Mid-day Update

S&P 500 1,118.46 -.53%
NASDAQ 1,916.88 -.67%

Leading Sectors
Homebuilders +.26%
Tobacco +.22%
I-Banks +.11%

Lagging Sectors
Papers -1.34%
Iron/Steel -1.52%
Semis -2.07%

Other
Crude Oil 53.43 -.39%
Natural Gas 6.74 -3.62%
Gold 415.80 -1.80%
Base Metals 123.37 -1.51%
U.S. Dollar 88.09 +.63%
10-Yr. T-note Yield 4.08% -1.12%
VIX 15.22 +3.47%
Put/Call .88 +14.29%
NYSE Arms 2.21 +82.64%

Market Movers
STT -5.9% after missing 3Q estimates.
SNDK -3.9% after Citi SmithBarney downgrade to Sell.
TZOO +7.1% on strong 3Q earnings.
INFY +5.3% on strong 2Q earnings and positive 3Q guidance.
CTV -18.0% after reaffirming 3Q and lowering 4Q forecasts.
SFL -8.7% on Citi SmithBarney downgrade to Sell and profit-taking.
FAST -6.7% after slightly missing 3Q estimates.
OSK -5.7% after losing out on a $1.97 billion contract to build support vehicles for the U.K.'s Ministry of Defense.

Economic Data
None of note.

Recommendations
Goldman Sachs reiterated Outperform on UNH, MER, NFP, GCI, AHC, AMT, BBY, XRX and IBM. Goldman reiterated Underperform on EK and DYN. Citi SmithBarney said to Buy DPZ ahead of earnings, target $21. Citi downgraded SNDK to Sell, target $25. Citi reiterated Buy on URBN, target $43. Citi downgraded SFL to Sell, target $16. Citi reiterated Buy on NPSP, target $30. WFMI cut to Undeweight on JP Morgan. ZION rated Buy at Deutsche Bank, target $71. OS rated Buy at Jeffries, target $22. MI rated Buy at Deutsche Bank, target $46. WOR cut to Underweight at Prudential, target $15. PSUN raised to Outperform at Bear Stearns.

Mid-day News
U.S. stocks are modestly lower mid-day on continuing fears over high energy prices and earnings worries. Anheuser-Busch will have a strong position in the Chinese market after its acquisition of Harbin Brewery Group, the No. 4 Chinese beer-maker, the Wall Street Journal reported. General Maritime, the second-largest owner of mid-sized oil tankers, expects freight rates to stay near record highs as scrapping of single-hulled vessels reduces supplies, Bloomberg said. DreamWorks SKG plans to sell shares to the public either this month or in early November, the NY Times said. EBay is working to repair its PayPal service, which has had some disruptions following a monthly software upgrade on Oct. 8, the AP said. California voters are likely to pass a ballot measure that would generate as much as $800 million annually for mental health services by taxing the state's millionaires, the LA Times reported. President Bush indicated he might allow imports from Canada of cheaper prescription drugs that his administration has opposed, the NY Times reported. Chicago-area home foreclosures declined 8% from 2002-2003, the first time the delinquency actions have decreased in a decade, the Chicago Sun-Times reported. The Fed's pace of rate increases will probably be "a lot slower" after an expected rate boost next month, said Paul McCulley, a managing director at PIMCO. Merrill Lynch said third-quarter profit fell 8% as an industry-wide slump in stock trading hurt revenue, Bloomberg reported. Chiron, which on Oct. 5 said it wouldn't sell influenza vaccine in the U.S. this season, said it received a grand jury subpoena from the U.S. Attorney's office. Johnson & Johnson said third-quarter profit rose 13% on higher sales of the anti-psychotic drug Risperdal and Remicade for rheumatoid arthritis, Bloomberg reported. The Afghan election was "overwhelming positive" and brings the country closer to a "vigorous democracy," a senior UN official told the Security Council. "The impressive participation, the enthusiasm and pride of the women and men voting for the first time, the peaceful and orderly environment in which the electoral operation unfolded made it a very special event." Crude oil is declining, after reaching $54.45/bbl. in NY, on speculation that demand doesn't warrant prices at this level, Bloomberg reported.

BOTTOM LINE: The Portfolio is lower mid-day on weakness in my shipping, base metal and internet longs. I have not traded today and the Portfolio is still 75% net long. The tone of the market is negative today, however measures of investor anxiety are rising again, which is a positive. I continue to believe the major indices are just consolidating recent gains before another meaningful push higher later this month. U.S. economic growth should accelerate in November and investors will begin to anticipate this over the next couple of weeks. The IEA today said, after oil demand increases 3.4% this year, crude demand will fall next year due to slowing world economic growth and China's move to natural gas. Slowing demand and increased production should push crude prices back to the $30-40/bbl. range next year. I expect stocks to trade mixed-to-higher into the close.