Thursday, June 10, 2004

Mid-day Update

S&P 500 1,33.87 +.23%
NASDAQ 1,991.90 +.06%

Leading Sectors
Oil Service +1.37%
Energy +1.29%
Iron/Steel +1.20%

Lagging Sectors
Nanotech -1.20%
Biotech -1.31%
Airlines -3.22%

Crude Oil 38.30 +1.97%
Natural Gas 6.18 +1.61%
Gold 387.50 +.60%
Base Metals 104.09 -.72%
U.S. Dollar 89.18 -.62%
10-Yr. T-note Yield 4.82% +.29%
VIX 15.01 -2.47%
Put/Call 1.13 +26.97%
NYSE Arms .86 -27.73%

Market Movers
ASKJ -6.61% on continued weakness after saying it bought Tukaroo for an undisclosed price.
DDS +13.2% on speculation that it may be acquired by FD and Bank of America upgrade to Neutral.
ACTL -11.68% after lowering 2Q estimates.
ALOG -10.39% after missing 3Q estimates.
MATK -3.49% after missing 2Q estimates lowering guidance.

Economic Data
Import Price Index for May rose 1.6% versus expectations of a .8% rise and a .2% rise in April.
Initial Jobless Claims for last week were 352K versus expectations of 335K and 340K prior week.
Continuing Claims were 2881K versus expectations of 2972K and 2987K prior.

Goldman Sachs reiterated Outperform on BAX, XRX, IGT, STN, BSX, FD, CIT and AMGN. Goldman still positive on cell-tower stocks, favorite is AMT. Goldman said managements of INTC, SNDK, ALTR, AMAT and MXIM are showing more optimism regarding the length of the current semi cycle. Goldman reiterated Underperform on MAY and HRB. Goldman reiterated positive stance on gold, sees 21% upside to XAU near-term, favorites are NEM and PDG. City SmithBarney upgraded EOG to Buy, target $63. Citi reiterated Sell on UST, target $28.00. Citi reiterated Buy on MNST, target $29. Citi reiterated Buy on MATK, target $90. Citi reiterated Buy on FE, target $43. Citi reiterated Buy on RDWR, target $25. BJS, ESV, NBR, NE, SII, SLB raised to Buy at UBS. ALL raised to Overweight at Morgan Stanley, target $53. CYH rated Outperform at Thomas Weisel. EXPD cut to Underweight at Morgan Stanley. NUE raised to Overweight at Prudential, target $50. STA raised to Buy at Bank of America, target $46. GVHR rated Outperform at CSFB, target $33. COST raised to Buy at Merrill Lynch, target $50. ACE rated Underweight at Lehman, target $40. INTX rated Buy at Deutsche Bank, target $26.

Mid-day News
U.S. stocks are modestly higher mid-day on strength in commodity-related shares as a higher-than expected inflation report and rising oil prices are sending those shares higher. Iraqi Prime Minister Allawi said the government would follow the interim constitution the Iraqi Governing Council approved until elections are held next year to appease Kurdish leaders, the NY Times reported. Alzheimer's disease is one of the illnesses least likely to be cured by expanded human embryonic stem cell research, even though support for such study increased following Reagan's death, the Washington Post reported. China National Petroleum plans to buy 1 million tons of pipes in the next 2 years for building a natural gas pipeline, the Tex Report said. Massachusetts Governor Romney's proposal to cut the state's income tax rate to 5% may generate thousands of jobs and boost investment, the Boston Herald said. CNN will hire an executive to overhaul prime time programming, which has trailed Fox News badly in ratings for almost 2 years, the NY Post said. Iraq is ready to re-sell oil to Jordan and revive talks on building a $450 million oil pipeline, al-Rai newspaper reported. Kmart Holding Chairman Lampert may turn Kmart into an investment company as Warren Buffett did with Berkshire Hathaway, the NY Daily News said. FedEx said it probably beat analysts' expectations for the fourth quarter, Bloomberg reported. World oil demand this year will rise the most since 1980 as economic growth leads to higher-than-expected use in Brazil, India, China and the U.S., the IEA said. Iraq's Prime Minister Allawi said those who attack the country's power grid and oil pipelines are "traitors" and "not freedom fighters," and he called on Iraqis to defeat the saboteurs, Bloomberg reported.

BOTTOM LINE: The Portfolio is unchanged today as my longs and shorts are offsetting each other. I took profits in a couple of gaming longs and added a few internet shorts this morning, leaving the Portfolio with 25% net short market exposure. One of my new shorts is YHOO and I am using a $32.50 stop-loss on the position. I expect stocks to fall modestly into the afternoon on concerns over weekend violence in the middle-east, rising oil prices and increasing interest rates.

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