Thursday Close

S&P 500 1,161.67 +1.62%
NASDAQ 2,023.63 +.96%

Leading Sectors
Airlines +4.77%
Gaming +3.65%
Retail +3.37%

Lagging Sectors
Drugs -.04%
Homebuilders -.19%
Oil Service -.33%

Other
Crude Oil 48.68 -.29%
Natural Gas 8.18 -.23%
Gold 430.20 -.14%
Base Metals 116.70 +1.29%
U.S. Dollar 84.47 -.27%
10-Yr. T-note Yield 4.07% -.05%
VIX 13.97 -.50%
Put/Call .84 -3.45%
NYSE Arms .77 +5.48%

After-hours Movers
VCLK +21.7% after beating 3Q estimates, boosting 4Q outlook and raising 05 guidance.
KEYW +12.4% after beating 3Q estimates and raising 05 outlook substantially.
GPRO +10.4% after beating 3Q estimates and raising 04 guidance.
NVDA +8.4% after beating 3Q estimates.
ANPI +6.1% after exceeding 3Q estimates.
AIRT -14.8% after missing 2Q estimates.
VXGN +16.0% after winning a $877 million contract to supply the U.S. government with anthrax vaccine.

Recommendations
Goldman Sachs reiterated Outperform on AAP and Underperform on FISV. Shares of Midway Games(MWY) will rise as the entertainment market expands, Business Week reported.

After-hours News
U.S. stocks finished sharply higher today on optimism over President Bush's forthcoming agenda and falling oil prices. Iraqi Prime Minister Allawi said countries that have been "spectators" in the war should become involved with efforts to rebuild the country, the Financial Times reported. DoubleClick, which may sell all or part of its divisions, may find separate buyers for its data and technology units, Business Week reported. General Motors debt rating was lowered one level to Baa2, or two steps above non-investment grade, Bloomberg reported. Univision Communications, the largest U.S. Spanish-language tv and radio broadcaster, said third-quarter profit rose 74% as ad sales rose, Bloomberg said. The Lancet medial journal will publish research that concludes Merck should have stopped selling its Vioxx painkiller years before the drug's Sept. 30 withdrawal, said Prudential Financial analyst Tim Anderson. Crude oil fell, extending yesterday's 4.1% decline, as rising OPEC production and U.S. inventories eased concern about winter fuel shortages, Bloomberg reported. Palestinian leader Arafat remained on life support in a Paris-area hospital as factions in the Gaza Strip prepared to discuss his successor in an effort to avoid conflict, Bloomberg reported.

BOTTOM LINE: The Portfolio finished higher today on strength in my security, retail, restaurant, semiconductor and Indian ADR longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. The tone of the market improved throughout the day with the advance/decline line finishing near its highs and volume remaining healthy. It appears investors are beginning to anticipate the better economic growth I predicted for after the election. As well, investors are finally contemplating the very positive effects that tort-reform, tax-reform, social-security reform and health-care reform will have on U.S. stocks. The AAII % Bulls rose sharply this week which likely means a short period of consolidation is in store for stocks in the near-term. I expect Non-farm Payrolls to exceed the 175K estimate tomorrow.

Mid-day Update

S&P 500 1,153.48 +.90%
NASDAQ 2,011.76 +.37%

Leading Sectors
Airlines +3.05%
Gaming +2.69%
Retail +2.52%

Lagging Sectors
Disk Drives -.40%
Drugs -.63%
Homebuilders -1.10%

Other
Crude Oil 49.55 -2.81%
Natural Gas 8.35 -4.59%
Gold 431.20 +1.36%
Base Metals 116.73 +1.32%
U.S. Dollar 84.51 -.21%
10-Yr. T-note Yield 4.06% -.33%
VIX 13.18 -6.13%
Put/Call .92 +5.75%
NYSE Arms .93 +27.4%

Market Movers
QCOM -4.4% after meeting 4Q estimates and lowering 05 outlook.
GPS +6.8% after reporting strong Oct. sales and boosting 3Q outlook.
ADRX -19.7% after missing 3Q estimates and JP Morgan downgrade to Underweight.
ISLE +15.6% on PENN/ARGY merger.
PENN +24.7% after agreeing to purchase Argosy Gaming for $1.4 billion in cash to create the third-largest U.S. operator of gambling properties. AGY +11.3%.
PDII +12.3% after beating 3Q estimates and raising 04 forecast.
BEBE +9.1% on very strong Oct. sales.
COHR +8.3% on strong 4Q results.
COGT +10.6% on continued optimism over its fingerprint ID technology.
DITC -29.5% after lowering 2Q/3Q guidance and First Albany downgrade to Buy.
DIGE -26.4% after missing 1Q estimates, lowering 2Q/05 outlooks and multiple downgrades.
JOSB -14.2% after disappointing Oct. sales.
BOBJ -17.0% after meeting 3Q estimates and lowering 4Q outlook.

Economic Data
Preliminary 3Q Non-farm Productivity rose 1.9% versus estimates of 1.5% and a rise of 3.9% in 2Q.
Preliminary 3Q Unit Labor Costs rose 1.6% versus estimates of 2.3% and a rise of 1.0% in 2Q.
Initial Jobless Claims for last week were 332K versus estimates of 340K and 351K the prior week.
Continuing Claims were 2800K versus estimates of 2805K and 2820K prior.

Recommendations
-Goldman Sachs reiterated Outperform on DHR, GE, STZ, ASN, CMX, TYC, MMM, AA, DELL, VNO, CBG, MDT, HD. Goldman reiterated Underperform on IHR.
-Citi SmithBarney upgraded PHS(target $53), AET(target $125) and HUM(target $29) to Buy. Citi reiterated Buy on L, target $11.50. Citi reiterated Sell on WTW, target $31. Citi reiterated Buy on NJR, target $46. Citi reiterated Buy on RSG, target $34. Citi reiterated Sell on BLDP, target $5. Citi reiterated Buy on UNM, target $20. Citi reiterated Sell on HOTT, target $14. Citi reiterated Buy on PCG, target $35. Citi reiterated Buy on ACLS, target $9.
-Merrill Lynch named JCP Focus 1 stock of the week.
-UBS rated APCS Buy, target $13. UBS rated NBL Buy, target $76.
-Bank of America lowered AMAT to Sell, target $12.59. BofA downgraded KLAC to Sell, target $36.33.
-Legg Mason rated MHK Buy, target $100. Legg Mason rated DXYN Buy, target $20.
-Prudential raised EOG to Overweight, target $80. Pru cut APC to Underweight, target $66. Pru cut ASYT to Underweight, target $3.50.
-Deutsche Bank raised XOM to Buy, target $55.
-JP Morgan cut PBG, CINF and ADRX to Underweight. JP Morgan raised STA to Overweight.
-Raymond James raised SPN to Strong Buy, target $19.25. Raymond James raised XEC, target $44.
-Bear Stearns downgraded ENR to Underperform.

Mid-day News
U.S. stocks are higher mid-day on optimism over President Bush's stated agenda and falling energy prices. Alcan expects a reduction in the aluminum surplus this year, CEO Engen told CNBC. A technical problem with a computer file server on election night delayed tv networks' access to exit poll data for 2 ½ hours just as the consortium conducting the polling was about to update with information showing President Bush with a 1-point lead, the Washington Post reported. Public Service Co. of Colorado and other utilities will have to produce at least 10% of the state's electricity from renewable energy sources by 2015 because of voter support for a ballot initiative, the Wall Street Journal reported. California is poised to become the U.S. center for stem-cell research after voters in the state passed Proposition 71, the NY Times said. U.S. Attorney General Ashcroft may submit his resignation in two weeks, CNN reported. Starbucks plans to add 100 stores in Canada over the next 12 months as it expands around the world, the Globe and Mail reported. Viacom said it plans to make an offer to buy the rest of financial news Internet site MarketWatch.com that it doesn't already own, Bloomberg reported. Bill Miller, manager of the $14.9 billion Legg Mason Value Trust, may lose his 13-year streak of outperforming the S&P 500 after he missed this year's rally in energy-related stocks, Bloomberg said. The number of U.S. workers filing first-time claims for unemployment insurance fell more than forecast last week to a level consistent with more job creation, Bloomberg reported. General Motors recalled 1.22 million Chevrolet Cavalier sedans, GMC Envoy sport-utilities and other vehicles, bringing U.S. recalls by all automakers this year to a record of almost 25 million, Bloomberg said. Sales at U.S. retailers including Federated Dept. Stores and Nordstrom rose 4% in October, signaling growth for the holiday season, Bloomberg said. Palestinian leader Arafat is still being treated in a French hospital and hasn't died, Bloomberg reported. Crude oil is falling on expectations of extended inventory increases as OPEC production rises, Bloomberg said.

Bottom Line: The Portfolio is lower mid-day as gains in my retail and gaming longs are being more than offset by declines in my telecom equipment and internet longs. I exited a couple of longs as they hit stop-losses and added a few semiconductor and restaurant longs, thus leaving the Portfolio 125% net long. One of my new longs is ADBL and I am using a $21 stop-loss on this position. The tone of the market is mixed today and improving. The advance/decline line is mildly positive and tech is underperforming again. I suspect the Bears are beginning to get very nervous as they expected a sell-the-news fall in the major indices after the election. Instead stocks are strengthening, breaking out clearly from downtrends that have been in place since early in the year. The shorts are having one of their best years ever. I believe many will cover in the later part of the month, as the economy accelerates, to protect their gains. As well, mutual fund and hedge fund managers that are significantly underperforming for the year will have to put money to work on the long-side as fundamentals improve. I feel more confident than ever about my prediction for a strong double-digit 4Q rally in the major indices. However, stocks are getting overbought short-term and will likely pause over the coming days.

Thursday Watch

Earnings of Note
Company/Estimate
AL/.69
CAH/.56
CMX/.35
CVS/.41
NVDA/.09
RRGB/.43
UVN/.20
WMB/.12
OATS/-.12
XMSR/-.65

Splits
None of note.

Economic Data
Preliminary 3Q Non-farm Productivity estimated up 1.5% versus a 2.5% gain in 2Q.
Preliminary 3Q Labor Costs estimated up 2.4% versus a 1.8% rise in 2Q.
Initial Jobless Claims for last week are estimated at 340K versus 350K the prior week.
Continuing Claims are estimated at 2805K versus 2823K prior.

Recommendations
Goldman Sachs reiterated Outperform on CAT, SYMC, CVD, STZ, IR, BSX, GDT, MDT, AAP, RRI, BAC, FSH and Underperform on EW, UNM, DUK, DE, NAV.

Late-Night News
Asian indices are mixed as optimism over U.S. gains is being offset by today's rise in energy prices. Companies are becoming more wary about their tax affairs amid an increased focus on corporate governance in the post-Enron era, the Financial Times reported. China needs to raise interest rates further to slow the economy as they are still negative in real terms, China Securities Journal reported. General Electric won a court ruling in a dispute over federal income taxes, the Wall Street Journal reported. Managed-care company payments to physicians will rise by 4% next year while payments for outpatient hospital treatment will increase by 3.3% because of inflation, the Wall Street Journal reported.

Late-Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated -.12%.
NASDAQ 100 indicated -.20%

BOTTOM LINE: I expect U.S. equities to open mixed in the morning as the major indices consolidate recent gains and traders anticipate Friday's jobs report. The Portfolio is at its highs for the year and is 125% net long heading into tomorrow.

Wednesday Close

S&P 500 1,143.20 +1.12%
NASDAQ 2,004.33 +.98%

Leading Sectors
HMOs +5.55%
Biotech +3.35%
Defense +3.17%

Lagging Sectors
Semis -1.0%
Broadcasting -1.04%
Airlines -1.48%

Other
Crude Oil 50.91 +.06%
Natural Gas 8.82 +.78%
Gold 427.70 +.54%
Base Metals 114.83 -1.10%
U.S. Dollar 84.70 -.90%
10-Yr. T-note Yield 4.07% +.67%
VIX 14.04 -13.23%
Put/Call .87 +16.0%
NYSE Arms .73 -35.96%

After-hours Movers
PENN +12.2% after agreeing to purchase Argosy Gaming for $1.4 billion in cash to create the third-largest U.S. operator of gambling properties. ARGY +12.3%.
TALK +14.9% after beating 3Q estimates and raising 4Q guidance substantially.
QCOM -4.94% after meeting 4Q estimates and lowering 05 outlook.
DITC -30.5% after lowering 2Q/3Q guidance.
DIGE -24.8% after missing 1Q estimates and lowering 2Q/05 outlooks.
ADRX -19.3% after missing 3Q estimates.
BOBJ -16.7% after meeting 3Q estimates and lowering 4Q outlook.
AUDC -8.6% after saying it intends to offer $100 million aggregate principal amount of Senior Convertible Notes due 2024.

Recommendations
Goldman Sachs reiterated Outperform on NFX and PG.

After-hours News
U.S. stocks finished higher today on optimism over President Bush's victory, improving sentiment, better economic reports and short-covering. After the close, the California Public Employees' Retirement System asked chief executive officers of Fortune 100 companies to disclose whether they have any financial stake in businesses that provide service to their companies, CNBC said. President Bush's re-election may force French and German leaders who opposed the war in Iraq to try to patch up strained relations with the U.S., officials and scholars from Stockholm to Berlins said. California voters overturned a law that would have required businesses to pay for their workers' health insurance, a victory for retailers and restaurateurs such as Wal-Mart Stores and McDonald's, Bloomberg reported. News Corp. said fiscal first-quarter profit rose 27%, in part because advertising sales increases at its cable-tv networks such as Fox News Channel, Bloomberg said. Electronic Data Systems postponed the release of third-quarter results a second time as it reviews the value of assets related to a money-losing U.S. Navy contract, Bloomberg reported. Shares of W.R. Grace, USG Corp. and other companies facing claims for asbestos-related injuries surged on optimism that Republican victories in U.S. elections improved prospects for creation of a fund to end the lawsuits, Bloomberg said. Toyota, Honda and Nissan, Japan's biggest automakers, led U.S. sales gains in October and propelled Asia-based brands to a market share record on demand for their newest cars and light trucks, Bloomberg reported. Shares of Diebold, whose electronic-voting machines were criticized as vulnerable to hacking and breakdowns, rose after computerized ballots showed few signs of trouble in yesterday's U.S. presidential election, Bloomberg said. U.S. service industries expanded in October at the fastest pace in three months and more companies said they were hiring, evidence the economy is strengthening, Bloomberg reported. Qualcomm said fourth-quarter net income rose amid growing demand for handsets that play games, music and deliver e-mail, Bloomberg said. General Electric's NBC last night drew more viewers with its coverage of the U.S. presidential election than other broadcast networks. On cable tv, Fox News Channel drew a substantially bigger audience than CNN, Bloomberg reported. Constellation Brands will acquire Robert Mondavi for a sweetened offer of $1.03 billion in cash, ending any plans to keep the company in the Mondavi family, Bloomberg said. Palestinian leader Arafat was taken to an intensive care unit at the hospital in Paris where he is undergoing treatment, Agence France-Presse reported. Hamid Karzai's victory in Afghanistan's first direct presidential election is a "milestone" toward democracy in the country, the U.S. State Department said.

BOTTOM LINE: The Portfolio finished higher today on strength in my healthcare, biotech and internet longs. I took profits in a few wireless longs in the afternoon and added some Indian ADR longs, leaving the Portfolio with 125% net long market exposure. One of my new longs is WIT and I am using a $20.95 stop-loss on this position. The tone of the market was good today as most stocks rose and volume increased. Technology stocks underperformed as investors rotated into healthcare-related companies on the belief that a President Bush victory was positive for the sector. I believe tech's underperformance is a short-term phenomenon as this sector should benefit from the accelerating economic growth I foresee. Measures of investor anxiety fell today and will likely hit new intermediate-term lows over the next several months on diminishing domestic terrorism fears and rising stock prices.

*Alert*

There will not be a mid-day update due to a scheduling conflict. The Wednesday close will appear at its regular time. The Portfolio is still 125% net long and substantially higher on the day.

Wednesday Watch

Earnings of Note
Company/Estimate
EL/.37
EDS/.08
FOX/.37
IACI/.21
QCOM/.29
SONS/.02
TWX/.14

Splits
None of note.

Economic Data
Factory Orders for September are estimated to rise .4% versus a .1% decline in September.
ISM Non-Manufacturing for October estimated at 58.0 versus 56.7 in September.
Total Vehicle Sales for October estimated at 16.5M versus 17.5M in September.
Domestic Vehicle Sales for October estimated at 13.5M versus 14.3M in September.

Recommendations
Goldman Sachs reiterated Outperform on VZ, IR, AMLN, CZN, AG and EPD. Goldman reiterated Underperform on PPS, HCC and VICL.

Late-Night News
Asian indices are higher on optimism over President Bush's apparent victory and the prospects for accelerating world economic growth. Royal Philips Electronics, Europe's biggest consumer-electronics maker, forecast sales derived from China will reach $15 billion in 2007, double the level in 2002, the Shanghai Daily said. Microsoft has won a $919 million contract to put its software on U.K. National Health Service computers, the London-based Times reported. The California Public Employees' Retirement System has invested about $100 million in Indian stocks since April, the Financial Express reported. China and the 10 members of the Association of Southeast Asian Nations will begin forming a free-trade zone next year, the Xinhua News Agency reported. Saudi Arabia is boosting purchases of oil-drilling equipment to tap new reserves and meet rising global demand for oil, the Wall Street Journal reported. California voters approved a plan to sell $3 billion in state-backed municipal bonds to pay for stem cell research, the AP reported. Switzerland signed agreements with the European Union last week which will allow it to keep its banking confidentiality rules, the Wall Street Journal reported. American Intl. Group would have its books examined by an independent monitor under a proposal from the SEC, the NY Times reported. Colorado voters rejected a ballot measure that would have changed the state's winner-takes-all system for awarding its 9 electoral votes to one that allocates them in proportion to the popular vote, CNN reported. The Republican Party retained control of the U.S. Senate by picking up seats in North Carolina, South Carolina and Georgia, Bloomberg reported. Republican beat four incumbent Democrats in Texas and picked up the seat of a retiring Democratic lawmaker in Kentucky to retain control of the U.S. House of Representatives, Bloomberg reported. U.S. stock futures and the dollar are soaring as President Bush appears poised for re-election, Bloomberg said.

Late-Night Trading
Asian Indices are +1.0% to +1.75% on average.
S&P 500 indicated +1.27%.
NASDAQ 100 indicated +1.77%

BOTTOM LINE: I expect U.S. equities to open sharply higher in the morning on optimism over an end to one of the most negative elections in U.S. history, plummeting domestic terrorism fears, the prospects for accelerating economic growth, short-covering and bargain hunting. At this hour, President Bush has not officially won re-election, however barring some unforeseen circumstance this should occur shortly. Senator Kerry needed to win Ohio for any chance at the Presidency. Ohio is currently very close, but based on my calculations it would be virtually impossible to close the gap of 105,000 given the tendencies of the counties that are still unreported. Fox News and NBC have already called Ohio for President Bush. By tomorrow, it should be apparent that the President succeeded in his bid for re-election.