Tuesday, February 15, 2005

Mid-day Report

S&P 500 1,207.31 +.10%
Dow 10,809.61 +.17%
NASDAQ 2,085.06 +.10%
Russell 2000 633.53 -.23%
DJ Wilshire 5000 11,884.74 +.05%
S&P Barra Growth 580.68 +.35%
S&P Barra Value 624.72 +.24%
Morgan Stanley Consumer 592.93 +.14%
Morgan Stanley Cyclical 767.62 +.37%
Morgan Stanley Technology 477.97 +.58%
Transports 3,605.11 +.44%
Utilities 353.90 -.53%
Put/Call .73 -16.09%
NYSE Arms .84 -19.23%
Volatility(VIX) 11.64 +1.04%
ISE Sentiment 173.00 -11.28%
US Dollar 83.61 -.42%
CRB 289.19 +.46%

Futures Spot Prices
Crude Oil 47.57 +.27%
Unleaded Gasoline 127.00 -.63%
Natural Gas 6.14 +.77%
Heating Oil 130.30 +.66%
Gold 426.90 -.09%
Base Metals 123.27 +.19%
Copper 145.60 +1.15%
10-year US Treasury Yield 4.10% +.81%

Leading Sectors
Gaming +2.12%
Disk Drives +1.36%
Retail +1.18%

Lagging Sectors
Oil Service -.44%
Utilities -.60%
Homebuilders -.60%

Market Movers
AAPL +4.64% after Merrill Lynch raised price target to $102.
C +17.92% after receiving a $3.25 billion cash acquisition offer from its fifth largest shareholder, Highfields Capital Management.
ANR +18.05% on strong demand for IPO.
TEVA -5.43% on disappointing 4Q results and 05 guidance.
ANSS +9.71% after beating 4Q estimates and raising 05 outlook.
PFBC +10.78% on strong demand for IPO.
MFLX +12.66% on no news.
CRL +6.94% after beating 4Q estimates, maintaining 1Q outlook and 05 guidance.
FOXH +10.68% after beating 4Q estimates and raising 1Q outlook.
BYD +5.09% on no news.
PFGC -15.15% after saying it would delay filing fourth-quarter and year-end financial results to complete an investigation of its accounting practices and JP Morgan downgrade to Underweight from Overweight.
ROCK -11.1% after missing 4Q estimates and lowering 1Q outlook.
MOLXE -10.52% after missing 2Q estimates and lowering 3Q outlook substantially.
CTCO -4.92% after missing 4Q estimates and lowering 1Q/05 guidance.
BG -5.3% on comments by John Deere regarding slower purchases of farm equipment in Brazil due to low soybean prices.
KWK -4.1% on UBS downgrade to Neutral.
AXCA -9.1% on disappointing 1Q results.

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

Economic Data
-Empire Manufacturing for February fell to 19.19 versus estimates of 20.0 and a reading of 20.08 in January.
-Advance Retail Sales for January fell .3% versus estimates of a .4% decline and a 1.1% increase in December.
-Retail Sales Less Autos for January rose .6% versus estimates of a .4% gain and a .3% increase in December.
-Net Foreign Security Purchases for December fell to $61.3B versus estimates of $58.5B and an upwardly revised $89.3B in November.
-Business Inventories for December rose .2% versus estimates of a .2% increase and a 1.1% gain in November.
-NAHB Housing Market Index fell to 68 in February versus estimates of 69 and a reading of 70 in January.

-Goldman Sachs: Reiterated Outperform on K, KRB, EBAY, CCL, HOT, MSFT and A. Reiterated Underperform on INFA, DE, RAI and FSS.
-Banc of America: Said investors in bonds of GM should buy the carmaker’s 30-year securities because their returns will be better than shorter-dated debt.
-Morgan Stanley: Raised MCO to Overweight, target $100.
-Oppenheimer: Raised FMBI to Buy.
-JP Morgan: Downgraded PFGC to Underweight.
-Legg Mason: Rated LEG Buy, target $34.
-UBS: Raised GG to Buy, target $16.

Mid-day News
US stocks are mixed mid-day as gains in technology shares are being offset by losses in interest-rate sensitive sectors. Debt levels among companies are too low and they have scope to increase their borrowing, according to a survey of investors by Merrill Lynch. Copper prices will average $1.20 a pound this year, Merrill Lynch said, revising a previous estimate 9.1% higher because of continuing growth in US and Chinese demand for the metal used in wiring and plumbing. The Baltic Exchange, the 260-year-old shipping organization in London, plans to set up a container ship freight-rate index that could be used for derivative trading, TradeWinds reported. Major League Baseball may today say it has reached agreement to purchase Tickets.com, an online provider of entertainment and sports tickets, for $66 million, the Wall Street Journal reported. Merck’s Vioxx and Pfizer’s Celebrex painkillers will face more scrutiny tomorrow when a FDA advisory panel hears about how the agency and Merck dealt with Vioxx’s recall, the NY Times reported. GM and other US companies are paying more for mail order generic drugs for their employees than individuals get buying the same drugs at retail pharmacies, the Wall Street Journal reported. The number of US households owning at least one individual retirement account in 2004 remained relatively unchanged at 40.4%, the Wall Street Journal reported. Federated Department Stores’ acquisition talks with May Department Stores halted last week after the two retailers couldn’t agree on price, the Wall Street Journal said. Verizon Communications’ planned purchase of MCI for $6.7 billion could mean US corporations will no longer see price wars for telephone and Internet services, the NY Times reported. Advanced Micro Devices cut prices on its existing Opteron server chips by as much as 35% after introducing higher-performing Opteron models, CNet News reported. Brazil plans to ask the WTO to investigate the legality of US government subsidies for soybean farmers, Bloomberg said. Privatizing part of Social Security has advantages and will help divide retirement saving from interest group politics, taxes and government spending, Gary Becker, a Nobel laureate in economics, wrote in the Wall Street Journal. European economic growth unexpectedly slowed in the fourth quarter as Germany and Italy, which account for half the region’s $10 trillion economy, contracted for the first time in more than a year, Bloomberg reported. The United Iraqi Alliance, which came first in the National Assembly elections, is meeting to choose between Ibrahim al-Jaafari, Ahmed Chalabi and Adel Abdel Mahdi, as a candidate for the job of Prime Minister, Bloomberg reported. Billionaire investors Warren Buffett and George Soros increased their holdings of US cable television companies, taking advantage of declines in stock prices to buy shares of the industry’s top two operators, Bloomberg said. The FDA will set up an independent drug safety oversight board to monitor medicines after they win approval, Bloomberg reported. Microsoft will release a new version of its Internet Explorer browser to fix security problems, Bloomberg said. Databases maintained by ChoicePoint, which sells personal information on people in the US to government agencies and businesses, have been accessed by criminals posing as legitimate businesses, MSNBC.com reported.

BOTTOM LINE: The Portfolio is higher mid-day on gains in my internet and software longs. I have not traded today, thus the Portfolio is still 100% net long. The tone of the market is mixed as the advance/decline line is slightly negative and most sectors are higher. As well, volume is better today and measures of investor anxiety are mixed. The Nasdaq is finding resistance at the key technical level of around 2100. I expect the Nasdaq to break above this level in the next few days on strong earnings reports, more constructive Fed comments, increasing fund inflows, short-covering and a decline in energy prices. I will increase market exposure on a clear break above this level. US stocks should trade modestly higher from current levels into the close.

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