Friday, December 10, 2004

Mid-day Report

S&P 500 1,190.97 +.15%
NASDAQ 2,133.15 +.23%

Leading Sectors
Homebuilders +3.31%
Airlines +1.43%
I-Banks +1.10%

Lagging Sectors
Broadcasting -.88%
Oil Service -1.07%
Wireless -1.16%

Crude Oil 41.15 -3.24%
Natural Gas 6.86 -.38%
Gold 436.10 -.25%
Base Metals 114.20 +.55%
U.S. Dollar 82.64 +.65%
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
CBON +21.5% on strong demand for IPO.
HOV +10.7% on positive comments from multiple analysts.
MATK +8.9% after beating 4Q estimates.
FFIV +5.7% on comments from Citi SmithBarney.
ADIC -11.6% on disappointing 4Q results.
*Homebuilder up across the board on continuing optimism over fundamentals.

Economic Data
Producer Price Index for November rose .5% versus estimates of a .1% increase and a 1.7% gain in October.
PPI Ex Food & Energy for November rose .2% versus estimates of a .2% increase and a gain of .3% in October.
Preliminary Univ. of Mich. Consumer Confidence for December rose to 95.7 versus estimates of 93.5 and a reading of 92.8 in November.

-Goldman Sachs reiterated Outperform on MO. Goldman reiterated Underperform on WIN and CR.
-Citi SmithBarney reiterated Buy on GE, target $44. Citi reiterated Buy on TOL, target $94. Citi reiterated Buy on TYC, target $40. Citi reiterated Buy on MO, target $68. Citi reiterated Buy on BEAS, target $11.50. Citi reiterated Buy on BJ, target $34. Citi reiterated Buy on BBW, target $43. Citi reiterated Buy on NSM, target $21.
JP Morgan raised GYI to Overweight. JP Morgan rated FLSH Overweight.
-Banc of America rated DHI Buy, target $42. BofA rated HOV Buy, target $50.
-UBS downgraded AMD to Reduce, target $20.
-Thomas Weisel raised FHRX to Outperform, target $29. Thomas Weisel raised NVDA to Outperform. Thomas Weisel raised ATYT to Outperform.
-Legg Mason rated NIHD Buy, target $58.
-CSFB cut FLR to Underperform, target $45. CSFB cut EME to Underperform, target $35.
-Morgan Stanley rated MHS Overweight, target $45.

Mid-day News
U.S. stocks are modestly higher mid-day on optimism over better consumer sentiment and lower energy prices. A journalist from the Chattanooga Times Free Press was behind a U.S. National Guard's question to Defense Secretary Donald Rumsfeld on the shortage of vehicle armor available to the army, the Washington Post reported. OPEC agreed to cut output to end a six-week slide in prices, Dow Jones reported. Senator Grassley plans to introduce a new bill next year to require pharmaceutical companies to report drug trials on a public database, the NY Times reported. Gemstar-TV Guide Intl. CEO Shell, who resigned yesterday, may join Comcast to oversee the cable-tv operator's channels, the LA Times reported. The European Central Bank isn't as worried about inflation as it was a month ago, reducing pressure for an increase in interest rates, Swedish news service Direkt reported. The US dollar is heading for its biggest gain against the yen in almost six years amid speculation the Bank of Japan's Tankan survey will show business confidence is waning, Bloomberg reported. U.S. consumer sentiment rose for a second month in December as oil prices plunged and the government reported continued job creation in November, Bloomberg said. Carlyle Group may raise $6.5 billion for what would be the world's biggest buyout fund, Bloomberg reported. General Electric said it will increase its dividend by 10% and authorized the repurchase of $15 billion of its shares over three years, Bloomberg reported. Southwest Airlines is offering more than $100 million in cash and loans for ATA Holdings assets including Chicago airport gates, Bloomberg reported. The Core PPI had its smallest gain in four months, Bloomberg said.

Bottom Line: The Portfolio is higher mid-day on gains in my homebuilding, security, Chinese ADR and semi longs. I added a few longs this morning, bringing the Portfolio's market exposure to 100% net long. One of my new longs is DRIV and I am using a $39.75 stop-loss on this position. The tone of the market is moderately positive today notwithstanding the mixed performance of the major indices. Many market leaders are higher. The Weekly Leading Index rose again this week and is now at its highest level since late June. Moreover, the continuing decline in energy prices, low interest rates and a stabilizing US dollar bode well for stocks. I expect U.S. equities to rise modestly into the close on short-covering and bargain-hunting.

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