Wednesday, December 01, 2004

Mid-day Report

S&P 500 1,187.39 +1.16%
NASDAQ 2,129.67 +1.57%

Leading Sectors
Disk Drives +3.99%
Airlines +3.74%
Semis +3.01%

Lagging Sectors
Utilities -1.20%
Energy -1.53%
Oil Service -3.30%

Crude Oil 46.50 -5.35%
Natural Gas 7.48 -1.97%
Gold 456.50 +.71%
Base Metals 120.79 +.03%
U.S. Dollar 81.61 -.26%
10-Yr. T-note Yield 4.36% +.23%
VIX 12.89 -2.64%
Put/Call .80 -8.05%
NYSE Arms .66 -33.33%

Market Movers
OVTI +9.9% after beating 3Q estimates and raising 4Q outlook.
UCO -4.79% after Weatherford Intl. sold 4 million of its shares for $141.8 million.
CHS +13.2% after beating 3Q estimates.
GORX +102.7% after the FDA approved its Mucotrol medicine for the treatment of a side effect of chemotherapy and radiation.
CPRT +18.0% after better-than-expected 1Q estimates.
CI +8.5% after raising 04 and 05 guidance.
CTRP +11.7% after saying it signed a distribution agreement with Pegasus Solutions(PEGS) providing CTRP with direct access to inventory at nearly 60,000 hotels worldwide.
SYNA -7.1% after saying it intends to offer $100 million of Convertible Senior Subordinated Notes.
*Oil Services down across the board on falling energy prices.

Economic Data
Personal Income for October rose .6% versus estimates of a .5% rise and a .2% gain in September.
Personal Spending for October rose .7% versus estimates of a .4% gain and a .6% increase in September.
PCE Deflator(YoY) for October rose 2.4% versus estimates of a 2.4% increase and a 2.0% gain in September.
PCE Core(YoY) for October rose 1.5% versus estimates of a 1.4% increase and a rise of 1.5% in September.
Construction Spending for October came in unch. versus estimates of a .7% rise and a .1% gain in September.
ISM Manufacturing for November came in at 57.8 versus estimates of 57.0 and a reading of 56.8 in October.
ISM Prices Paid for November came in at 74.0 versus estimates of 75.3 and a reading of 78.5 in October.

-Goldman Sachs reiterated Outperform on BBY, SAP, BNS, JTX, PFE, NUE, X, AGN and IP. Goldman reiterated Underperform on CI and SAY.
-Banc of America cut PEG to Sell. BofA raised RKY to Buy, target $82.
-Citi SmithBarney sees near-term 10%+ trade in QLGC and ELX. Citi reiterated Buy on ATH, target $147. Citi reiterated Buy on MAN, target $56.
-Thomas Weisel rated IMCL Buy.
-Legg Mason rated TR Buy, target $36.
-JP Morgan rated MMR Overweight.
-Merrill Lynch downgraded IFX to Sell.

Mid-day News
U.S. stocks are sharply higher mid-day on optimism over strong economic reports and falling energy prices. EchoStar Communications and Vivendi Universal's Music Group are in talks to start a 24-hour music channel to rival MTV, the NY Post reported. Pfizer's benefit from increased sales of Celebrex and Bextra after the recall of Merck's Vioxx may be temporary because doctors are increasingly prescribing older drugs considered safer, the NY Times said. Whole Foods Market and other gourmet supermarkets plan to expand in NY City and nationwide as the market for specialty foods increases, the NY Times reported. Procter & Gamble's testosterone patch, meant to bolster post-menopausal women's sex drive, will be studied by a FDA panel tomorrow for approval amidst concerns about its clinical trial results and possible side effects, the Philadelphia Inquirer reported. Harvard Law School said yesterday it would reinstate a policy that bans military recruiters from the campus, the Boston Globe reported. Vought Aircraft Industries plans to open a $500 million plant in Charlston, SC, to build components for Boeing's new 7E7 jetliner, the Fort Worth Star-Telegram reported. Gilead Sciences' tenofovir drug, sold as Viread to treat HIV-infected adults, will be tested as a preventative treatment for AIDS in an international study later this month, the San Francisco Chronicle reported. 89% of the biggest U.S. law firms plans to raise their hourly billing rates next year, according to a new survey by the American Lawyer. IBM said it won more than $1 billion in new contracts as it completed the acquisition of two Danish businesses, Bloomberg said. Disney's ESPN network plans to branch into the mobile-phone business through the use of Sprint's network, Bloomberg reported. Nokia gained mobile-phone market share for a second straight quarter, helped by price cuts and new models, and Samsung overtook Motorola as the second-largest handset maker for the first time, Bloomberg said. Raytheon will increase its annual dividend by 10% to 88 cents and buy back as much as $700 million in stock, Bloomberg reported. Ukrainian Prime Minister Yanukovych lost a confidence vote in parliament and President Kuchma opened the door to new presidential candidates by demanding new elections after the disputed Nov. 21 vote, Bloomberg reported. U.S. home prices increased at the fastest pace in 25 years during the third quarter as the economy improved and low mortgage rates made financing more affordable, Bloomberg said. Crude oil fell more than $2/bbl. on a report showing that inventories of heating oil and other fuels rose more than expected as refineries operated at the highest rate since a hurricane hit the U.S. in September, Bloomberg reported. U.S. manufacturing strengthened in November, with growth accelerating for the first time in four months, as orders and employment picked up, the ISM survey found. U.S. consumer spending rose in October and a surge in hiring led to the biggest rise in incomes in five months, Bloomberg reported. Ford Motor said U.S. sale of cars and trucks fell 7.3% in November from a year earlier, while DaimlerChrysler said sales rose 4.4% and Nissan's sales soared 26%, Bloomberg said.

Bottom Line: The Portfolio is substantially higher mid-day on strength in my Internet, Chinese ADR, semi and telecom equipment longs. I added a few new longs this morning, bringing the Portfolio's market exposure to 125% net long. One of my new longs is MNST and I am using a $27.25 stop-loss on this position. The tone of the market is very good today on a strong advance/decline line and good volume. The next up-leg of the rally has likely begun. Falling energy prices and better employment prospects should propel the major indices through year-end. I continue to expect oil to fall to the $35-$40/bbl. range over the next few months. Intel's mid-quarter update after the close Thur. and Fri.'s jobs report should provide the catalysts for further strength to end the week. I expect U.S. stocks to trade mixed into the close on a consolidation of today's gains.

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