Thursday, December 16, 2004

Mid-day Report

S&P 500 1,2004.29 -.12%
NASDAQ 2,157.66 -.23%

Leading Sectors
Drugs +1.73%
Biotech +.42%
Boxmakers +.42%

Lagging Sectors
Transports -1.27%
Software -1.27%
HMOs -1.52%

Crude Oil 43.65 -1.22%
Natural Gas 7.06 -2.43
Gold 439.20 -.68%
Base Metals 118.22 +.54%
U.S. Dollar 82.30 +.82%
10-Yr. T-note Yield 4.18% +2.50%
VIX 12.25 -.81%
Put/Call .66 +8.20%
NYSE Arms .60 -41.75%

Market Movers
SYMC -8.0% after agreeing to buy Veritas Software(VRTS) for $13.5 billion, the biggest software purchase in six years.
ISON +23.1% on optimism over 2Q report.
SEPR +9.7% after saying it won FDA approval for its Lunesta sleeping pill and positive comments by JP Morgan.
ARBX +44.3% on strong demand for IPO.
AEA +28% on strong demand for IPO.
HUBG +18.3% on Bear Stearns upgrade to Outperform.
POG +14.3% after Noble Energy(NBL) agreed to acquire it for $2.76 billion to expand in the Rockies.
WYNN +7.2% after Prudential raised its price target from $62 to $95.
JOYG +10.6% after announcing 3-for-2 split, beating 4Q estimates and raising 05 outlook.
LVS +7.3% on continuing strong demand for IPO.
FLIR +7.1% after announcing 2-for-1 split, raising 05 eps and lowering 05 sales outlook.
MFE -11.3% on worries over slowing growth in anti-virus biz.
APOL -5.1% after meeting 1Q estimates, lowering 05 guidance slightly and Merrill Lynch downgrade to Neutral.

Economic Data
Current Account Balance for 3Q was -$164.7B versus estimates of -$170.6B and -$164.4B in 2Q.
Housing Starts for November were 1771K versus estimates of 1980K and 2039K in October.
Building Permits for November were 1988K versus estimates of 2000K and 2018K in October.
Initial Jobless Claims for last week were 317K versus estimates of 342K and 360K the prior week.
Continuing Claims were 2737K versus estimates of N/A and 2787K prior.
Philadelphia Fed. rose to 29.6 in December versus estimates of 20.5 and a reading of 20.7 in November.

-Goldman Sachs reiterated Outperform on CEN, MSFT.
-Bank of America downgraded IPCC to Sell.
-Citi SmithBarney upgraded COO to Buy, target $84. Citi rated CD Buy, target $28. Citi rated INTU Buy, target $54. Citi rated SY Buy, target $22.50. Citi reiterated Buy on FNM, target $81. Citi rated CHK Buy, target $20. Citi reiterated Buy on BBY, target $73. Citi reiterated Buy on TWX, target $22. Citi reiterated Buy on AMGN, target $90. Citi reiterated Buy on LEN, target $80. Citi reiterated Sell on SEPR, target $40.
-JP Morgan rated VVTV Overweight. JPM rated UVN Underweight.
-UBS raised BKS to Buy, target $38.
-Thomas Weisel cut AW to Underperform.
-CSFB cut TER to Underperform, target $14. CSFB cut CMOS to Underperform, target $7.50. CSFB cut KLIC to Underperform, target $7.50.
-Deutsche Bank rated JBHT Buy, target $46. Deutsche rated SCST Buy, target $25.
-Bear Stearns raised HUBG to Buy, target $70. Bear cut MFC to Underperform, target $45.
-Oppenheimer rated IDBE Buy, target $23.

Mid-day News
U.S. stocks are modestly lower mid-day as rising interest rates are more than offsetting lower energy prices, merger activity and strong economic reports. U.S. retailers including Gap, Nike and Build-A-Bear Workshop have aligned themselves with charities during this year's holiday shopping season to help appeal to customers, the NY Times reported. The average Wall Street bonus is up 15-20% this year, said Tom Cleary, a partner at Rhodes Associates. Sepracor CFO Southwell told CNBC that its newly approved sleeping pill Lunesta has the potential to reach $1 billion or more in sales. Peninsular & Oriental Steam Navigation, the largest UK shipping company, has been picked to establish a "green terminal" for the Port of Los Angeles, the LA Times reported. Illinois Governor Blagojevich wants to make renting or selling violent and sexually explicit video games to people under 18 illegal, the Chicago Sun-Times reported. The US dollar is "a little undervalued," said Mark Mobius, a managing director at Templeton Asset Management. Cendant agreed to buy the UK's Gullivers Travel and Octopus Travel for about $1.1 billion, Bloomberg reported. United Technologies agreed to buy Kidde of the UK for $2.8 billion in cash, Bloomberg said. FedEx said second-quarter net income almost quadrupled as international air shipments rose, Bloomberg said. Goldman Sachs said quarterly profit rose 23%, spurred by revenue from fixed-income trading and fees from providing merger advice, Bloomberg reported. Symantec will buy Veritas Software for $13.5 billion in stock to add data-storage products, Bloomberg said. The number of Americans filing first-time claims for unemployment insurance benefits fell by 43,000 last week to a five-month low, suggesting that more US companies are retaining workers to meet rising demand, Bloomberg reported. Johnson & Johnson agreed to acquire Guidant for $25.4 billion, Bloomberg said. Glamis Gold, which produces gold in Nevada and Honduras, made a hostile $3.38 billion takeover bid for Goldcorp, Canada's fourth-biggest gold producer, Bloomberg reported. The Philly Fed Index soared to 29.6 from 20.7 in November, substantially topping economists' estimates, Bloomberg said. The US dollar rose the most in two months against the euro after a report showed the US current-account deficit grew less than forecast in the third quarter, Bloomberg said.

Bottom Line: The Portfolio is higher unchanged mid-day as gains in my semi and rfid longs are offsetting losses in my internet longs. I have not traded today and the Portfolio is still 125% net long. The underlying tone of the market is weaker today as interest rates rise on a better-than-expected Philly Fed report and lower jobless claims. Today's performance is a bit disappointing considering the merger activity, falling energy prices and strong economic/earnings reports. I do not view the weaker housing starts number as a problem, just a slowdown from scorching levels in October. I expect US stocks to trade mixed-to-weaker into the close.

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