Monday, February 28, 2005

Mid-day Report

S&P 500 1,200.49 -.90%
Dow 10,750.05 -.84%
NASDAQ 2,041.83 -1.14%
Russell 2000 629.58 -1.25%
DJ Wilshire 5000 11,821.06 –.94%
S&P Barra Growth 578.96 -.64%
S&P Barra Value 616.80 -1.20%
Morgan Stanley Consumer 584.18 -.58%
Morgan Stanley Cyclical 768.45 -1.05%
Morgan Stanley Technology 471.26 -.44%
Transports 3,722.82 +.21%
Utilities 352.13 -1.11%
Put/Call .67 -19.28%
NYSE Arms 1.98 +144.44%
Volatility(VIX) 12.31 +7.31%
ISE Sentiment 213.00 +46.90%
US Dollar 82.44 -.28%
CRB 304.40 +1.38%

Futures Spot Prices
Crude Oil 51.58 +.17%
Unleaded Gasoline 121.60 -3.07%
Natural Gas 6.69 -.37%
Heating Oil 149.50 +2.81%
Gold 437.50 +.32%
Base Metals 128.29 +1.20%
Copper 149.80 +.81%
10-year US Treasury Yield 4.37% +2.60%

Leading Sectors
Computer Hardware +.07%
Foods +.07%
Computer Services -.02%

Lagging Sectors
Airlines -2.22%
Homebuilders -2.36%
Biotech -4.90%

Market Movers
BIIB -44.4% after it and Irish partner Elan Corp.(ELN) suspended sales of the MS drug Tysabri after one death was reported. ELN -65.8%.
RETK +40.33% after announcing SAP AG agreed to buy it for about $496M.
TEVA +6.56% on BIIB/ELN news.
USFC +24.0% after Yellow Roadway(YELL) agreed to buy it for about $1.37B. YELL -4.0%.
PACT +36.0% after raising 4Q revenue guidance.
SRA +18.1% on BIIB/ELN news.
JDAS +14.2% on RETK news.
XMSR +10.3% after saying it will raised the price of its basic subscription package to $12.95/month, include the Internet service XM Radio Online and SunTrust upgrade to Buy.
BBY +4.68% on JP Morgan upgrade to Overweight.
BDY -27.2% after saying the SEC started an informal inquiry into possible violations of securities laws.
VLO -6.0% on profit-taking.

Market Internals
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
- Personal Income for January fell 2.3% versus estimates of a 2.6% fall and a 3.7% increase in December.
- Personal Spending for January was unchanged versus estimates of a .1% increase and a .8% gain in December.
- The PCE Deflator for January rose 2.2% versus estimates of a 2.2% rise and a 2.4% increase in December.
- The PCE Core for January rose 1.6% versus estimates of a 1.5% increase and a 1.5% gain in December.
- New Home Sales for January fell to 1106K versus estimates of 1125K and an upwardly revised 1218K in December.
- Chicago Purchasing Manager for February rose to 62.7 versus estimates of 60.5 and a reading of 62.4 in January.

- Goldman Sachs: Reiterated Outperform on MDT, CSCO, LVS and TMK.
- Smith Barney: Said Asia Handset Tour indicated order acceleration ahead, favorite beneficiaries are NSM, MCRL, ADI and SMTC. Said soft-line retailers positioned to post the best February same store sales increases include ANF, AEOS, PLCE and TJX. Said hard-line retailers AZO and BBW experienced better-than-expected comp trends in February. Said within their coverage universe, NMGA and SKS face the most difficult comps vs. last year while MAY and WMT face the easiest. Reiterated Buy on PG and G, while reiterating Sell on CLX. Reiterated Buy on NOI, target $53. Reiterated Buy on WMT, target $65. Said BAC, WB and WFC should exceed quarterly estimates and FHN, MTB may be worse than expected.
- Banc of America: Cut F to Sell, target $10. Cut GM to Sell, target $27.
- JP Morgan: Raised BBY to Overweight. Cut MTA to Underweight. Raised HZO to Overweight.
- Morgan Stanley: Raised GP to Overweight, target $39.
- Oppenheimer: Downgraded DDS to Sell. Cut MAY to Sell.
- Legg Mason: Raised EEEE to Buy, target $16.50.
- Thomas Weisel: Raised TXN to Outperform.
- Merrill Lynch: Raised TCB to Buy, target $31.
- Bear Stearns: Cut BIIB to Underperform.
- CSFB: Downgraded DNR to Underperform, target $33. Cut POT to Underperform, target $79.
- Prudential: Raised STT to Overweight, target $49. Downgraded NOVL to Underweight, target $7.
- Deutsche Bank: Cut BIIB to Sell, target $38. Raised SLH to Buy, target $20.

Mid-day News
US stocks are lower mid-day on losses in the biotechnology sector and worries over higher long-term interest rates. Charter Communications’ fourth quarter earnings might not be as bad as some have feared, the Wall Street Journal reported. German Chancellor Schroeder called on the Saudi Arabian government to allow more democracy, Financial Times Deutschland reported. The new Palestinian leadership won’t tolerate attacks like the Feb. 25 bombing in Tel Aviv that killed at least 4 people and injured dozens, Palestinian Authority President Abbas told the Independent. Lebanese anger against Syria’s occupation of the country has exploded since a bombing killed former Prime Minister Hariri two weeks ago, the Wall Street Journal reported. ABN Amro NV, JP Morgan Chase and Goldman Sachs are among about a dozen investment banks competing for a contract to advise the Australian government how to sell its majority stake next year in Telstra, the Wall Street Journal reported. Pathmark Stores, which owns 142 supermarkets in the northeastern US, will probably be acquired by C&S Wholesale Grocers, New England’s biggest food wholesaler, the NY Post reported. Time Warner’s Money Magazine will revamp the April issue to increase its appeal among women and younger readers, the NY Times reported. BellSouth wants to boost revenue through wireless and broadband services, rather than join industry merger talks, the NY Times reported. Movielink, which is owned by five movie studios, and Blinkx, a search-engine provider, are working on a way to enable Internet surfers to buy or rent movies and television shows on the Web, the LA Times reported. Lebanese Prime Minister Karami announced the resignation of his Syrian-backed government today, the AP reported. A study of HIV-infected teens in San Francisco, Los Angeles, New York and Miami showed they were twice as likely to engage in risky sexual behavior as teens in similar research a decade ago, Bloomberg reported. Copper rose to a record in London on speculation demand may pick up after Japan, the world’s third-largest user of the metal, reported a bigger-than-expected increase in industrial production, Bloomberg reported. Mylan Labs, the generic drug maker that pursued a takeover of King Pharmaceuticals for six months, abandoned the proposed $4 billion transaction yesterday, Bloomberg said. Ericsson AB had its debt rating raised one level to so-called investment grade level by Standard & Poor’s Corp, Bloomberg reported. Biogen Idec and Elan said they’ve voluntarily suspended marketing their new MS drug Tysabri after one death was reported, Bloomberg said. The CRB Index is hitting a 24-year high as demand for raw materials remains strong from the US and China, Bloomberg reported. Chicago-area business expanded at an accelerated pace in February, Bloomberg said. US new home sales unexpectedly declined in January and the median price dropped to the lowest in a year, Bloomberg reported. US Treasury notes are falling after a government index on inflation rose the most in 2 years, Bloomberg said.

BOTTOM LINE: The Portfolio is lower mid-day on losses in my homebuilding, pharmaceutical and semi longs. I exited a number of longs as they hit stop losses this morning, thus bringing the Portfolio’s market exposure to 50% net long. The tone of the market is poor as the advance/decline line is weak, almost ever sector is declining and volume is stronger. Measures of investor anxiety are mixed. The rise in long-term rates will likely continue in the near-term as economic reports continue to exceed expectations. I expect US stocks to trade mixed-to-higher from current levels into the close as optimism over economic growth and short-covering mostly offsets worries over rising rates.

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