Tuesday, December 28, 2004

Mid-day Report

S&P 500 1,211.50 +.55%
NASDAQ 2,168.65 +.67%

Leading Sectors
Homebuilders +1.39%
Restaurants +1.19%
Biotech +1.19%

Lagging Sectors
Gaming +.05%
Hospitals -.17%
Airlines -.20%

Crude Oil 42.10 +1.98%
Natural Gas 6.30 +2.27%
Gold 445.10 -.25%
Base Metals 122.53 +.76%
U.S. Dollar 80.70 -.02%
10-Yr. T-note Yield 4.32% +.50%
VIX 12.09 -.41%
Put/Call .73 -13.10%
NYSE Arms .70 -36.94%

Market Movers
AMZN +6.2% on Bear Stearns upgrade to Outperform.
JUPM +10.7% on optimism over internet stocks.
UNFI +9.6% after announcing a definitive 3-year distribution agreement with Whole Foods Market(WFMI).
UHS -3.7% after cutting 4Q forecast.
*Providers of equipment and technology that help protect against the effects of earthquakes are up across the board.

Economic Data
Consumer Confidence for December soared to 102.3 versus estimates of 94.0 and an upwardly revised reading of 92.6 in November.

-Goldman Sachs reiterated Outperform on JNJ.
-JP Morgan rated ENR Underweight.
-Bear Stearns raised AMZN to Outperform, target $55.

Mid-day News
U.S. stocks are higher mid-day on a strong consumer confidence report. President Bush is likely to delay his proposed overhaul of the US tax code until at least 2006 as his administration focuses on social security and cutting the deficit, the Washington Post reported. US companies plan to boost hiring next year as economic conditions continue to improve, the Wall Street Journal reported, citing a survey by TEC Intl. of small and medium-sized businesses. US culinary schools have boosted enrollment by 40% since 2000, as aspiring chefs hope to duplicate the success of stars such as Emeril Lagasse, the Wall Street Journal reported. Year-end bonuses on Wall Street will likely rise to $15.9 billion this year, the highest amount since $19.5 billion in 2000 at the height of the bubble, the NY Times reported. PSS World Medical, which sells medical supplies to doctors, looks increasingly likely to go on hitting its target of 20% profit growth a year, the Wall Street Journal said. Texas Pacific Group, a buyout firm, expects to make at least three times what it paid for restaurant chain Burger King in the next three years, the Wall Street Journal reported. US Airways' weekend passenger delays and stranded luggage could put the company at risk, as passengers vowed to never again fly on the airline, the Philadelphia Inquirer reported. Home Depot and Lowe's are increasingly selling installation services, as time-constrained homeowners pay the stores to lay carpet and connect appliances, the Wall Street Journal Reported. OAO Yukos Oil missed interest payments yesterday on a $1 billion loan, leading S&P to cut its grade for the oil producer's debt to default, Bloomberg said. Sales at US retailers surged 4.3% during Christmas week, Bloomberg said, citing the Intl. Council of Shopping Centers. Lobbyists spent a record $1.1 billion in the first half of 2004 to influence US politicians, Bloomberg reported. The death toll from the weekend's earthquake and tsunamis in Asia crossed 50,000, making it the deadliest natural disaster in more than a decade, Bloomberg said. The Ukrainian Central Electoral Committee declared Viktor Yushchenko the winner of the Dec. 26 presidential election, Bloomberg said. Blockbuster threatened to make a $700 million hostile takeover offer for Hollywood Entertainment after saying the board refused to cooperate in negotiations, Bloomberg reported. US consumer confidence soared in December, reaching a five-month high and reflecting increased optimism about jobs and incomes, Bloomberg reported. The index of consumer expectations for the next six months rose to 99.9 from 90.2 in November, marking the biggest increase since the liberation of Iraq in May 2003, Bloomberg said.

Bottom Line: The Portfolio is higher mid-day on gains in my internet, biotech and security longs. I added a few new longs from various sectors this morning, thus leaving the Portfolio 125% net long. One of my new longs is NANO and I am using a $14 stop-loss on this new position. As I forecasted a few months ago, Consumer confidence is moving significantly higher on an end to the bitterly negative election, falling energy prices, better labor market, rising stock market, low interest rates, strong housing market and diminishing domestic terrorism fears. This trend should continue in 05 as confidence reaches cycle highs. I expect US stocks to rise modestly into the close on short-covering, year-end positioning and more optimism. I also expect energy prices to resume their fall tomorrow on a better inventory report, decelerating demand from Europe and Asia and mild weather.

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