merrill. KVHI raised to Strong Buy at Raymond James. Goldman Sachs reiterated Underperform on LSI. Goldman says tone at Society of Toxicology conference in Baltimore was markedly positive for CRO companies. GS reiterated Outperform on AVP, AG and BBY. Citi Smith Barney positive on commodity chemical companies, favorites are EMN, NCX and MCH. Citi would Buy MU on weakness.

Mid-day News
U.S. stocks are rising sharply mid-day, led by airlines and technology shares. A drop in energy prices, strong earnings reports and more positive economic data are the catalysts for the rise. Lucent(LU) will repair and upgrade Iraq's telecom networks under a two-year contract valued at $75M from the U.S. Dept. of Defense, the Star-Ledger reported. Texas oil refineries are possible targets for terrorists, the FBI said today, Reuters reported. Al Jazeera aired a tape of al-Qaeda's Zawahiri calling on Pakistanis to overthrow the government, CNN reported. The number of Americans filing initial claims for jobless benefits remained near a 3-year low, a government report showed. Eli Lilly, maker of the world's top-selling schizophrenia medicine, Zyprexa, said its marketing and promotional practices are being investigated by the U.S. Attorney in Pennsylvania. Oil fell after members of OPEC said the group should postpone production cuts. The U.S. economy expanded at a 4.1% annual rate in the final 3 months of 2003 after a rise of 8.2% in the 3rd quarter, resulting in the fastest six-month economic growth in almost 20 years. The National Association of Manufacturing says 55% of companies surveyed expect to increase hiring in the near future, the most positive results they have seen in a very long time, reported CNBC.

BOTTOM LINE: The Portfolio is having a good day today as I added technology and airline longs on the gap up open in the Morgan Stanley High-tech Index and the gap down in crude oil. The Portfolio is 100% net long. This countertrend rally should have legs into next week on quarter-end positioning. Hedge funds will take profits in their shorts and Mutual funds will use cash to attempt to boost shares at quarter-end. Tech stocks positive reaction to Micron's relatively weak quarter, the fall in crude oil prices and the broad market's strength in the face of another al-Qaeda video tape threat also leads me to believe that this countertrend rally will continue for a few days.

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