Monday, May 10, 2004

Mid-day Update

S&P 500 1,083.68 -1.37%
NASDAQ 1,889.18 -1.50%


Leading Sectors
Semis -.02%
Retail -.76%
Tobacco -.82%

Lagging Sectors
Gaming -2.70%
Iron/Steel -5.14%
Nanotechnology -5.68%

Other
Crude Oil 39.15 -1.95%
Natural Gas 6.23 -1.02%
Gold 376.30 -.71%
Base Metals 100.45 -2.73%
U.S. Dollar 91.80 +.74%
10-Yr. Long-Bond Yield 4.78% +.27%
VIX 19.99 +10.26%
Put/Call 1.33 +33.0%
NYSE Arms .80 +23.08%

Market Movers
ADSK -4.7% after announcing acquisition of Unreal Pictures and Citi SmithBarney downgrade to Hold.
BRK/A -3.0% after disappointing 1Q earnings.
C -3.3% after saying it will set aside $4.95B in 2Q to cover legal costs.
NAV -6.0% after JP Morgan downgrade to Neutral.
OSTK -13.0% after announcing 1.73M secondary offering.
STFC -14.0% after Gregory Shepard dropped his bid to buy 8M shares and instead will sell 1M to Carl Icahn for $13.
STI -6.9% after announcing the acquisition of NCF for $6.98B.
Chinese ADRs down across the board on continued worries over economic growth.

Economic Data
None of note.

Recommendations
Goldman Sachs reiterated Outperform on SPG, FDC, CSCO, KO, PEP, STZ and CLI. QSFT raised to Buy at Citi SmithBarney, $16 target. CEY raised to Buy at Citi, target $44. POWI cut to Sell at Bank of America, target $22. STI cut to Underweight at Prudential. LEA raised to Overweight at Prudential, target $70.

Mid-day News
U.S. stocks are falling mid-day on fears over rising U.S. interest rates and slowing Chinese economic growth. Kuwait is backing Saudi Arabia's call for more OPEC production, Dow Jones reported. Some cable executives have pledged not to carry former Vice President Al Gore's new 24-hour network, as they were angered by his attempts at price controls, the LA Times reported. U.K. Defense Secretary Hoon said there are strong signs that Iraqi abuse photographs the Daily Mirror published may be fake, Bloomberg reported. Delta Air said it may be forced to seek Chapter 11 bankruptcy protection unless the company is able to reduce costs, stem losses and raise capital, Bloomberg reported.

BOTTOM LINE: The Portfolio is up slightly today as my retail shorts are down more than my healthcare longs. U.S. stocks appear to have entered the "shake-out" phase, which should result in a more meaningful intermediate-term bottom. I am currently in the process of rotating out of a few of my more defensive longs and into some of the leading basic material, industrial and tech companies. I will likely increase market exposure into any further extreme weakness this afternoon or tomorrow.

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