Thursday, December 09, 2004

Mid-day Report

S&P 500 1,183.43 +.06%
NASDAQ 2,123.61 -.12%

Leading Sectors
Homebuilders +3.75%
Broadcasting +1.77%
Oil Service +1.12%

Lagging Sectors
Iron/Steel -.94%
Disk Drives -1.25%
Semis -1.74%

Crude Oil 42.50 +1.34%
Natural Gas 6.84 +2.35%
Gold 437.40 -.32%
Base Metals 113.57 -.46%
U.S. Dollar 82.24 +.40%
10-Yr. T-note Yield 4.17% +1.31%
VIX 13.04 -1.14%
Put/Call .71 -20.22%
NYSE Arms .86 -29.51%

Market Movers
ALTR -11.5% after lowering 3Q outlook.
SMA +20.6% on strong demand for IPO.
ATPG +17.6% after saying a test on its Mississippi Canyon No.4 ST1 well was successful and showed flow rates that exceeded its expectations.
DITC +14.5% on Roth Capital upgrade to Strong Buy, target $24.80.
TOL +9.8% after beating 4Q estimates and raising 05/06 guidance.
FNF +6.0% after announcing a leveraged recapitalization plan and a special $10/share cash dividend.
INTL -11.6% after saying a unit will pay $8.7 million and plead guilty to bid rigging and wire fraud in connection with a federal program that helps link schools and libraries to the Internet.
LNG -8.4% after ChevronTexaco decided not to invest in a Louisiana plant the company plans to build.
TLCV -7.2% after saying it entered into an underwriting agreement to sell 2.3 million shares of common stock in the ipo of Occulogix.
VIP -9.2% after saying it has enough cash to meet obligations if a claim of $157 million in back taxes from 2001 is upheld.
DWA -5.5% on Bear Stearns downgrade to Underperform.

Economic Data
The Import Price Index for November rose .2% versus estimates of unch. and a 1.6% increase in October.
Initial Jobless Claims for last week were 357K versus estimates of 335K and 349K the prior week.
Continuing Claims were 2796K versus estimates of 2746K and 2705K prior.
Wholesale Inventories for October rose 1.1% versus estimates of a .5% gain and a .6% increase in September.

-Goldman Sachs reiterated Outperform on INTC, SANM, SLR, TYC, FON, BAX, GCI, PG, AVP and BBBY. Goldman reiterated Underperform on DJ, DYN, JDSU, CR and TRB.
-UBS downgraded LZB to Reduce, target $10. UBS downgraded JNS to Reduce, target $15.
-Banc of America rated CW Buy, target $68. BofA rated UDI Buy, target $52.
-Thomas Weisel raised GRMN to Outperform.
-JP Morgan raised LAVA to Overweight.
-Citi SmithBarney raised TWX to Buy, target $22.
-Deutsche Bank raised PPC to Buy, target $36.
-CIBC raised FLSH to Sector Outperform, target $25.
-Bear Stearns rated DWA Underperform, target $33. Bear raised MBT to Outperform, target $176.

Mid-day News
U.S. stocks are mixed mid-day as strong gains in the homebuilding sector are being offset by losses in technology shares. La-Z-Boy and other recliner makers are designing smaller, more delicate chairs that appeal to women to combat stagnant sales, the Wall Street Journal reported. Former Vermont governor and presidential candidate Dean urged fellow Democrats to stick to their liberal principles and not move to a more moderate stance to attract voters, the Washington Post reported. Citigroup plans to open 400 branches in the U.S., Canada and Mexico this year and next year to improve its profitable consumer finance business, Reuters reported. MBNA Corp., the world's largest independent credit-card lender, has angered some cardholders by switching their accounts to its new partner, American Express, from Visa or MasterCard without permission, the NY Times reported. The U.S. successfully resisted the adoption of socialism after WWII in its economic ideology, yet government's role in the economy has increased in recent years and that must be checked, Milton Friedman wrote in a Wall Street Journal column. More workers in the U.S. are finding permanent jobs through temporary assignments, USA Today reported. The Teamsters union proposed cutting the AFL-CIO's budget to help stem a decline in organized labor, the NY Times reported. Mexico's federal government has contracts that protect next year's oil revenue against a decline in the price of oil exports below $23-$24/bbl., daily Reforma reported. Hyatt Corp. agreed to buy the AmeriSuites chain of 143 hotels to tap rising demand from corporate travelers for upscale self-service rooms, Bloomberg said. Eli Lilly said net income will rise to $2.80 to $2.90 a share for 2005 as the company wins approval to sell new medicines, Bloomberg said. Toll Brothers, the largest U.S. builder of luxury homes, said fiscal fourth-quarter earnings increased 93% on higher sales, and raised its forecast for profit growth next year, Bloomberg reported. Men and teenage boys who use laptop computers may be damaging their fertility, a U.S. study shows. DaimlerChrysler AG said it doubled its number of fuel-cell models to 19 in the U.S. as part of the automaker's goal to have 100 of the no-emissions cars, trucks and buses worldwide by the end of this year, Bloomberg reported. National Semiconductor said profit rose for a sixth straight quarter, Bloomberg said. The US dollar had its biggest two-day advance since October against the euro and rose versus the yen as German Chancellor Schroeder and Japanese Prime Minister Koizumi denounced gains in their currencies, Bloomberg reported. The number of U.S. workers filing initial jobless claims unexpectedly rose by 8,000 last week to the highest since September, Bloomberg reported. Nextel Communications and Sprint Corp. are in "active and ongoing" talks about a possible merger, CNBC reported.

Bottom Line: The Portfolio is unchanged mid-day as strength in my retail longs is offsetting weakness in my semi/equipment longs. I have not traded today and the Portfolio is still 50% net long. The tone of the market has improved from morning lows, however it remains weak. Measures of investor anxiety are falling again and breadth is poor. The SOX bounced off its 50-day moving-average, which is a positive considering the news. I expect U.S. stocks to trade mixed-to-higher into the close on short-covering and bargain-hunting.

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