Thursday Watch

Earnings of Note
Company/Estimate
ABS/.33
CMN/.28
DLM/.21
MBG/.88

Splits
None of note.

Economic Data
Initial Jobless Claims for last week estimated at 330K versus 323K the prior week.
Continuing Claims estimated at 2768K versus 2755K prior.
Factory Orders for October estimated to rise .2% versus a .4% decline in September.

Recommendations
Goldman Sachs reiterated Underperform on DE, EW, CMOS and PYX.

Late-Night News
Asian indices are higher on optimism over falling energy prices and exports to the U.S. Taiwan Semiconductor Manufacturing's customer orders will rebound in the first quarter on demand from graphics chip designers such as Nvidia Corp., the Commercial Times reported. General Motors is planning a joint venture with Yulon Motor to make vehicles in Taiwan, the Economic Daily News reported. Halliburton may win the contract to oversee construction of the U.K. Ministry of Defense's two new Royal Navy aircraft carriers due to enter service in 2012 and 2015, the Independent said. India may attract as much as $4 billion more in the next two months from overseas funds investing in local stocks and bonds as economic expansion and a stronger rupee help boost their returns, the Business Standard reported. Nissan Motor and Toyota Motor stocks are rising in Asia after a report showed Asian automakers are headed for a record share of the U.S. auto market, after gaining on GM and Ford in November, Bloomberg reported. Ukraine's parliamentary groups are negotiating to choose a successor to Prime Minister Viktor Yanukovych after he lost a confidence vote prompted by the crisis arising from disputed presidential elections, Bloomberg said. Nissan Motor said it may cut production next year because of a lack of steel, the second time a shortage of the metal has interrupted production, Bloomberg reported. The US dollar will rebound, halting its 3.5% drop in the past month versus the yen, as the strength of the U.S. economy increases the appeal of its assets, said Zembei Mizoguchi, a former top Japanese currency policy maker, Bloomberg reported. UN Secretary-General Annan will not resign over the massive corruption relating to the Iraqi/UN Oil-for-Food program as called for by a U.S. senator, Xinhua News reported. Viacom Chairman and CEO Sumner Redstone said there is a "total disconnect" between the company's performance and the value of its shares, which have declined 20% this year, Bloomberg reported. President Bush may have to move faster to present his proposals for a revision of the U.S. tax code to Congress if he wants to get them approved, the Wall Street Journal reported.

Late-Night Trading
Asian Indices are +1.0%. to +1.5% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated +.09%

BOTTOM LINE: I expect U.S. equities to open mixed in the morning on a consolidation of today's gains. However, stocks will likely rise modestly into the afternoon on continuing optimism over falling energy prices, short-covering ahead of Intel's mid-quarter update and anticipation of another good jobs report. The Portfolio is 125% net long heading into tomorrow.

Wednesday Close

S&P 500 1,191.37 +1.50%
NASDAQ 2,138.23 +1.98%

Leading Sectors
Airlines +5.60%
Disk Drives +5.08%
Semis +3.83%

Lagging Sectors
Utilities -1.28%
Energy -2.28%
Oil Service -3.85%

Other
Crude Oil 45.60 +.24%
Natural Gas 7.44 +.42%
Gold 456.50 +.13%
Base Metals 120.79 +.03%
U.S. Dollar 81.56 -.32%
10-Yr. T-note Yield 4.36% +.32%
VIX 12.97 -2.04%
Put/Call .80 -8.05%
NYSE Arms .61 -38.38%

After-hours Movers
CMOS +9.3% after beating 4Q estimates and raising 1Q guidance.
ARO +5.4% after reporting better-than-expected November same-store-sales.
SBUX +3.0% after reporting 13% November same-store-sales, the fastest in 9 months.

Recommendations
Goldman Sachs reiterated Outperform on GDT, VZ and JTX.

After-hours News
U.S. stocks finished sharply higher today on a substantial decline in energy prices, strong economic reports and short-covering. After the close, the Massachusetts economy grew at an annual rate of 4.6% in October, the highest since February 2000, the Boston Globe reported. The chief executives of Esmark LLC and Olympic Steel, both of which process and distribute the metal, said they expect demand for steel will keep prices rising into next year, American Metal Market reported. Japan and officials from countries that share the euro have discussed possible joint action in the currency market if the yen and the euro continue to strengthen against the dollar, the Financial Times said. Eric Topol, the chairman of cardiology at the Cleveland Clinic, served on a board of a hedge fund that was short-selling Merck shares while he was criticizing the company's Vioxx drug, Fortune magazine reported. Crude oil tumbles more than $3, its biggest decline in three years, after a government report showing an increase in U.S. heating oil inventories spurred expectations of adequate supplies this winter, Bloomberg said. Disney said its board of directors raised the annual cash dividend by 14%, Bloomberg reported. Sales at U.S. Internet retailers jumped 36% last week as people used faster online connections to shop for holiday items on Thanksgiving Day, Bloomberg reported. Neiman Marcus said first-quarter earnings rose 14%, boosted by demand for designer handbag and lizard-skin shoes, Bloomberg said. Alliant Techsystems got an Army contract worth as much as $140 billion to develop a laser-guided mortar, defeating a protest by Lockheed Martin, Bloomberg reported. A John Singer Sargent painting sold today for $23.5 million, setting a record for the U.S. artist at auction, Bloomberg said.

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my internet, telecom equipment, semi, Chinese ADR and retail longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. The tone of the market was exceptional today as volume rose substantially, most sectors posted significant gains and the major US indices finished at their highs for the day. Moreover, the outsized decline in energy prices, combined with a slight drop in interest rates is also a big positive for equities. Shorts are likely seeing their substantial gains for the year wiped out in a very short period of time, which should lead to further short covering. As well, further declines in energy prices and better job prospects should boost consumer sentiment and spending into year-end which should also help propel shares higher.

Mid-day Report

S&P 500 1,187.39 +1.16%
NASDAQ 2,129.67 +1.57%

Leading Sectors
Disk Drives +3.99%
Airlines +3.74%
Semis +3.01%

Lagging Sectors
Utilities -1.20%
Energy -1.53%
Oil Service -3.30%

Other
Crude Oil 46.50 -5.35%
Natural Gas 7.48 -1.97%
Gold 456.50 +.71%
Base Metals 120.79 +.03%
U.S. Dollar 81.61 -.26%
10-Yr. T-note Yield 4.36% +.23%
VIX 12.89 -2.64%
Put/Call .80 -8.05%
NYSE Arms .66 -33.33%

Market Movers
OVTI +9.9% after beating 3Q estimates and raising 4Q outlook.
UCO -4.79% after Weatherford Intl. sold 4 million of its shares for $141.8 million.
CHS +13.2% after beating 3Q estimates.
GORX +102.7% after the FDA approved its Mucotrol medicine for the treatment of a side effect of chemotherapy and radiation.
CPRT +18.0% after better-than-expected 1Q estimates.
CI +8.5% after raising 04 and 05 guidance.
CTRP +11.7% after saying it signed a distribution agreement with Pegasus Solutions(PEGS) providing CTRP with direct access to inventory at nearly 60,000 hotels worldwide.
SYNA -7.1% after saying it intends to offer $100 million of Convertible Senior Subordinated Notes.
*Oil Services down across the board on falling energy prices.

Economic Data
Personal Income for October rose .6% versus estimates of a .5% rise and a .2% gain in September.
Personal Spending for October rose .7% versus estimates of a .4% gain and a .6% increase in September.
PCE Deflator(YoY) for October rose 2.4% versus estimates of a 2.4% increase and a 2.0% gain in September.
PCE Core(YoY) for October rose 1.5% versus estimates of a 1.4% increase and a rise of 1.5% in September.
Construction Spending for October came in unch. versus estimates of a .7% rise and a .1% gain in September.
ISM Manufacturing for November came in at 57.8 versus estimates of 57.0 and a reading of 56.8 in October.
ISM Prices Paid for November came in at 74.0 versus estimates of 75.3 and a reading of 78.5 in October.

Recommendations
-Goldman Sachs reiterated Outperform on BBY, SAP, BNS, JTX, PFE, NUE, X, AGN and IP. Goldman reiterated Underperform on CI and SAY.
-Banc of America cut PEG to Sell. BofA raised RKY to Buy, target $82.
-Citi SmithBarney sees near-term 10%+ trade in QLGC and ELX. Citi reiterated Buy on ATH, target $147. Citi reiterated Buy on MAN, target $56.
-Thomas Weisel rated IMCL Buy.
-Legg Mason rated TR Buy, target $36.
-JP Morgan rated MMR Overweight.
-Merrill Lynch downgraded IFX to Sell.

Mid-day News
U.S. stocks are sharply higher mid-day on optimism over strong economic reports and falling energy prices. EchoStar Communications and Vivendi Universal's Music Group are in talks to start a 24-hour music channel to rival MTV, the NY Post reported. Pfizer's benefit from increased sales of Celebrex and Bextra after the recall of Merck's Vioxx may be temporary because doctors are increasingly prescribing older drugs considered safer, the NY Times said. Whole Foods Market and other gourmet supermarkets plan to expand in NY City and nationwide as the market for specialty foods increases, the NY Times reported. Procter & Gamble's testosterone patch, meant to bolster post-menopausal women's sex drive, will be studied by a FDA panel tomorrow for approval amidst concerns about its clinical trial results and possible side effects, the Philadelphia Inquirer reported. Harvard Law School said yesterday it would reinstate a policy that bans military recruiters from the campus, the Boston Globe reported. Vought Aircraft Industries plans to open a $500 million plant in Charlston, SC, to build components for Boeing's new 7E7 jetliner, the Fort Worth Star-Telegram reported. Gilead Sciences' tenofovir drug, sold as Viread to treat HIV-infected adults, will be tested as a preventative treatment for AIDS in an international study later this month, the San Francisco Chronicle reported. 89% of the biggest U.S. law firms plans to raise their hourly billing rates next year, according to a new survey by the American Lawyer. IBM said it won more than $1 billion in new contracts as it completed the acquisition of two Danish businesses, Bloomberg said. Disney's ESPN network plans to branch into the mobile-phone business through the use of Sprint's network, Bloomberg reported. Nokia gained mobile-phone market share for a second straight quarter, helped by price cuts and new models, and Samsung overtook Motorola as the second-largest handset maker for the first time, Bloomberg said. Raytheon will increase its annual dividend by 10% to 88 cents and buy back as much as $700 million in stock, Bloomberg reported. Ukrainian Prime Minister Yanukovych lost a confidence vote in parliament and President Kuchma opened the door to new presidential candidates by demanding new elections after the disputed Nov. 21 vote, Bloomberg reported. U.S. home prices increased at the fastest pace in 25 years during the third quarter as the economy improved and low mortgage rates made financing more affordable, Bloomberg said. Crude oil fell more than $2/bbl. on a report showing that inventories of heating oil and other fuels rose more than expected as refineries operated at the highest rate since a hurricane hit the U.S. in September, Bloomberg reported. U.S. manufacturing strengthened in November, with growth accelerating for the first time in four months, as orders and employment picked up, the ISM survey found. U.S. consumer spending rose in October and a surge in hiring led to the biggest rise in incomes in five months, Bloomberg reported. Ford Motor said U.S. sale of cars and trucks fell 7.3% in November from a year earlier, while DaimlerChrysler said sales rose 4.4% and Nissan's sales soared 26%, Bloomberg said.

Bottom Line: The Portfolio is substantially higher mid-day on strength in my Internet, Chinese ADR, semi and telecom equipment longs. I added a few new longs this morning, bringing the Portfolio's market exposure to 125% net long. One of my new longs is MNST and I am using a $27.25 stop-loss on this position. The tone of the market is very good today on a strong advance/decline line and good volume. The next up-leg of the rally has likely begun. Falling energy prices and better employment prospects should propel the major indices through year-end. I continue to expect oil to fall to the $35-$40/bbl. range over the next few months. Intel's mid-quarter update after the close Thur. and Fri.'s jobs report should provide the catalysts for further strength to end the week. I expect U.S. stocks to trade mixed into the close on a consolidation of today's gains.

Wednesday Watch

Earnings of Note
Company/Estimate
CMVT/.07
DG/.25
SNPS/.03
NMG/A/1.45

Splits
SYMC 2-for-1
RYL 2-for1

Economic Data
Personal Income for October estimated to rise .5% versus a .2% gain in September.
Personal Spending for October estimated to rose .4% versus a .6% gain in September.
PCE Deflator (YoY) for October estimated up 2.4% versus a 2.0% rise in September.
Construction Spending for October estimated up .7% versus a 0.0% change in September.
ISM Manufacturing for November estimated at 57.0 versus 56.8 in October.
ISM Prices Paid for November estimated at 75.3 versus 78.5 in October.
Total Vehicle Sales for November estimated at 16.5M versus 17.0M in October.
Domestic Vehicle Sales for November estimated at 13.1M versus 13.2M in October.
Fed's Beige Book.

Recommendations
Goldman Sachs reiterated Outperform on PFE, AGN and JTX. Goldman reiterated Underperform on CI. Banc of America upgraded RKY to Buy.

Late-Night News
Asian indices are lower on concerns China's attempts to slow growth will lead to a hard landing in the region. China will probably set the nation's economic growth target for next year at 8%, Wen Wei Po reported. United Nations Secretary General Annan should resign because the UN failed to detect and stop abuses of the oil-for-food program by former Iraqi leader Saddam Hussein, Minnesota Senator Norm Coleman said in a column to be published in tomorrow's Wall Street Journal. Disney may say it will increase its dividend following high earnings and annual cash-flow growth to $2.9 billion, the Financial Times said. British tourists are choosing to holiday in the U.S. rather than Europe due to the weakness of the dollar against the euro, the Financial Times said. Investors, including California Public Employees' Retirement System and Morgan Stanley, helped India's benchmark stock index rise to a record close yesterday, betting the expansion of Asia's fourth-biggest economy will help companies such as Infosys and Wipro, Bloomberg reported. Rudolph Giuliani, New York's former mayor, is starting an investment bank, and as part of that his consulting firm, Giuliani Partners LLC, will buy Ernst & Young's investment-banking business, the Wall Street Journal reported.

Late-Night Trading
Asian Indices are -.75%. to -.25% on average.
S&P 500 indicated +.22%.
NASDAQ 100 indicated +.45%

BOTTOM LINE: I expect U.S. equities to open modestly higher, led by tech shares, on better economic reports and declining energy prices. However, stocks may weaken slightly later in the day on apprehension ahead of Intel's mid-quarter update after Thur.'s close and Friday's unemployment report. The Portfolio is 100% net long heading into tomorrow.

Tuesday Close

S&P 500 1,173.82 -.40%
NASDAQ 2,096.81 -.48%

Leading Sectors
Iron/Steel +.93%
HMOs +.93%
Hospitals +.78%

Lagging Sectors
Semis -1.40%
Utilities -1.43%
Retail -2.45%

Other
Crude Oil 48.98 -.31%
Natural Gas 7.60 -.26%
Gold 453.20 unch.
Base Metals 120.75 -.02%
U.S. Dollar 81.82 -.13%
10-Yr. T-note Yield 4.35% +.73%
VIX 13.24 -.45%
Put/Call .87 +16.0%
NYSE Arms .99 -3.88%

After-hours Movers
CPRT +5.05% after better-than-expected 1Q estimates.
CHS +6.03% after beating 3Q estimates.
OVTI +10.9% after beating 3Q estimates and raising 4Q outlook.
SYNA -4.7% after saying it intends to offer $100 million of Convertible Senior Subordinated Notes.
ADEX -4.6% after meeting 2Q estimates and lowering 3Q guidance.

Recommendations
Goldman Sachs reiterated Outperform on SBC.

After-hours News
U.S. stocks finished modestly lower today as fears over consumer spending more than offset other strong economic reports. After the close, NTT DoCoMo, Japan's largest mobile-phone operator, plans to start selling mobile phones from Nokia Oyj and Motorola next year, to reduce its reliance on local manufacturers, the Financial Times reported. Indiana Pacers players will face criminal charges for fighting with fans during a Nov. 19 game against the Detroit Pistons, the Detroit News reported. Ken Jennings, who won more money on a game show than anyone in history, lost on "Jeopardy" in the episode that airs today, ending a streak that lasted 74 days and earned him $2,520,700, King World said. Radioactive iodine released from a plutonium-producing plant run by General Electric and DuPont in Washington state in the 1940s and 1950s didn't lead to health problems decades later, a newly published study found. Cigna Corp. said 2004 earnings excluding some items probably would be $950 million to $975 million, higher than a forecast earlier this month as medical management improves, Bloomberg reported. Analog Devices said the U.S. SEC is conduction an inquiry into the company's granting of stock options to directors and officers in the past five years, Bloomberg said. Man Group Plc, the world's largest publicly traded hedge fund manager, may have its credit rating lowered because of the company's high level of borrowing and its funds' slumping performance, Moody's Investors Service said. NY State Comptroller Hevesi sued Merck over pension fund losses related to Vioxx, Bloomberg reported. LG.Philips LCD, the world's second-largest market of liquid crystal displays, said it plans to spend $5.1 billion building the world's largest liquid crystal display plant, Bloomberg said.

BOTTOM LINE: The Portfolio finished unchanged today as strength in my security, internet and telecom equipment longs offset weakness in my medical equipment, retail and wireless longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. I continue to view recent market action as healthy and necessary for another move higher before year-end. The major U.S. indices will likely continue their recent consolidation over the next couple of days and begin advancing on Friday's jobs report.

Mid-day Report

S&P 500 1,177.35 -.11%
NASDAQ 2,104.29 -.12%

Leading Sectors
Iron/Steel +1.36%
HMOs +.73%
Defense +.39%

Lagging Sectors
I-Banks -.90%
Broadcasting -.93%
Retail -2.18%

Other
Crude Oil 49.18 -1.17%
Natural Gas 7.49 -4.43%
Gold 452.50 -.72%
Base Metals 120.75 -.02%
U.S. Dollar 81.91 -.02%
10-Yr. T-note Yield 4.35% +.73%
VIX 13.09 -1.58%
Put/Call .87 +16.0%
NYSE Arms 1.0 -2.91%

Market Movers
TASR +7.6% on short-covering after 2-for-1 split.
PACT +23.0% after announcing it signed a partnership agreement to become a designated distributor of China Netcom(CN), and to distribute Netcom's XiaoLingTone/PHS mobile phone products, prepaid calling cards, wireless broadband and internet services.
RHAT +9.7% after Prudential upgrade to Overweight.
UNFI +8.2% after beating 1Q estimates and reiterated 05 guidance.
ELOS -19.0% after the FDA refused to review its VelaSmooth device for treating cellulite.
HOTT -11.8% after lowering 4Q guidance and multiple downgrades.
XING -12.9% after disappointing 9-months earnings report.

Economic Data
Preliminary 3Q GDP rose 3.9% versus estimates of 3.7% and a prior forecast of 3.7%.
Preliminary 3Q Personal Consumption rose 5.1% versus estimates of 4.7% and a prior forecast of 4.6%.
Preliminary 3Q Price Deflator rose 1.3% versus estimates of 1.3% and a prior estimate of 1.3%.
Consumer Confidence for November fell to 90.5 versus estimates of 96.0 and a reading of 92.9 in October.
Chicago Purchasing Manager for November was 65.2 versus estimates of 62.0 and a reading of 68.5 in October.

Recommendations
-Goldman Sachs reiterated Outperform on WAG. Goldman reiterated Underperform on ABY.
-Citi SmithBarney reiterated Buy on SHO, target $22. Citi reiterated Buy on INTC, target $25.50. Citi reiterated Sell on HOTT, target $14. Citi reiterated Buy on K, target $48.
-JP Morgan rated KEA Underweight. JP Morgan rated DTPI Overweight. AMT rated Overweight at JP Moran.
-Banc of America rated AMTD Sell, target $12.
-Legg Mason rated TSA Buy, target $37. AV rated Buy at Legg Mason, target $21.
-Prudential raised OSI to Overweight, target $41. Pru raised RHAT to Overweight, target $17.
-CSFB rated MMM Outperform, target $92.
-Merrill Lynch rated SHO Buy, target $21.
-Raymond James rated ANT Outperform, target $43.

Mid-day News
U.S. stocks are slightly lower mid-day on a continuing consolidation of recent gains. IBM and Sybase plan to collaborate to market an edition of Sybase's database software for IBM Servers that use the Linux operating system, the Wall Street Journal reported. Oragenics will likely say today it has received U.S. FDA approval to test bacteria that's intended to prevent tooth decay, the NY Times reported. Helicopter companies are benefiting from increased demand for medical airlifts and other commercial services, the NY Times reported. A U.S. appeals court ruled the government can't withhold federal funds from universities that bar military recruiters from campus, the Washington Post reported. Materials for making chemical blood agents and literature on how to produce a deadly form of anthrax were found at two houses in Fallujah, Iraq, last week, the Washington Times reported. Dallas Mavericks owner Mark Cuban says he plans to create a hedge fund managed by professional gamblers in which investors could wager on sporting events, the Dallas Morning News reported. Allergan's shares fell as much as 4.5% after the company said it was investigating whether injections of its Botox wrinkle treatment may have caused two people in Florida to become ill with botulism, Bloomberg reported. OAO Yukos Oil has lost financial stability and spent all its capital, Interfax said. German Chancellor Schroeder and Russian President Putin agreed during a telephone call that the result of any rerun of the disputed Ukrainian presidential election must be "strictly respected," Bloomberg reported. The U.S. economy grew at a 3.9% annual pace from July through September, faster than the government estimated last month, as consumer spending strengthened, Bloomberg said. Priceline.com and Lowestfare.com stopped selling retail airline tickets for Northwest Airlines as the companies disagree on distribution terms, Bloomberg said. Pfizer may be the first to produce a single medication designed to reduce "bad" cholesterol and elevate "good" cholesterol, Bloomberg reported. OAO Gazprom, Russia's state-run natural gas company, will bid for OAO Yukos' biggest unit and may buy other domestic producers to created an oil business rivaling that of Exxon Mobil within six years, Bloomberg reported. NAACP President Mfume said he is resigning from the civil rights group, Bloomberg said. Crude oil in NY is falling as warm temperatures and rising inventories eased concern that demand may outpace supplies of heating oil and natural gas, Bloomberg said. The employment index component of the Chicago Purchasing Manager report rose to a 16-year high, suggesting the manufacturing recovery is secure and will help drive economic growth, Bloomberg reported.

Bottom Line: The Portfolio is unchanged mid-day as strength in my security, telecom equipment and internet longs is being offset by weakness in my wireless, retail and medical equipment longs. I have not traded today and the Portfolio is still 100% net long. The major indices continue to consolidate recent gains in an orderly and healthy manner. I still expect one more substantial run higher over the next few weeks into year-end and plan to buy favorite longs aggressively on any near-term weakness. Friday's employment report should exceed expectations, thus boosting consumer confidence, and provide the catalyst for higher stock prices. I expect U.S. stocks to trade modestly higher into the close on declining energy prices.