Friday, January 14, 2005

Mid-day Report

S&P 500 1,183.37 +.50%
NASDAQ 2,082.76 +.59%


Leading Sectors
Airlines +2.04%
Iron/Steel +2.03%
Semis +1.72%

Lagging Sectors
Biotech +.04%
Boxmakers -.07%
Telecom -.25%

Other
Crude Oil 48.30 +.54%
Natural Gas 6.38 -.93%
Gold 423.00 -.49%
Base Metals 119.14 -.17%
U.S. Dollar 83.02 +.62%
10-Yr. T-note Yield 4.21% +1.17%
VIX 12.49 -2.73%
Put/Call .70 -15.66%
NYSE Arms .87 -40.82%
ISE Sentiment 134.00 -14.10%

Market Movers
CREE -24.66% after missing 2Q estimates and lowering 3Q forecast.
EPIX -29.5% after the company and its German partner, Schering AG said US regulators demanded more data before approving its scan contrast product MS-325.
CAAS +16.4% after announcing it has signed a technology licensing agreement with Korea Delphi Automotive Systems to manufacture and export its M150/M200 model automotive steering systems.
NX +11.2% after boosting 1Q estimates.
ASKJ +9.1% on Piper Jaffray upgrade to Outperform.
AIT +12.8% after beating 2Q estimates and raising 3Q forecast.
GMTN -16.6% after cutting 4Q forecast.

Economic Data
Producer Price Index for December fell .7% versus estimates of a .1% fall and a .5% increase in November.
PPI Ex Food & Energy for December rose .1% versus estimates of a .2% increase and a .2% gain in November.
Business Inventories for November rose 1.0% versus estimates of a .6% increase and a .4% rise in October.
Industrial Production for December rose .8% versus estimates of a .4% gain and a .2% increase in November.
Capacity Utilization for December came in at 79.2% versus estimates of 78.9% and an upwardly revised 78.6% in November.

Recommendations
-Goldman Sachs: Reiterated Outperform on HD and BAX. Reiterated Underperform on BE.
-Banc of America: Upgraded NOVL to Buy, target $8.50. Rated LLY Buy, target $67. Rated WYE Buy, target $46. Rated SGP Sell, target $17.
-Citi SmithBarney: Upgraded ELOS to Buy, target $37. Upgraded RSAS to Buy.
-CSFB: Raised STX to Outperform.
-JP Morgan: Cut JTX, KSS to Underweight. Raised RA, AMB to Overweight. Rated NINE Overweight.
-UBS: Raised FLEX to Buy, target $17. Raised KNX to Buy, target $28. Rated OS Buy, target $26.
-Deutsche Bank: Rated VSEA Buy, target $39. Rated SPRT Buy, target $9. Raised ABX to Buy, target $26.50.
-Thomas Weisel: Rated CPC Outperform.
-Morgan Stanley: Raised DISH to Overweight, target $40.
-Prudential: Rated NWAC Overweight, target $16. Rated LUV Overweight, target $22. Rated JBLU Overweight, target $28. Rated DAL Underweight, target $9. Rated AMR Overweight, target $17. Rated AAI Overweight, target $15. Cut UST to Underweight, target $40.
-Legg Mason: Rated AOC Sell.
-Merrill Lynch: Raised DIS to Buy, target $35.

Mid-day News
U.S. stocks are modestly higher mid-day on good economic data and a technical bounce after yesterday’s sell-off. Marsh & McLennan offered to pay $600 million to settle allegations of contract bid-rigging, the Wall Street Journal said. Boeing will end production of its 717 short-haul airliner after completing outstanding orders for the 117-seat jet, the Wall Street Journal reported. Fannie Mae and Freddie Mac earned about $4 billion last year through guarantees fees, at the expense of millions of homeowners, the Wall Street Journal said. Cosmetics makers Revlon, L’Oreal SA and Unilever Plc said they no longer use phthalates in their products, because of concern that the chemicals may be harmful to health, the Wall Street Journal reported. US trade and budget deficits are unlikely to slow efforts by the Bush administration to tackle meaningful reform of the tax code and Social Security, the Wall Street Journal reported. A new US law that requires employers to destroy papers containing personal information of workers such as nannies may boost sales of shredding machines, USA Today reported. Harvard University has hired 2004 graduate Zac Corker, who helped create a Web site that posts party information, drinking-game rules and tips on how to unhook a bra, as its new social programmer to help students unwind, the Boston Herald reported. The NY Metropolitan Transportation Authority will start operating its first computer-run subways in July on the L line, the NY Times reported. Hewlett-Packard will combine its printing and personal computer units and said Executive Vice President Duane Zitzner, who ran the PC group, left the company, Bloomberg reported. Shares of Verizon Communications fell for the 13th consecutive day amid concern by some investors that cable and wireless companies will win local-calling customers, Bloomberg said. Merck and Johnson & Johnson provided an “adequate rationale” for selling the cholesterol medication Mevacor without a doctor’s prescription, Bloomberg reported. US industrial production increased more than expected in December, making last year the busiest for factories, mines and utilities since 2000, Bloomberg said. US wholesale prices fell a larger-than-expected .7% last month, the biggest decline since April 2003 and led by falling energy costs, Bloomberg reported. The US dollar is gaining against the euro after a Fed official said policy makers may drop their plan to lift interest rates at a “measured” pace “at some point,” Bloomberg said.

Bottom Line: The Portfolio is slightly higher mid-day on gains in my homebuilding longs and software shorts. I have not traded today and the Portfolio remains 25% net long. The tone of the market is better today, however volume is lighter and most measures of investor anxiety are falling. The homebuilders’ ability to add to yesterday’s gains with long-term interest rates rising today is a positive for the group. I continue to believe the Fed is trying to jawbone the dollar and do not expect an accelerated pace of rate hikes. I expect US stocks to trade mixed-to-weaker into the close.

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