Wednesday, March 10, 2004

Wednesday Close

S&P 500 1,123.89 -1.46%
NASDAQ 1,964.15 -1.55%

Leading Sectors
Tobacco -.32%
Fashion -.33%
Foods -.46%

Lagging Sectors
Papers -2.92%
Oil Service -3.13%
Iron/Steel -3.21%

Crude Oil 36.14 +.11%
Natural Gas 5.40 +.06%
Gold 400.50 +.05%
Base Metals 107.40 +.67%
U.S. Dollar 88.95 +.59%
10-Yr. Long-Bond Yield 3.73% +.25%
VIX 18.67 +12.47%
Put/Call .85 -13.27%
NYSE Arms 2.42 -11.68%

After-hours Movers
AMSY +24.19% after $415M purchase of their Defense and Intelligence Group by CAI.
ZQK +6.74% after significantly beating 1Q estimates and raising 04 forecast.
YELL +6.32% after boosting 1Q forecast at mid-quarter update.
LF -31.54% after significantly lowering 1Q forecast.
MATK -5.37% after slightly missing 1Q estimates.

Goldman Sachs reiterates positive view on capital goods stocks. is saying that AFCI is down on the possibility of losing the Verizon FTTP contract. Jim Cramer, of, thinks panic selling has begun and it is necessary to put in a good sustainable bottom.

After-hours News
U.S. stocks dropped Wednesday as investors fear the economy may be slowing and the NASDAQ broke through a key support level. Cyclicals and pharmaceuticals bore the brunt of the selling. After the close, the Financial Times said NATO may announce plans to take over full control of Afghanistan to guarantee security. Intel, which spent $300M promoting its Centrino chip package last year, will stop selling the chipset in China after balking at the government's demands to alter the product to meet its new standards. Target may sell its Mervyn's and Marshall Field's stores, Bloomberg reported.

BOTTOM LINE: Today was a very bad day for the bulls. Almost all sectors participated in the decline. Cyclicals dropped significantly on expectations the economy is slowing and profit-taking. I think profit-taking is healthy, but I do not agree that the economy is slowing. However, it is possible that enough negative talk and reporting could lead to a self-fulfilling prophecy. If enough people believe all the negative news being reported right now, they won't spend as much and that would hurt the economy. Retail spending is very strong right now, but I will closely monitor this area for any signs of weakness resulting from a continued decline in confidence. The accelerating rate of attacks on the pharmaceutical industry is finally taking its toll, as these stocks broke down technically today. I expect drug stocks to remain in a trading range until the political attacks subside towards the end of the year. The Portfolio ended the day modestly down as the selling spread throughout most sectors. I added a few shorts in the oil service and technology sectors, bringing net market exposure to 0% or market neutral.

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