Mid-day Update

S&P 500 1,111.62 +.75%
NASDAQ 1,919.50 +.87%

Leading Sectors
I-Banks +1.82%
Banks +1.57%
Gaming +1.49%

Lagging Sectors
HMOs -.54%
Disk Drives -1.48%
Insurance -2.85%

Other
Crude Oil 54.56 -.37%
Natural Gas 6.70 -1.51%
Gold 420.20 +.17%
Base Metals 114.53 +1.45%
U.S. Dollar 87.18 -.42%
10-Yr. T-note Yield 4.07% +1.24%
VIX 14.98 -8.64%
Put/Call .93 -13.08%
NYSE Arms 1.39 -15.24%

Market Movers
MMC -14.4% on continuing worries over Spitzer probe and saying it will immediately suspend its practice of market services agreements with insurance carriers.
HIG -4.4% on continuing worries over Spitzer probe.
JNPR -6.3% on profit-taking after beating 3Q estimates and raising 4Q guidance.
PFE -4.2% after saying its Bextra painkiller can cause a fatal skin reaction and heart problems.
AIG -4.3% on continuing worries over Spitzer probe.
FARO +11.87% after boosting 3Q and 04 forecasts.
GPC +7.44% after meeting 3Q estimates and reiterating 04 guidance.
PENN +5.7% after agreeing to sell its Pocono Downs racetrack to the Mohegan Tribal Gaming Authority for $280 million.
FLYR -21.5% after cutting 3Q, 4Q and 04 forecasts and multiple downgrades.
GIVN -15.2% after missing 3Q estimates.
NFP -16.4% on continuing worries over Spitzer probe.
MGAM -13.7% after lowering 4Q and 04 guidance.
NFLX -38.2% after missing 3Q estimates substantially, saying AMZN will start competing video service and multiple downgrades.
POSS -33.3% after cutting 1Q and 05 forecast and Frist Albany downgrade to Underperform.
ACE -7.2% on continuing worries over Spitzer probe.

Economic Data
Producer Price Index for September rose .1% versus estimates of a .1% increase and a .1% decline in August.
PPI Ex Food & Energy for September rose .3% versus estimates of a .2% gain and a .1% decrease in August.
Advance Retail Sales for September rose 1.5% versus estimates of a .7% increase and a .2% decline in August.
Retail Sales Less Autos for September rose .6% versus estimates of a .3% increase and a .2% decline in August.
Empire Manufacturing for October fell to 17.43 versus estimates of 25.00 and a reading of 27.26 in September.
Industrial Production for September rose .1% versus estimates of a .3% increase and a .1% decline in August.
Capacity Utilization for September was 77.2% versus estimates of 77.5% and 77.2% in August.
Preliminary Univ. of Mich. Consumer Confidence for October fell to 87.5 versus estimates of 94.0 and a reading of 94.2 in September.
Business Inventories for August rose .7% versus estimates of a .6% rise and a 1.0% increase in July.

Recommendations
Goldman Sachs reiterated Outperform on RE, ENH, JNPR, STZ, PFE, IP, ALL and AIG. Goldman downgraded MMC to Underperform. Citi upgraded EIX to Buy, target $32. Citi downgraded MMC to Sell, target $31. Citi upgraded MPG to Buy, target $26. Citi reiterated Buy on MTG, target $90. Citi reiterated Buy on JNPR, target $32.50. Citi reiterated Buy on TCB, target $34. Lehman downgrade Auto and Auto Parts industries to Negative. APA raised to Buy at UBS, target $61. MRVL cut to Reduce at UBS. WERN raised to Buy at Legg Mason, target $23. AMMD cut to Underweight at JP Morgan. WMS rated Overweight at Morgan Stanley, target $33. NFLX downgraded to Underweight at JP Morgan. PHTN cut to Sector Underperform at CIBC.

Mid-day News
U.S. stocks are modestly higher mid-day on optimism over Greenspan's comments, strong retail sales and short-covering. The SEC's inquiry into Fannie Mae's accounting has become a formal probe, the Washington Post said. European election observers will monitor the U.S. presidential election Nov. 2 in closely contested states, the Washington Times said. The tax bill passed by Congress this week should spur U.S. companies to buy back shares which should boost earnings, the NY Times reported. Alcoa and Alcan may spend $1 billion to build a new alumina refinery in Guinea, Reuters said. The median price of a home in the San Francisco Bay area rose to $544,000 in September, up 17% from $465,000 the same month a year ago, the San Francisco Chronicle reported. A ban on snowmobiles in Yellowstone National Park and Grand Teton National Park was ruled invalid by a federal judge, the AP reported. Russia is ready to increase oil exports by 5.4%, the nation's pipeline monopoly said. Sales at U.S. retailers rose 1.5% in September, the most in six months, led by spending on automobiles and general merchandise, Bloomberg reported. U.S. consumer confidence fell more than forecast this month, as job growth slowed and negative political ads filled the airways, Bloomberg said. Antidepressants must carry the strictest black-box warning on increased suicidal behavior in children who take the medicines, U.S. regulators said. A Chicago Board of Trade sold for a record $1 million, at least the 14th membership to change hands this week as investors bet the futures market will sell shares to the public or be bought by the Chicago Mercantile Exchange, Bloomberg reported. Fidelity Investments, State Street and Barclays Plc may have suffered investment losses of as much as $5 billion from the plunge in insurance stocks over the past two days, Bloomberg said. Oil prices aren't high enough to trigger inflation and slow growth like the U.S. experienced in prior oil shocks, Fed Reserve Chairman Greenspan said. Billionaire hedge fund manager George Soros increased his donations to anti-Bush political groups to around $16 million, Bloomberg reported.

BOTTOM LINE: The Portfolio is unchanged mid-day as gains in my steel and alternative energy longs are being offset by losses in my wireless and internet longs. I added a few new longs in various sectors this morning, bringing the Portfolio's market exposure to 100% net long. One of my new longs is BRCM and I am using a $28 stop-loss on this position. The tone of the market has improved significantly from this morning on positive comments by Greenspan, short-covering and strong retail sales. Interest rates are rising as investors are beginning to anticipate stronger economic growth. I continue to expect U.S. GDP growth for the 3rd quarter will come in above 4% and the 4th quarter near 5%. U.S. stocks should rise modestly into the close on more short-covering.