Wednesday, December 15, 2004

Mid-day Report

S&P 500 1,202.09 -.11%
NASDAQ 2,156.79 -.14%

Leading Sectors
Homebuilders +2.52%
Iron/Steel +1.94%
Disk Drives +1.34%

Lagging Sectors
Biotech -.40%
Airlines -.73%
Telecom -.99%

Crude Oil 43.80 +4.38%
Natural Gas 7.32 unch.
Gold 442.50 +1.19%
Base Metals 117.08 +.85%
U.S. Dollar 81.49 -1.01%
10-Yr. T-note Yield 4.08% -.93%
VIX 12.59 -1.10%
Put/Call .62 -19.48%
NYSE Arms 1.04 +19.54%

Market Movers
LVS +55.2% on strong demand for IPO.
RIMM -4.2% on continuing worries over yesterday's patent ruling.
LEN +10.1% after beating 4Q estimates and raising 05 guidance.
MSTR +8.2% on rebound after yesterday's fall related to CFO resignation.
SUN +4.2% on Prudential upgrade to Overweight.
FS +4.7% on positive comments from Goldman Sachs.
BBY +5.6% after beating 3Q estimates and raising 4Q outlook.
BMET -6.9% on disappointing 2Q report.
JRCC -7.0% on continuing worries over recent 3Q report.
JMDT -9.64% on NXTL/FON merger news.
PLMO -3.45% on profit-taking and Lehman downgrade to Equal Weight.
*Homebuilders up across the board on falling long-term rates and LEN report.

Economic Data
Empire Manufacturing for December rose to 29.93 versus estimates of 20.0 and a reading of 18.86 in November.

-Goldman Sachs reiterated Outperform on SYMC, BBY and KRB.
-Citi SmithBarney upgraded DD to Buy, target $57. Citi upgraded LZ to Buy, target $42. Citi reiterated Buy on GE, target $44. Citi reiterated Buy on SCH, target $14.50. Citi reiterated Buy on SLM, target $61. Citi reiterated Sell on FCEL, target $7. Citi reiterated Buy on NT, target $5. Citi reiterated Buy on BNI, target $50.50. Citi reiterated Buy on VRTS, target $33.
-Banc of America rated CENT Buy, target $44.
-UBS rated NAT Buy, target $42. UBS rated ATB Buy, target $24. UBS raised WEN to Buy, target $44.
-Morgan Stanley cut RAD to Underweight.
-Prudential raised SUN to Overweight, target $73. Pru cut VLO to Underweight, target $41. Pru raised MRO to Overweight, target $42. Pru cut PCO to Underweight, target $42.
-Raymond James rated ASPT Buy, target $15. RJF raised MRK to Strong Buy, target $38.50.

Mid-day News
U.S. stocks are modestly lower mid-day as worries over a bounce in oil prices and a decline in the US dollar more than offset declining interest rates and strong economic/earnings reports. U.S. hedge funds' returns are dwindling as more and more funds chase the same investment opportunities, the Wall Street Journal reported. Ali Hassan al-Majid, known as "Chemical Ali" because of his role in gas attacks on the Kurds, will become the first former aide of deposed Iraqi dictator Saddam Hussein to stand trial next week, Agence France-Presse reported. Palestinian public tv has been airing less anti-Israeli rhetoric, the NY Times reported. Charles Schwab CFO Dodds said the company may be able to beat a fourth-quarter earnings forecast by 10-20%, Dow Jones reported. Crude oil prices are expected to trade at $37 to $39/bbl. next year, Kyodo News reported, citing Japan's Institute of Energy Economics. Career Education Corp. may lose the right to operate its schools in California, the Financial Times reported. EchoStar Communications may soon start offering high-definition tv and high-speed Internet services using a new satellite to be launched this week, the Rocky Mountain News of Denver reported. Google can keep selling ads prompted by searches using trademarked company names, the AP reported, citing a federal judge in a case between Geico and Google. OAO Yukos said it sought Chapter 11 bankruptcy protection in the U.S. and requested an emergency court hearing to stop the government's auction of its biggest unit, Bloomberg reported. Russia is committed to a market economy and foreign investment, Finance Minister Kudrin said. Best Buy, the world's largest electronics retailer, said third-quarter earnings rose as it limited holiday discounts and sold more digital televisions, cameras and MP3 players, Bloomberg reported. Manufacturing in New York state expanded more than forecast this month as more factories reported rising orders, sales and increased employment, Bloomberg said. U.S. communications regulators approved a plan to foster high-speed Internet access aboard airplanes, Bloomberg said. The dollar fell the most in two months against the yen on a report showing purchases of assets in the U.S. increased in October at the slowest pace in a year, Bloomberg said. AT&T, MCI and other U.S. telephone companies that lease competitors' networks to sell local service will lose discount rates in early 2006, regulators said. Crude oil had its biggest gain in six months after the government reported a decline in U.S. heating-oil inventories and below-normal temperatures boosted demand, Bloomberg reported. Sprint agreed to buy Nextel for about $35 billion in a transaction that would leave three companies in control of 70% of the US mobile-telephone market, Bloomberg reported.

Bottom Line: The Portfolio is higher mid-day on gains in my semi, internet and homebuilding longs. I have not traded today and the Portfolio is still 125% net long. The underlying tone of the market is mildly positive today, notwithstanding today's small losses in the major indices. The advance/decline line is slightly higher and many leaders are higher. It is also a positive to see interest rates lower again even with a decline in the dollar on worries over foreign demand for US treasuries. As well, the bounce in energy prices isn't resulting in any significant selling of equities. Oil will likely approach $45-$47/bbl. in the near-term before heading to $35/bbl. over the next few months. I expect US stocks to rise modestly into the close on short-covering, strong economic data, falling interest rates, good earnings reports and merger optimism.

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