Friday, February 25, 2005

Mid-day Report

S&P 500 1,207.86 +.64%
Dow 10,801.63 +.49%
NASDAQ 2,057.15 +.27%
Russell 2000 632.93 +.86%
DJ Wilshire 5000 11,890.47 +.64%
S&P Barra Growth 580.66 +.47%
S&P Barra Value 622.58 +.77%
Morgan Stanley Consumer 586.41 -.09%
Morgan Stanley Cyclical 773.33 +.75%
Morgan Stanley Technology 470.68 +.45%
Transports 3,695.86 +.42%
Utilities 355.78 +1.93%
Put/Call .83 -11.70%
NYSE Arms .79 +2.60%
Volatility(VIX) 11.30 -2.33%
ISE Sentiment 132.00 -26.26%
US Dollar 82.72 -.23%
CRB 298.96 +.31%

Futures Spot Prices
Crude Oil 51.40 +.06%
Unleaded Gasoline 125.50 -2.24%
Natural Gas 6.68 +3.50%
Heating Oil 144.70 -1.23%
Gold 436.40 +.14%
Base Metals 126.77 -.40%
Copper 148.50 +.34%
10-year US Treasury Yield 4.25% -.73%

Leading Sectors
Iron/Steel +3.15%
Energy +2.24%
Homebuilders +2.14%

Lagging Sectors
Networking -.25%
Software -.43%
Broadcasting -1.50%

Market Movers
SYNA +13.66% after saying its touch-screen technology is being used in Apple Computer’s new iPod models.
JLG +25.8% after beating 2Q estimates and raising 05 guidance.
BOOM +22.53% on continuing optimism over strong 4Q results.
MANT +12.28% after meeting 4Q estimates and raising 1Q guidance.
APC +7.55% after Business Week reported the company may be valued as high as $117/share in a takeover.
PD +6.11% on optimism over US economic growth and technical breakout.
BCSI -13.25% after meeting 3Q estimates and lowering 4Q guidance.
TKLC -9.7% after meeting 4Q estimates and lowering 1Q guidance.
WON -6.99% after missing 4Q estimates and lowering 05 outlook.

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

Economic Data
- Preliminary 4Q GDP rose 3.8% versus estimates of 3.7% rise and prior expectations of a 3.1% increase.
- Preliminary 4Q GDP Price Deflator rose 2.1% versus estimates of a 2.0% increase and prior expectations of a 2.0% rise.
- Preliminary 4Q Personal Consumption rose 4.2% versus estimates of a 4.6% gain and prior expectations of a 4.6% rise.
- Existing Home Sales for January fell to 5.94M versus estimates of 6.7M and a downwardly revised 5.97M in December.

- Goldman Sachs: Reiterated Outperform on JNPR, MRVL, NEM, AMGN, GILD, IBM, EMC and MERQ. Reiterated Underperform on GPI and HRB. Downgraded MCDTA to Underperform.
- Smith Barney: Said crude-oil prices may fall during the second quarter because of high inventories. Said shares of INTC and CSCO may rally, fueling gains in the S&P 500. Reiterated Sell on CPN, target $3. Reiterated Buy on MRO, target $47. Reiterated Buy on INTU, target $54. Reiterated Sell on TIVO, target $3.50. Reiterated Buy on SPLS, target $37. Reiterated Buy on HD, target $48. Reiterated Buy on WTS, target $335. Reiterated Buy on ASD, target $50. Reiterated Buy on ROP, target $70. Reiterated Buy on CYH, target $39. Reiterated Buy on APCS, target $15. Reiterated Buy on JCP, target $63. Reiterated Buy on BEAS, target $11.50. Reiterated Sell on CEI, target $12.
- Prudential: Raised XOM to Overweight, target $70.
- CSFB: Raised MAS to Outperform, target $37.

Mid-day News
US stocks are modestly higher mid-day on optimism over US economic growth and lower long-term interest rates. The expansion of the liquefied natural gas tanker fleet is causing a shortage of qualified crewmembers, putting safety at risk, TradeWinds reported. Executives from Federated Department Stores, the owners of Macy’s and Bloomingdale’s, will meet May Department Stores board members to agree on a merger, the Wall Street Journal said. The US venture-capital business is seeing the emergence of firms that concentrate on particular regions or industries, rather than investing in a range of business ideas, the Wall Street Journal reported. Onyx Pharmaceuticals licenses a therapy it developed to Shanghai Sunway Biotech, a Chinese biotech company, after stopping work on the virus-aided treatment in 2003, the NY Times reported. US mutual funds are pushing for cuts in the commissions brokers charge for trading stocks, the Wall Street Journal said. Medical-device makers including Advance Neuromodulation Systems are facing greater scrutiny from regulators regarding sales and promotional tactics, the Wall Street Journal reported. The SEC will vote on new rules to open the credit ratings industry to competition, the Washington Post reported. Alcan, the world’s second-largest aluminum producer, may shut its three plants in France if costs for electricity rise further, Liberation reported. Vail Resorts is interested in buying California’s popular Mammoth Mountain Ski Area, valued by analysts at about $300 million, the Rocky Mountain News reported. The French unemployment rate unexpectedly rose to a five-year high of 10% in January and manufacturers in the country became more pessimistic, Bloomberg said. Optimism in the US over the stability of Iraq is growing, while most Americans think their troops will remain in the Middle Eastern country for at least two more years, according to a Pew Research Center Poll. Iran is seeking greater involvement from the US in talks with European countries aimed at limiting its nuclear program, Bloomberg reported. Residents of the northeastern US braced for another blast of winter, as a second storm forecast to hit the region Monday may form a nor’easter and dump snow and rain along the coast, Bloomberg said. Record coal prices will be higher than forecast for at least the next three years, buoyed by surging steel production in China, said Merrill Lynch. Credit Suisse First Boston economists raised their February job forecast as “new cycle low” jobless claims and a surprise improvement in help-wanted advertising suggest hiring is accelerating, Bloomberg reported. The US economy grew at a 3.8% annual rate in the fourth quarter of 2004, faster than earlier estimated, because the trade deficit turned out to be smaller than thought and businesses spent more on equipment and software, Bloomberg reported. MCI will do its “utmost” to complete a combination with Verizon after receiving a revised bid from Qwest, MCI CEO Capellas said. American Airlines, Delta Airlines and America West raised fares as much as $20 on round-trip flights in the US and Canada, matching a fare increase by Northwest, Bloomberg said. The European Union should regulate hedge funds to protect inexperience investors, EU Financial Services Commissioner McCreevy said. US sales of previously owned homes, including condominiums and co-ops for the first time, declined .1% in January, Bloomberg reported.

BOTTOM LINE: The Portfolio is higher mid-day on gains in my homebuilding, semiconductor and alternative energy longs. I added a few new longs this morning, thus bringing the Portfolio to 100% net long market exposure. One of my new longs is GE and I am using a $35 stop-loss on this position. The tone of the market is modestly positive as the advance/decline line is higher, almost ever sector is rising and volume is light. Measures of investor anxiety are mixed. Homebuilders, steel producers and energy-related stocks are once again leading the way. As well, small-caps and interest-rate sensitive sectors are outperforming and most technology-related sectors are underperforming. It is a psychological positive that long-term rates are falling today after a better-than-expected GDP report. I expect US stocks to trade mixed from current levels into the close as rising energy prices offsets optimism over US economic growth and lower long-term interest rates.

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