Tuesday, February 22, 2005

Mid-day Report

S&P 500 1,192.10 -.79%
Dow 10,685.39 -.92%
NASDAQ 2,045.25 -.65%
Russell 2000 621.85 -1.32%
DJ Wilshire 5000 11,731.44 -.86%
S&P Barra Growth 573.52 -.82%
S&P Barra Value 613.86 -.82%
Morgan Stanley Consumer 582.32 -1.34%
Morgan Stanley Cyclical 760.33 -.89%
Morgan Stanley Technology 467.18 -.07%
Transports 3,568.49 -1.42%
Utilities 346.32 -1.71%
Put/Call .74 -11.90%
NYSE Arms 1.09 +81.67%
Volatility(VIX) 12.55 +12.25%
ISE Sentiment 142.00 -14.46%
US Dollar 82.58 -1.13%
CRB 296.81 +2.11%

Futures Spot Prices
Crude Oil 50.55 +4.55%
Unleaded Gasoline 131.00 +3.69%
Natural Gas 6.07 +2.74%
Heating Oil 143.30 +6.20%
Gold 435.80 +1.73%
Base Metals 128.78 +1.58%
Copper 148.60 -.10%
10-year US Treasury Yield 4.27% +.32%

Leading Sectors
Semis +.87%
Networking +.55%
Drugs +.28%

Lagging Sectors
Utilities -1.89%
Airlines -1.96%
HMOs -2.67%

Market Movers
ELAB +9.1% after Novartis AG agreed to buy German generic-drug market Hexal AG and its US affiliate Eon Labs for about $8.3 billion in cash.
SINA +10.47% after Shanda Interactive said it acquired a 20% stake in the company.
BOOM +16.54% on strong 4Q results.
ACI +5.76% on Morgan Stanley upgrade to Overweight.
KMG +5.55% after saying investor Carl Icahn plans to buy as much as $1 billion of the company’s stock.
HELE -15.0% after lowering 4Q outlook.
PER -13.78% after saying Harvard Pilgrim ended its outsourcing pact with the company and KeyBanc downgrade to Hold.
EASI -12.3% after meeting 1Q estimates and lowering 05 guidance.
AYI -7.89% after lowering second half outlook and announcing 1,100 job cuts.
OSTK -5.35% on no news.
CPS -6.92% after saying identity theft at the company may involve as many as 500,000 victims, the AP said.

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

Economic Data
- Consumer Confidence for February rose to 104.0 versus estimates of 103.0 and an upwardly revised reading of 105.1 in January.

- Goldman Sachs: Reiterated Outperform on MRVL, TU, HD, BC, BSX, BBBY and PFE. Reiterated Underperform on AG, CVC and WIN.
- Smith Barney: Upgraded Semis/Equipment to Overweight and Tech Hardware/Equipment to Marketweight. Added CSCO and INTC to Recommended List and removed BG and G. Said to Buy WY, target $75. Reiterated Buy on FNM, target $81. Reiterated Buy on FRE, target $84. Reiterated Buy on RRI, target $16.50. Reiterated Sell on SUP, target $20. Reiterated Buy on WMT, target $65.
- JP Morgan: Raised MTG to Overweight. Raised PMI to Overweight. Cut DVSA to Underweight. Cut NAFC to Underweight.
- Morgan Stanley: Downgraded CNX to Underweight. Upgraded ACI to Overweight, target $52.
- CSFB: Raised BMET to Outperform, target $50.
- Deutsche Bank: Raised JCP to Buy, target $55.
- Thomas Weisel: Rated CTRX Outperform, target $11. Rated MCHX Outperform.

Mid-day News
US stocks are lower mid-day on worries over higher commodity prices and slowing global growth. Shares of Costco have risen more than 30% in the past year, but some investors and analysts say sharper competition may now slow the momentum, the Wall Street Journal reported. The recommendation by a FDA panel that Merck’s Vioxx painkiller should be allowed back on the market raises the question whether it was sensible to withdraw the drug in the first place, the Wall Street Journal reported. Iraqi soldiers successfully struggled to recover the bodies of three US soldiers from the icy waters of the Isaki Canal where they drowned, and the Iraqis’ heroic efforts are helping to change negative perceptions US soldiers had of their allies, the Washington Post reported. A new surgery recently performed at a Chicago hospital may be used to treat atrial fibrillation, a condition that affects 2.2 million Americans, the Wall Street Journal reported. Patient identity theft is an increasing problem in US hospitals, in part because of the use of Social Security numbers as identification, the Wall Street Journal reported. GM plans to begin building the Saturn Sky roadster at its Wilmington, Delaware, factory in a bid to win customers back to the brand, the Philadelphia Inquirer reported. OPEC doesn’t see a need to cut crude output for the time being, Agence France-Presse reported. The US Dept. of Homeland Security is considering measures that would force companies to safeguard themselves from terrorist attacks by using the insurance industry as a watchdog, the Boston Globe reported. GM reduced prices as much as $2,000 on sport utility vehicles such as the Chevrolet TrailBlazer, USA Today reported. Egypt named Mohammed Asim Ibrahim as ambassador to Israel, ending a four-year diplomatic hiatus and signaling an improvement in ties, Agence France-Presse said. The Fed must keep raising interest rates as the economy grows to keep inflation low and stable, St. Louis Fed Bank President Poole told USA Today. Home Depot said fourth-quarter earnings gained 9.5% as demand from contractors and holiday sales increased, Bloomberg said. Omnicom Group, the world’s largest owner of ad agencies, said fourth-quarter net income rose 12% after it won new accounts from clients including Capital One Financial and PepsiCo, Bloomberg reported. All 26 members of NATO are making some contribution, whether financial or with personnel, to the training of Iraqi security forces and police, Bloomberg said. Hovnanian Enterprises and DR Horton are among junk-rated homebuilders taking advantage of improving credit ratings to sell bonds and cut borrowing costs, Bloomberg reported. US consumer confidence fell in February from a six-month high, however Americans were more upbeat about their present situation, Bloomberg reported. Merck’s legal liability may be reduced by almost 75% after US government advisers found Vioxx’s benefit outweighed the risks of heart damage, according to CSFB analyst Catherine Arnold. The US dollar is falling the most in more than four months against the yen and dropped versus the euro, Korean won and at least 30 other currencies after the Bank of Korea said it plans to increase its non-dollar reserves, Bloomberg reported. Crude oil is surging above $50/bbl., the highest since Nov. 30, as colder-than-normal weather in the US and Europe raised demand fro furnace fuels, Bloomberg said.

BOTTOM LINE: The Portfolio is slightly lower mid-day as losses in my homebuilding and medical information systems longs are more than offsetting gains in my gaming longs. I exited a number of longs this morning as they hit stop-losses, thus bringing the Portfolio’s market exposure to 25% net long. The tone of the market is poor as decliners are swamping decliners, most sectors are lower and volume is higher. Technology stocks are outperforming, while interest-rate sensitive shares, small-caps and energy-sensitive stocks are underperforming. Finally, the CRB is making a new high today which is a negative. Measures of investor anxiety are mostly higher. I expect US stocks to trade modestly lower into the close from current levles on worries over higher interest rates, increasing commodity prices and slowing global growth.

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