Thursday Watch

Earnings of Note
Company/Estimate
FDX/1.27
ADBE/.42
APOL/.57
DRI/.23
CTAS/.44
CCL/.31
GS/2.32
KBH/4.13
NKE/.86
PLMO/.53
ZQK/.40
TTWO/1.55
TEK/.32

Splits
LCAV 3-for-2

Economic Data
Current Account Balance for 3Q estimated at -$170.6B versus -$166.2B in 2Q.
Housing Starts for November estimated at 1980K versus 2027K in October.
Building Permits for November estimated at 2000K versus 2018K in October.
Initial Jobless Claims for last week estimated at 342K versus 357K the prior week.
Continuing Claims estimated at N/A versus 2796K prior.
Philadelphia Fed. for December estimated at 20.5 versus 20.7 in November.
Minutes of Nov. 10 FOMC Meeting.

Recommendations
Goldman Sachs reiterated Outperform on BBBY, AMGN, IP and Underperform on AZR, HMT, VTS. Banc of America upgraded BIIB to Buy.

Late-Night News
Asian indices are quietly higher, led by Korean and Australian shares. Carlyle Group, a U.S. buyout fund, will acquire a 25% stake in China Pacific Life Insurance, the nation's third-biggest life insurer, for up to $400 million, in the biggest overseas private-equity purchase in China, the Financial Times reported. China's Supreme People's Court will issue new rules making piracy and counterfeiting of software and other goods a more severe criminal offense, stepping up the nation's crackdown on bootlegged intellectual property, China Daily reported. Isuzu Motors, Japan's largest truckmaker, is in talks with GM to get more steel as a worldwide shortage of the material crimps automakers, the Sankei newspaper said. Samsung said it expects to increase mobile phone sale by about 16% next year to more than 100 million units, Korea Economic Daily reported. Latin America's economy will grow by 5.5% this year, the fastest in 24 years, the Financial Times reported. Fannie Mae, the biggest source of money for U.S. home mortgages, failed to comply with accounting rules for financial contracts designed to protect against swings in interest rates, the SEC said. Johnson & Johnson agreed to acquire Guidant for $25.4 billion, adding electrical devices for treating heart disease to a lineup of thousands of health products ranging from Band-Aids to cardiac stents, Bloomberg reported.

Late-Night Trading
Asian Indices are +.25%. to +.50% on average.
S&P 500 indicated +.02%.
NASDAQ 100 indicated -.06%

BOTTOM LINE: I expect U.S. equities to open modestly higher on better-than-expected economic/earnings reports, short-covering and merger activity. The Portfolio is 125% net long heading into tomorrow.

Monday Close

S&P 500 1,205.72 +.19%
NASDAQ 2,162.55 +.13%

Leading Sectors
Homebuilders +3.38%
Iron/Steel +2.67%
Disk Drives +1.78%

Lagging Sectors
Wireless -.44%
Airlines -.49%
Telecom -1.16%

Other
Crude Oil 44.53 +.77%
Natural Gas 7.22 -.15%
Gold 443.10 +.16%
Base Metals 117.59 +1.29%
U.S. Dollar 81.65 +.02%
10-Yr. T-note Yield 4.07% +.09%.
VIX 12.35 -2.99%
Put/Call .61 -20.78%
NYSE Arms 1.03 +18.39%

After-hours Movers

Recommendations

After-hours News

BOTTOM LINE: The Portfolio finished higher today on gains in my internet, homebuilding, semi and healthcare longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. Once again, the tone of the market improved throughout the day as volume increased and the major indices closed near their highs. Today's mild gains should be considered a win for the bulls as the US dollar fell and energy rose. As well, it is a positive to see long-term rates decline again even as cyclicals and small-caps outperformed.

Mid-day Report

S&P 500 1,202.09 -.11%
NASDAQ 2,156.79 -.14%

Leading Sectors
Homebuilders +2.52%
Iron/Steel +1.94%
Disk Drives +1.34%

Lagging Sectors
Biotech -.40%
Airlines -.73%
Telecom -.99%

Other
Crude Oil 43.80 +4.38%
Natural Gas 7.32 unch.
Gold 442.50 +1.19%
Base Metals 117.08 +.85%
U.S. Dollar 81.49 -1.01%
10-Yr. T-note Yield 4.08% -.93%
VIX 12.59 -1.10%
Put/Call .62 -19.48%
NYSE Arms 1.04 +19.54%

Market Movers
LVS +55.2% on strong demand for IPO.
RIMM -4.2% on continuing worries over yesterday's patent ruling.
LEN +10.1% after beating 4Q estimates and raising 05 guidance.
MSTR +8.2% on rebound after yesterday's fall related to CFO resignation.
SUN +4.2% on Prudential upgrade to Overweight.
FS +4.7% on positive comments from Goldman Sachs.
BBY +5.6% after beating 3Q estimates and raising 4Q outlook.
BMET -6.9% on disappointing 2Q report.
JRCC -7.0% on continuing worries over recent 3Q report.
JMDT -9.64% on NXTL/FON merger news.
PLMO -3.45% on profit-taking and Lehman downgrade to Equal Weight.
*Homebuilders up across the board on falling long-term rates and LEN report.

Economic Data
Empire Manufacturing for December rose to 29.93 versus estimates of 20.0 and a reading of 18.86 in November.

Recommendations
-Goldman Sachs reiterated Outperform on SYMC, BBY and KRB.
-Citi SmithBarney upgraded DD to Buy, target $57. Citi upgraded LZ to Buy, target $42. Citi reiterated Buy on GE, target $44. Citi reiterated Buy on SCH, target $14.50. Citi reiterated Buy on SLM, target $61. Citi reiterated Sell on FCEL, target $7. Citi reiterated Buy on NT, target $5. Citi reiterated Buy on BNI, target $50.50. Citi reiterated Buy on VRTS, target $33.
-Banc of America rated CENT Buy, target $44.
-UBS rated NAT Buy, target $42. UBS rated ATB Buy, target $24. UBS raised WEN to Buy, target $44.
-Morgan Stanley cut RAD to Underweight.
-Prudential raised SUN to Overweight, target $73. Pru cut VLO to Underweight, target $41. Pru raised MRO to Overweight, target $42. Pru cut PCO to Underweight, target $42.
-Raymond James rated ASPT Buy, target $15. RJF raised MRK to Strong Buy, target $38.50.

Mid-day News
U.S. stocks are modestly lower mid-day as worries over a bounce in oil prices and a decline in the US dollar more than offset declining interest rates and strong economic/earnings reports. U.S. hedge funds' returns are dwindling as more and more funds chase the same investment opportunities, the Wall Street Journal reported. Ali Hassan al-Majid, known as "Chemical Ali" because of his role in gas attacks on the Kurds, will become the first former aide of deposed Iraqi dictator Saddam Hussein to stand trial next week, Agence France-Presse reported. Palestinian public tv has been airing less anti-Israeli rhetoric, the NY Times reported. Charles Schwab CFO Dodds said the company may be able to beat a fourth-quarter earnings forecast by 10-20%, Dow Jones reported. Crude oil prices are expected to trade at $37 to $39/bbl. next year, Kyodo News reported, citing Japan's Institute of Energy Economics. Career Education Corp. may lose the right to operate its schools in California, the Financial Times reported. EchoStar Communications may soon start offering high-definition tv and high-speed Internet services using a new satellite to be launched this week, the Rocky Mountain News of Denver reported. Google can keep selling ads prompted by searches using trademarked company names, the AP reported, citing a federal judge in a case between Geico and Google. OAO Yukos said it sought Chapter 11 bankruptcy protection in the U.S. and requested an emergency court hearing to stop the government's auction of its biggest unit, Bloomberg reported. Russia is committed to a market economy and foreign investment, Finance Minister Kudrin said. Best Buy, the world's largest electronics retailer, said third-quarter earnings rose as it limited holiday discounts and sold more digital televisions, cameras and MP3 players, Bloomberg reported. Manufacturing in New York state expanded more than forecast this month as more factories reported rising orders, sales and increased employment, Bloomberg said. U.S. communications regulators approved a plan to foster high-speed Internet access aboard airplanes, Bloomberg said. The dollar fell the most in two months against the yen on a report showing purchases of assets in the U.S. increased in October at the slowest pace in a year, Bloomberg said. AT&T, MCI and other U.S. telephone companies that lease competitors' networks to sell local service will lose discount rates in early 2006, regulators said. Crude oil had its biggest gain in six months after the government reported a decline in U.S. heating-oil inventories and below-normal temperatures boosted demand, Bloomberg reported. Sprint agreed to buy Nextel for about $35 billion in a transaction that would leave three companies in control of 70% of the US mobile-telephone market, Bloomberg reported.

Bottom Line: The Portfolio is higher mid-day on gains in my semi, internet and homebuilding longs. I have not traded today and the Portfolio is still 125% net long. The underlying tone of the market is mildly positive today, notwithstanding today's small losses in the major indices. The advance/decline line is slightly higher and many leaders are higher. It is also a positive to see interest rates lower again even with a decline in the dollar on worries over foreign demand for US treasuries. As well, the bounce in energy prices isn't resulting in any significant selling of equities. Oil will likely approach $45-$47/bbl. in the near-term before heading to $35/bbl. over the next few months. I expect US stocks to rise modestly into the close on short-covering, strong economic data, falling interest rates, good earnings reports and merger optimism.

Wednesday Watch

Earnings of Note
Company/Estimate
BBBY/.39
BBY/.44
BMET/.38
MLHR/.23
LEH/1.69
LEN/2.21
SCHL/1.76
WGO/.57
VTS/.18

Splits
None of note.

Economic Data
Empire Manufacturing for December estimated at 20.0 versus 19.76 in November.
NAHB Housing Market Index for December estimated at 70 versus 71 in November.

Recommendations
Goldman Sachs reiterated Outperform on EBAY, FS, GE, MDT, COH and Underperform on CR.

Late-Night News
Asian indices are higher as exporters in the region gained on optimism over sales to the US. Abby Joseph Cohen, chief investment strategist for Goldman Sachs, said she expects 2005 economic growth "will be good," averaging about 3.5%, CNBC reported. Wal-Mart declined to comment on a report that it may pull out of the bidding for Japan's Daiei, Bloomberg said. North Korea would consider any decision by Japan to impose economic sanctions against it as a "declaration of war," the communist nation's Foreign Ministry said. Sprint is close to an agreement to buy Nextel for more than $35 billion, doubling its customers, Bloomberg reported.

Late-Night Trading
Asian Indices are +.50%. to +1.25% on average.
S&P 500 indicated -.07%.
NASDAQ 100 indicated unch.

BOTTOM LINE: I expect U.S. equities to open modestly higher on strong earnings reports, economic data, merger speculation and gains in Asia. The Portfolio is 125% net long heading into tomorrow.

Tuesday Close

S&P 500 1,203.38 +.39%
NASDAQ 2,159.84 +.53%

Leading Sectors
Broadcasting +2.69%
Oil Service +1.89%
Semis +1.86%

Lagging Sectors
Software -.39%
Wireless -.47%
Networking -1.18%

Other
Crude Oil 41.91 +.22%
Natural Gas 7.29 -.52%
Gold 436.80 -.11%
Base Metals 116.09 +.37%
U.S. Dollar 82.32 +.27%
10-Yr. T-note Yield 4.12% -.56%.
VIX 12.73 +1.52%
Put/Call .77 +8.45%
NYSE Arms .87 +20.83%

After-hours Movers
BBI +5.33% after billionaire financier Icahn boosted his stake in Hollywood Entertainment to 9.54% and said he supports Blockbuster's bid for it.
ADCT +10.89% after beating 4Q estimates substantially.
MANC +5.0% on continuing optimism over 1Q report.
ABGX -5.7% after announcing it intends to sell approximately $150 million principal amount of its Convertible Senior Notes through a private placement.

Recommendations
Goldman Sachs reiterated Outperform on RIMM. Goldman cut WTW to Underperform .

After-hours News
U.S. stocks finished modestly higher today as merger speculation increased, long-term interest rates fell and the US dollar rallied. After the close, Russian policies are damaging the economy and the achievements of its rapid economic growth, the Financial Times reported. Federal Reserve policy makers raised the benchmark U.S. interest rate a quarter point to 2.25% and restated a plan to carry out further increases at a "measured" pace to keep inflation in check, Bloomberg reported. The US dollar rose against the yen after the Fed indicated it will keep increasing interest rates as the economy extends an expansion that's outpacing growth in Japan, Bloomberg said. The Nasdaq has advanced 23% from its 2004 low on Aug. 12, bringing its gain for the year to 7.8%. The index has jumped 94% since Oct. 9, 2002, Bloomberg reported. MCI Inc., formerly known as WorldCom before filing the biggest US bankruptcy, can pay more than $165 million to some of the consultants, lawyers and other advisers who guided its reorganization, Bloomberg said. Berkshire Hathaway named Microsoft founder Bill Gates to its board of directors, Bloomberg reported. Las Vegas Sands, owner of the Venetian Casino Resort in Las Vegas and China's Sands Macau, raised $690 million in the biggest IPO by a U.S. gaming company, Bloomberg reported. China has set the inflation target for 2005 at 4%, Wen Wei Po reported. China's consumer prices rose 2.8% in November from a year earlier, Bloomberg said.

BOTTOM LINE: The Portfolio finished slightly higher today as gains in my internet, semi and semi-equipment longs more than offset losses in my Chinese ADR and software longs. I exited a software long in the afternoon as it hit my stop-loss and added a new internet long, thus leaving the Portfolio 125% net long. I added MNST and I am using a $29.50 stop-loss on this position. The tone of the market improved throughout the day as volume increased and the advance/decline line finished near its daily high. It was also a positive to see long-term interest rates fall and the US dollar rally in the face of a disappointing trade report.

Mid-day Report

S&P 500 1,200.19 +.13%
NASDAQ 2,155.47 +.32%

Leading Sectors
Broadcasting +2.01%
Semis +1.63%
Oil Service +1.42%

Lagging Sectors
Wireless -.56%
Homebuilders -.56%
Networking -1.41%

Other
Crude Oil 41.40 +.95%
Natural Gas 7.29 +1.73%
Gold 437.40 -.66%
Base Metals 116.09 +.37%
U.S. Dollar 82.64 +.65%
10-Yr. T-note Yield 4.17% +1.31%
VIX 12.39 -1.20%
Put/Call .88 +23.94%
NYSE Arms .80 +11.11%

Market Movers
SYMC -12.1% after reports it is in advanced talks to acquire Veritas Software(VRTS) for at least $13 billion, the NY Times reported. VRTS +9.7%.
ERTS +5.6% after saying it entered into exclusive licensing relationships with the NFL and Players Inc. to develop, publish and distribute interactive football games. Competitor TTWO -5.3%.
RIMM +7.6% after a US appeals court orders new hearings in a patent infringement suit by a Virginia company.
ORNG +14.8% on strong demand for IPO.
MPS +13.2% after saying it had been selected as one of Raymond James' Analysts' Best Picks for 2005.
LNG +12.5% after completing an agreement to the rights to its Louisiana-based plant to ChevronTexaco.
PQE +11.2% after saying it will buy Voyager Expanded Learning for $360 million is cash and stock to expand its educational products.
SLAB +10.1% after Citi SmithBarney initiated it with Buy(Top Pick), target $46.
VRNT +7.4% on CIBC upgrade to Sector Outperform, target $43.
ADTN -14.7% after lowering 4Q estimates and multiple downgrades.
MSTR -10.4% after saying CFO is leaving and multiple downgrades.
AFCO -9.8% on Lehman Brothers downgrade to Equal Weight from Overweight.
JRCC -14.14% on disappointing 3Q results.
COO -7.1% on disappointing 3Q results.

Economic Data
Trade Balance for October was -$55.5B versus estimates of -$53.0B and -$50.9B in September.
Industrial Production for November rose .3% versus estimates of a .2% increase and a .6% gain in October.
Capacity Utilization for November fell to 77.6% versus estimates of 77.8% and 77.5% in October.

Recommendations
-Goldman Sachs reiterated Outperform on NKE, FON and SYMC.
-Citi SmithBarney said to Buy GIS, target $51.50. Citi said to Buy ACE and STA now, targets $49 and $43, respectively. Citi reiterated Sell on OSG, target $49. Citi reiterated Buy on CSC, target $68. Citi reiterated Buy AXP, target $57. Citi reiterated By on MAY, target $35. Citi reiterated Buy on ERTS, target $67.
-Banc of America rated NWS/A to Buy, target $21. BofA rated L Buy, target $13.25. BofA rated TWX Buy, target $23.
-UBS raised KYPH to Buy, target $30.
-CIBC raised VRNT to Sector Outperform, target $43. CIBC raised ISLE to Sector Outperform, target $30. CIBC raised HLT to Sector Outperform, target $25. CIBC raised PENN to Sector Outperform, target $59. CIBC raised HOT to Sector Outperform, target $61. CIBC cut PNK to Sector Underperform, target $16. CIBC cut ASCA to Sector Underperform, target $36. CIBC cut STN to Sector Underperform, target $55. CIBC cut KZL to Sector Underperform, target $56.
-Merrill Lynch said US dollar is undervalued and Euro is overvalued. Merrill also said US bonds will perform poorly in 2005.
-Thomas Weisel raised STE to Outperform, target $29.
-Legg Mason rated CBM Buy, target $31. Legg Mason rated FSH Buy, target $73.

Mid-day News
U.S. stocks are modestly higher mid-day on a rebound in the US dollar, merger speculation and a better-than-expected industrial production report. The US restaurant business is being pushed to reduce trans fats that are often used in processed foods to improve shelf-life, taste and texture, but which have been linked to health troubles, the Wall Street Journal reported. Mergers and acquisitions worth about $1.7 trillion worldwide have been announced so far this year, compared to $1.3 trillion for all of 2003, the Wall Street Journal reported. The Bush administration will urge Congress to overhaul air quality legislation early next year, the Washington Post reported. Bear Stearns is the subject of speculation on Wall Street over whether CEO Cayne will sell the company, the NY Times reported. Lucent and Nortel, the two main wireless network-equipment suppliers to Sprint, may benefit if Sprint merges with Nextel, the NY Times said, citing analyst Susan Kalla of FBR. Iraq next week will begin war crimes trials for leaders of the former regime of ousted dictator Saddam Hussein, the AP reported. Theme parks in North America boosted attendance by 4% this year, the first increase since the 2001 terrorist attacks, the LA Times reported. Companies are spending heavily on employee monitoring software, USA Today reported. Doctors might be able to identify patients with Alzheimer's disease by using a basic scratch-and-sniff test, Reuters reported. Boeing won a $928 million US contract to develop parts and systems for a site in Huntsville, AL, that will be part of a US anti-missile system from the Missile Defense Agency, Reuters reported. Mahmoud Abbas, the interim Palestinian leader and the front-runner to win Jan. 9 leadership elections, called for an end to the Palestinian armed uprising, saying it has been counterproductive, the AP reported. About 30% of companies in Massachusetts plan to hire in the first quarter of 05 compared with 20% a year earlier, according to Manpower. ChevronTexaco increased 2005 spending by 18% from this year to boost production amid record demand for oil and natural gas, Bloomberg said. Blockbuster will stop charging late fees to compete with Netflix, Bloomberg reported. Vodafone said it's not in talks with Verizon about mounting a bid for Sprint, Bloomberg said.

Bottom Line: The Portfolio is unchanged mid-day as strength in my semi and internet longs is offsetting weakness in my software and Chinese ADR longs. I have not traded today and the Portfolio is still 125% net long. The tone of the market is ok as more stocks are advancing than declining and volume is decent. It is a positive to see the US dollar rally on the trade report. The CRB is also falling again today even with the rise in energy prices. I expect US stocks to rise modestly into the close on merger optimism, short-covering and year-end repositioning.