Wednesday, December 08, 2004

Mid-day Report

S&P 500 1,183.54 +.54%
NASDAQ 2,129.62 +.70%

Leading Sectors
Disk Drives +2.17%
Biotech +1.93%
HMOs +1.92%

Lagging Sectors
Defense -.94%
Semis -1.07%
Iron/Steel -1.06%

Crude Oil 41.70 +.58%
Natural Gas 6.61 -.17%
Gold 438.70 -3.33%
Base Metals 114.10 -3.29%
U.S. Dollar 82.06 +1.02%
10-Yr. T-note Yield 4.14% -1.92%
VIX 13.34 -2.49%
Put/Call .91 ++24.66%
NYSE Arms 1.19 -23.03%

Market Movers
SIRI -15.3% on multiple downgrades to Sell.
VIP -26.9% after saying it received a claim of $157 million for back taxes, penalties and fines from 2001.
STX +6.4% after boosting 2Q estimates substantially and multiple upgrades.
GMR +13.6% after Frontline(FRO) indicated it bought at least 5% of the company and expressed interest in a business combination.
HITK +10.7% after beating 2Q estimates.
TTC +6.4% beating 4Q estimates, raising 1Q guidance and raising dividend.
MTL -20.5% after accusing the Russian police of raiding its Moscow offices to keep it from bidding for a stake in Russia's no. 2 steelmaker.
PIXR -6.0% after saying it and Disney are delaying the release of their movie "Cars" by six months and multiple downgrades.
DECK -5.8% on Piper Jaffray downgrade to Market Perform.
AVP -4.9% after lowering 4Q estimates.

Economic Data
None of note.

-Goldman Sachs reiterated Outperform on IBM, CSCO. Goldman reiterated Underperform on UIS. Goldman lowered AAI to Underperform.
-Citigroup SmithBarney rated ERTS Top Pick, target $62. Citi rated ATVI Buy, target $22. Citi reiterated Buy on MSFT, target $32. Citi reiterated Buy on TXN, target $27. Citi reiterated Buy on CSCO, target $30. Citi reiterated Buy on HOV, target $73.
-UBS raised NRP to Buy, target $60. UBS raised PVR to Buy, target $56. UBS raised USS to Buy, target $27.
-Deutsche Bank raised STX to Buy, target $22.
-Lehman Brothers raised GE to Overweight.
-CSFB rated SHOP Outperform, target $33. CSFB rated MRK Underperform, target $23. CSFB rated LLY Outperform, target $70. CSFB raised FDX to Outperform, target $130.
-Morgan Stanley raised AFL to Overweight, target $45.
-Banc of America downgraded Semis to Sell.

Mid-day News
U.S. stocks are modestly higher mid-day on optimism over falling interest rates and a rebound in the US dollar. Gap's Old Navy retail chain may suffer this holiday shopping season because it doesn't have many new apparel offerings, the NY Times reported. United Airlines may charge a $2/bag fee for curbside baggage check-in beginning in January, the NY Times said. Saudi Arabian Oil Minister Al-Naimi said today no action may be needed from OPEC to prevent oil prices from falling further, Platts reported. Construction contractors and equipment distributors are more confident about the industry and the economy than they have been in a decade, the Wall Street Journal reported today, citing a new survey. Nucor, the biggest U.S. maker of steel from recycled metal, yesterday lowered its prices on some products by $30/ton to compete with imports, American Metal Market reported. 99 Cents Only Stores' 65 union truck drivers voted to authorize a strike after contract negotiations fell through, the LA Times reported. Merck, already hurting from the withdrawal of Vioxx, said 2005 earnings will fall lower than expected as sales of its Zocor cholesterol medication decline, Bloomberg reported. Gold fell the most in 10 months as a rebound in the US dollar eroded the appeal of the precious metal as an alternative to stocks and bonds, Bloomberg said. Pfizer CEO McKinnell said sales of Lipitor may rise 15% in each of the next five or six years, Bloomberg reported. Nortel will file restated financial results on Jan. 10, the last day of a self-imposed deadline, Bloomberg said. The ACLU wants a federal judge to overturn a California law that requires anyone convicted of a felony to submit a DNA sample to law enforcement databases, the San Francisco Chronicle reported.

Bottom Line: The Portfolio is unchanged mid-day as gains in my retail longs are offsetting losses in my semi and semi-equipment longs. I have not traded today and the Portfolio is still 50% net long. The tone of the market is mildly positive today with measures of investor anxiety mixed. It is good to see interest rates falling, gold dropping, the dollar rebounding and the CRB declining near critical technical support. I continue to believe the CRB will fall next year which bodes well for future inflation readings. As well, commodity-related stocks will likely underperform in the intermediate-term. I expect U.S. stocks to trade mixed-to-higher into the close.

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