Tuesday, June 15, 2004

Mid-day Update

S&P 500 1,125.12 +.95%
NASDAQ 1,969.24 +1.77%

Leading Sectors
Iron/Steel +3.40%
Oil Service +2.95%
Computer Boxmakers +2.28%

Lagging Sectors
Insurance +.25%
Broadcasting +.22%
Hospitals +.22%

Crude Oil 37.50 -1.0%
Natural Gas 6.32 +1.14%
Gold 389.00 +1.25%
Base Metals 104.94 +1.16%
U.S. Dollar 89.16 -.85%
10-Yr. T-note Yield 4.69% -3.61%
VIX 14.88 -7.41%
Put/Call .70 -51.05%
NYSE Arms .75 -39.52%

Market Movers
SYMC -3.77% after MSFT said it will sell a separate program to protect customers' computers from viruses, competing with SYMC.
RHAT -9.14% after meeting 1Q estimates, multiple downgrades and announcing resignation of CFO.
AFFX +12.58% after raising 04 forecast.
FDS +7.96% after meeting 3Q estimates and raising 4Q forecast.
TSG +11.53% after raising 2Q estimates.
NUE +4.14% after substantially boosting 2Q estimates.
CTSH +6.23% after Citi SmithBarney said project pricing stabilized.
HGR -8.53%(halted) after a news report claimed it may have improperly booked sales by filling out fake prescriptions.
AD -6.56% after announcing resignation of CEO and downgrade by AG Edwards to Hold.

Economic Data
Consumer Price Index for May rose .6% versus expectations of a .5% rise and a .2% increase in April.
CPI Ex Food & Energy for May rose .2% versus expectations of .2% and a .3% rise in April.
Business Inventories for April rose .5% versus expectations of .4% and a .7% rise in March.
Empire Manufacturing for June came in at 30.17 versus expectations of 30.5 and a reading of 30.21 in May.
Preliminary U. of Mich. Consumer Confidence for June came in at 95.2 versus expectations of 90.8 and a reading of 90.2 in May.

Goldman Sachs reiterated Outperform on DIS, KO, KRB, CLX, NUE, AET, AMGN and MSFT. Goldman reiterated Underperform on TSG. Citi SmithBarney likes semi-equipment stocks, favorites are LRCX, WFR and DPMI. Citi reiterated Sell on FLSH, target $15. Citi reiterated Buy on VRTSE, target $34. Citi reiterated Buy on JNPR, target $32.50. Citi reiterated Sell on STX, target $10. QLTI raised to Buy at UBS, target $21.50. MAR raised to Buy at Deutsche Bank, target $61. IMDC raised to Buy at Oppenheimer. RHAT raised to Outperform at CSFB, target $25.

Mid-day News
U.S. stocks are rising mid-day on falling interest rates, strong consumer confidence and a fall in a core inflation reading. Yahoo! is expanding the amount of free storage for its e-mail customers in an effort to compete with Google, the NY Times said. Coca-Cola's Asian president said the new C2 cola is selling well after its Japanese introduction, the Wall Street Journal reported. Louisiana-Pacific CEO Suwyn told CNBC that the company is considering a stock buyback, Bloomberg reported. Enron manipulated energy markets and overcharged customers in western U.S. states during the 2000-2001 energy crisis by about $1.1 billion, the AP reported. 30% of U.S. employers plan to add workers in the third quarter, the most since the stock market bubble burst in 2000, according to a Manpower survey. A recent survey by the World Wealth report shows that 2.27 million Americans are now millionaires, the most ever. The survey also said 1 out of every 130 Americans has more than $1 million, even excluding home equity, Bloomberg said. Nucor, the biggest U.S. maker of steel from recycled metal, raised its second-quarter profit forecast because of growing demand in the U.S. and overseas, Bloomberg reported. Israeli Prime Minister Sharon won't be indicted on charges of bribery, Israel's Attorney General Mazuz said. The AARP may support a bill that enables American to import drugs from Canada, where government price controls keep prescription costs lower, Bloomberg reported. The U. of Mich.'s preliminary reading on consumer sentiment in June rose to 95.2, substantially higher than forecasts, as the addition of 1.2 million jobs this year, an improving situation in Iraq, rising incomes and falling gasoline prices is boosting the outlook for most Americans. An inflation report today showed the core CPI rose just .2%, below expectations, propelling government bonds to their best gains in over three months.

BOTTOM LINE: The Portfolio is down today as my tech shorts are rising more than my industrial and basic material longs. I covered a number of retail and homebuilding shorts this morning as they hit stop-losses and added a few technology and financial longs, bringing the Portfolio's market exposure to 50% net long. One of my new longs is CME and I am using a $123.50 stop-loss on this new position. While I correctly anticipated that the consumer sentiment and CPI readings would exceed expectations, I incorrectly judged the extent to which investors were focused on the CPI's core rate. Today's significant fall in interest rates sets the stage for what I believe will be a meaningful move higher for U.S. stocks beginning in the next month. Long-term investors should use any weakness over the next few weeks to add to favorite positions.

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