Monday, November 29, 2004

Mid-day Report

S&P 500 1,178.23 -.37%
NASDAQ 2,103.23 +.07%


Leading Sectors
Boxmakers +1.50%
HMOs +.69%
Wireless +.51%

Lagging Sectors
Retail -1.13%
Oil Service -1.42%
Homebuilders -2.71%

Other
Crude Oil 49.80 +.73%
Natural Gas 7.92 -8.32%
Gold 455.90 +.97%
Base Metals 120.77 +.21%
U.S. Dollar 81.84 +.07%
10-Yr. T-note Yield 4.33% +1.93%
VIX 13.35 +4.38%
Put/Call .73 +5.80%
NYSE Arms .99 +11.24%

Market Movers
AAPL +4.88% after UBS/Merrill raised estimates and target on strong weekend sales.
WMT -3.5% after lowering November sales estimates.
CAAS +102.5% after being selected to supply pumps to two companies, including General Motor's joint venture in China.
KCI +5.6% after Merrill added it to Focus List saying profit may rise 25% next year and 28% in 2006 as the maker of therapeutic beds benefits from its devices to treat wounds.
NGPS +12.5% on no news.
INFY +4.5% on no news.
OSTK +4.2% after saying traffic to its web site increased 31% y-o-y over the holiday weekend and Legg Mason reiterated Buy, target $78.
IPAR +12.5% after increasing 05 outlook.
PARL +12.3% on IPAR news.
GLNG -13.5% on disappointing 3Q report.
KMRT -4.4% on WMT news.
PHM -3.8% on higher interest rates.

Economic Data
None of note.

Recommendations
-Goldman Sachs reiterated Outperform on TPX, UNH and AVP. Goldman reiterated Underperform on TWMC.
-Citi SmithBarney said RSH will show the biggest upside surprise when comp store sales are reported early next month. Citi also raised comp estimates at AEOS, PLCE and lowered them at HOTT. Citi reiterated Buy on WMT, target $65. Citi reiterated Buy on FON, target $27. Citi reiterated Buy on AMT, target $22.00. Citi reiterated Buy on SSI, target $70. Citi reiterated Buy on ALK, target $36. Citi cut MET to Sell, target $38. Citi cut TMK to Sell, target $55.
-JP Morgan cut EP to Underweight.
-Merrill reiterated Buy on AAPL, raised target to $78.
-UBS reiterated Buy on AAPL, raised target to $77. UBS downgraded BNN to Reduce, target $34.
-Prudential cut ROH to Underweight, target $42. Pru cut DD to Underweight, target $47. Pru raised BEN to Overweight, target $75. Pru raised AMG to Overweight, target $72.
-Bear Stearns rated THO Outperform, target $25.

Mid-day News
U.S. stocks are mixed mid-day as rising interest rates and profit-taking is offsetting optimism over economic growth. Many U.S. hospitals are shying away from letting doctors deliver babies vaginally if the woman has previously had a Caesarean section, partly because of fears of lawsuits if there are complications, the NY Times reported. U.S. teenagers, indulging more than ever in luxury goods, are now paying adult prices for their clothes as designer labels becoming increasingly important to them, the Washington Post reported. Liquid crystal display flat-panel tv sets will drop in price by as much as 30% starting next year, the NY Times reported. An English-language tv network specifically geared toward Muslims will begin broadcasting in North America tomorrow, the NY Times said. McDonald's, Dunkin' Donuts and other fast-food restaurant chains plan to offer so-called stored-value gift cards this holiday season to capitalize on their success with other retailers, USA Today reported. Amazon.com is focusing on routing customers to third-party Web sites to buy products rather than selling items itself, the LA Times reported. Moscow's arbitration court will hear an appeal from OAO Yukos Oil on Dec. 3 against the government's decision to sell Yuko's main oil-producing unit, Interfax reported. General-merchandise and apparel sales will increase 4% to 6% this holiday season, Diane Swonk, chief economist at Mesirow Financial, told CNBC. Saudi Arabia plans to expand output capacity by 14% to ease concern of potential shortages, said the nation's oil minister. The UN nuclear watchdog said that Iran has agreed to suspend all uranium enrichment activities, according to a draft resolution before the IAEA in Vienna, Bloomberg reported. BT Group Plc, the U.K.'s largest phone operator, created an entertainment division to offer movies and tv programs over the Internet, Bloomberg said. President Bush has picked Carlos Gutierrez, CEO of Kellogg, to replace Donald Evans as secretary of Commerce, Bloomberg reported. U.S. retail sales over the Web increased 40% y-o-y on Friday, according to ComScore Networks. UN Secretary-General Annan said he was upset to learn his son was still getting paid this year by a company under investigation for its role in the scandal-ridden UN oil-for-food program through which former Iraqi dictator Saddam Hussein illegally pocketed $21.3 billion, Bloomberg reported. The benchmark 10-year U.S. Treasury is falling, pushing its yield to a three-month high on better-than-expected holiday retail sales and recent declines in the dollar, Bloomberg said.

Bottom Line: The Portfolio is lower mid-day on losses in my Chinese ADR, retail and telecom equipment longs. I exited a few long positions as they hit stop-losses this morning, thus leaving the Portfolio 100% net long. Today's mixed performance by the major indices appears to be mostly a result of profit-taking rather than real concerns over fundamentals. The Morgan Stanley Retail Index(MVRX) has gained 21.7% since August lows. Most retailers did very well over the weekend, notwithstanding WMT's November results. Other low-end retailers such as TGT, JCP and KSS exceeded expectations. Technology and small-caps are outperforming today and breadth is healthy for the overall market. The 10-year T-note yield is still 60 basis points below the highs set in June. As well, it is good to see measures of investor anxiety rising. I expect U.S. stocks to rise modestly into the close on short-covering and bargain-hunting ahead of tomorrow's GDP, Consumer Confidence and Chicago Purchasing Manager reports.

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