Tuesday, November 30, 2004

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.

Tuesday Watch

Earnings of Note
Company/Estimate
CHS/.38
CPRT/.21
OVTI/.24
JTX/.19
SFD/.52

Splits
TASR 2-for-1

Economic Data
Preliminary 3Q GDP estimated to rise 3.7% versus a 3.3% increase in 2Q.
Preliminary 3Q Personal Consumption estimated to rise 4.7% versus a 1.6% increase in 2Q.
Preliminary 3Q GDP Price Deflator estimated to increase 1.3% versus a 3.2% rise in 2Q.
Consumer Confidence for November estimated to rise to 96.0 versus a reading of 92.8 in October.
Chicago Purchasing Manager for November estimated at 62.0 versus 68.5 in October.

Recommendations
Goldman Sachs reiterated Outperform on GOOG and EBAY. Goldman reiterated Underperform on BSC.

Late-Night News
Asian indices are higher, led by Korean shares. Global profit forecasts have been upgraded more in 2004 than at any time in the past 15 years, the London-based Times said, citing research by Citigroup. The world is facing a "cascade of proliferation" of nuclear weapons unless the existing system to prevent their spread is improved, the Financial Times said, citing a UN report. Bank of New York is negotiating with federal prosecutors to ward off a possible criminal indictment on charges it failed to report suspicious activity at one of its branches, the Wall Street Journal reported. Ukraine's standoff over who won the Nov. 21 presidential election mustn't provoke a breakup of the country, U.S. Secretary of State Powell told Leonid Kuchma, the outgoing Ukrainian president. The Ukrainian Supreme Court may give its ruling today on charges of fraud in the Nov. 21 presidential election, as the outgoing president said he is prepared to hold fresh elections, Bloomberg said.

Late-Night Trading
Asian Indices are unch. to +1.0% on average.
S&P 500 indicated unch.
NASDAQ 100 indicated +.13%

BOTTOM LINE: I expect U.S. equities to open higher on better-than-expected economic reports, lower energy prices, a stronger dollar, short-covering and more optimism. The Portfolio is 100% net long heading into tomorrow.

Monday, November 29, 2004

Monday Close

S&P 500 1,178.57 -.34%
NASDAQ 2,106.87 +.23%


Leading Sectors
Boxmakers +1.57%
HMOs +.84%
Wireless +.62%

Lagging Sectors
Oil Service -.98%
Retail -1.36%
Homebuilders -2.76%

Other
Crude Oil 49.65 -.22%
Natural Gas 7.84 unch.
Gold 455.40 -.09%
Base Metals 120.77 +.21%
U.S. Dollar 81.96 +.04%
10-Yr. T-note Yield 4.32% unch.
VIX 13.30 +3.99%
Put/Call .75 +8.70%
NYSE Arms 1.03 +15.73%

After-hours Movers
STGS +5.1% after saying it will be added to the S&P Small-cap 600 Index.
HOTT -8.3% after lowering 4Q estimates on disappointing November sales.

Recommendations
Goldman Sachs reiterated Outperform on DNA and ACN.

After-hours News
U.S. stocks finished mixed today as rising interest rates offset optimism over economic growth. After the close, Europe's population is expected to decline by 96 million between 2000 and 2050 despite projected immigration of 600,000 a year during the same period, the Financial Times said. The Arctic Ocean may have significant deposits of oil and gas in a ridge buried near the North Pole, the NY Times reported. Beijing city officials canceled a $3.5 million software order to Microsoft, bowing to complaints from domestic rivals, the Financial Times said. Perry Corp., an investment advisory firm, said it owns 26.6 million Mylan Labs shares and supports the company's acquisition of King Pharmaceuticals that billionaire financier Carl Icahn has tried to block, Bloomberg reported. Halliburton said a bankruptcy judge approved a $1.5 billion settlement of asbestos claims between two of its subsidiaries and insurers, Bloomberg said.

BOTTOM LINE: The Portfolio finished slightly lower today as losses in my Chinese ADR, retail and telecom equipment longs more than offset gains in my security, internet and Indian ADR longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The market improved modestly into the afternoon as most stocks rose and technology outperformed. I continue to expect another rally in the near-term on better-than-expected economic reports, a rally in the dollar and lower energy prices.

Mid-day Report

S&P 500 1,178.23 -.37%
NASDAQ 2,103.23 +.07%


Leading Sectors
Boxmakers +1.50%
HMOs +.69%
Wireless +.51%

Lagging Sectors
Retail -1.13%
Oil Service -1.42%
Homebuilders -2.71%

Other
Crude Oil 49.80 +.73%
Natural Gas 7.92 -8.32%
Gold 455.90 +.97%
Base Metals 120.77 +.21%
U.S. Dollar 81.84 +.07%
10-Yr. T-note Yield 4.33% +1.93%
VIX 13.35 +4.38%
Put/Call .73 +5.80%
NYSE Arms .99 +11.24%

Market Movers
AAPL +4.88% after UBS/Merrill raised estimates and target on strong weekend sales.
WMT -3.5% after lowering November sales estimates.
CAAS +102.5% after being selected to supply pumps to two companies, including General Motor's joint venture in China.
KCI +5.6% after Merrill added it to Focus List saying profit may rise 25% next year and 28% in 2006 as the maker of therapeutic beds benefits from its devices to treat wounds.
NGPS +12.5% on no news.
INFY +4.5% on no news.
OSTK +4.2% after saying traffic to its web site increased 31% y-o-y over the holiday weekend and Legg Mason reiterated Buy, target $78.
IPAR +12.5% after increasing 05 outlook.
PARL +12.3% on IPAR news.
GLNG -13.5% on disappointing 3Q report.
KMRT -4.4% on WMT news.
PHM -3.8% on higher interest rates.

Economic Data
None of note.

Recommendations
-Goldman Sachs reiterated Outperform on TPX, UNH and AVP. Goldman reiterated Underperform on TWMC.
-Citi SmithBarney said RSH will show the biggest upside surprise when comp store sales are reported early next month. Citi also raised comp estimates at AEOS, PLCE and lowered them at HOTT. Citi reiterated Buy on WMT, target $65. Citi reiterated Buy on FON, target $27. Citi reiterated Buy on AMT, target $22.00. Citi reiterated Buy on SSI, target $70. Citi reiterated Buy on ALK, target $36. Citi cut MET to Sell, target $38. Citi cut TMK to Sell, target $55.
-JP Morgan cut EP to Underweight.
-Merrill reiterated Buy on AAPL, raised target to $78.
-UBS reiterated Buy on AAPL, raised target to $77. UBS downgraded BNN to Reduce, target $34.
-Prudential cut ROH to Underweight, target $42. Pru cut DD to Underweight, target $47. Pru raised BEN to Overweight, target $75. Pru raised AMG to Overweight, target $72.
-Bear Stearns rated THO Outperform, target $25.

Mid-day News
U.S. stocks are mixed mid-day as rising interest rates and profit-taking is offsetting optimism over economic growth. Many U.S. hospitals are shying away from letting doctors deliver babies vaginally if the woman has previously had a Caesarean section, partly because of fears of lawsuits if there are complications, the NY Times reported. U.S. teenagers, indulging more than ever in luxury goods, are now paying adult prices for their clothes as designer labels becoming increasingly important to them, the Washington Post reported. Liquid crystal display flat-panel tv sets will drop in price by as much as 30% starting next year, the NY Times reported. An English-language tv network specifically geared toward Muslims will begin broadcasting in North America tomorrow, the NY Times said. McDonald's, Dunkin' Donuts and other fast-food restaurant chains plan to offer so-called stored-value gift cards this holiday season to capitalize on their success with other retailers, USA Today reported. Amazon.com is focusing on routing customers to third-party Web sites to buy products rather than selling items itself, the LA Times reported. Moscow's arbitration court will hear an appeal from OAO Yukos Oil on Dec. 3 against the government's decision to sell Yuko's main oil-producing unit, Interfax reported. General-merchandise and apparel sales will increase 4% to 6% this holiday season, Diane Swonk, chief economist at Mesirow Financial, told CNBC. Saudi Arabia plans to expand output capacity by 14% to ease concern of potential shortages, said the nation's oil minister. The UN nuclear watchdog said that Iran has agreed to suspend all uranium enrichment activities, according to a draft resolution before the IAEA in Vienna, Bloomberg reported. BT Group Plc, the U.K.'s largest phone operator, created an entertainment division to offer movies and tv programs over the Internet, Bloomberg said. President Bush has picked Carlos Gutierrez, CEO of Kellogg, to replace Donald Evans as secretary of Commerce, Bloomberg reported. U.S. retail sales over the Web increased 40% y-o-y on Friday, according to ComScore Networks. UN Secretary-General Annan said he was upset to learn his son was still getting paid this year by a company under investigation for its role in the scandal-ridden UN oil-for-food program through which former Iraqi dictator Saddam Hussein illegally pocketed $21.3 billion, Bloomberg reported. The benchmark 10-year U.S. Treasury is falling, pushing its yield to a three-month high on better-than-expected holiday retail sales and recent declines in the dollar, Bloomberg said.

Bottom Line: The Portfolio is lower mid-day on losses in my Chinese ADR, retail and telecom equipment longs. I exited a few long positions as they hit stop-losses this morning, thus leaving the Portfolio 100% net long. Today's mixed performance by the major indices appears to be mostly a result of profit-taking rather than real concerns over fundamentals. The Morgan Stanley Retail Index(MVRX) has gained 21.7% since August lows. Most retailers did very well over the weekend, notwithstanding WMT's November results. Other low-end retailers such as TGT, JCP and KSS exceeded expectations. Technology and small-caps are outperforming today and breadth is healthy for the overall market. The 10-year T-note yield is still 60 basis points below the highs set in June. As well, it is good to see measures of investor anxiety rising. I expect U.S. stocks to rise modestly into the close on short-covering and bargain-hunting ahead of tomorrow's GDP, Consumer Confidence and Chicago Purchasing Manager reports.

Monday Watch

Earnings of Note
Company/Estimate
DCI/.33
OSIP/-1.17

Splits
None of note.

Economic Data
None of note.

Weekend Recommendations
Wall Street Week w/Fortune had guests that were negative on TPX and NFLX. Forbes on Fox had guests that were positive on MC, MEE, BP, mixed on SKS and negative on XRX. Cashin' In had guests that were positive on OEH, PWI, LSI, EDE, NOI and mixed on OSIP, SIRI, JPM. Bulls and Bears had guests that were positive on SNE, LEXR, AMX, TARO, MKL, QQQ, SIRI, PRAA, CRI and mixed on WTW. Barron's had negative comments on AUDC. Goldman Sachs reiterated Outperform on EBAY, DNA and Underperform on FISV. U.S. financial, health-care services and biotechnology stocks are among the favorite issues of Edward Keon Jr., chief investment strategist at Prudential Equity Group LLC, Barron's reported.

Weekend News
U.K. and German business groups will write to the U.S. SEC opposing the requirements of the Sarbanes-Oxley corporate governance law, the Financial Times reported. A two-night trip to New York from Manchester, England, to do Christmas gift shopping is cheaper than taking the train to London for a weekend to buy the same items, the Independent reported. The first stirrings of unrest have begun among the migrant workers who provide cheap labor to China's booming Pearl River Delta, which has drawn more than $50 billion in foreign investment the past five years, the Washington Post said. Colombia's largest rebel group targeted President Bush for assassination during his trip to the South American nation earlier this week, Reuters reported. The Iraqi government rejected calls for national elections to be delayed, sticking to its Jan. 30 poll date, the AP reported. Cendant Corp., the largest U.S. real estate and travel services company, will probably buy Ebookers Plc, Europe's largest online travel company, the Sunday Times reported. Researchers at the Idaho National Engineering and Environmental Laboratory and ceramics company Cerametec have found a more efficient way to produce pure hydrogen, which may be a step in weaning the U.S. off its dependence on oil, the NY Times reported. Alpaca breeding is increasing in popularity in the U.S. as a controlled market for breeding stock has caused prices for the animals to steadily rise, drawing former doctors and corporate executives to ranching, the NY Times reported. The DJIA may reach 40,000 by 2010, driven by technology and spending by people from the Baby Boom generation, author Harry Dent Jr. told Wall Street Week w/Fortune. China's inflation rate may slow to 3% next year, down from 5.3% in August, on slower growth in investment and exports, Xinhua news agency reported. E*Trade Financial will introduce a trading platform for futures contracts next year, the Financial Times reported. The decline of the dollar and the increase in oil prices haven't caused a "significant change" in the U.S. inflation outlook, the Fed's Poole said. Iraq, the fifth-largest oil producer in the Middle East, will spend more than $1 billion next year to increase oil output capacity by about 15% to 3.25 million barrels a day, Bloomberg reported. U.S. stock may build on their fourth-quarter gains in December as Microsoft's special dividend of $32 billion encourages investors to put more money into equities before year-end, Bloomberg said. Small businesses plan double-digit IT spending increases, CRN reported. Iraqi oil output was fairly steady at about 2 million barrels a day in the second and third quarters, despite frequent sabotage attempts, the Wall Street Journal reported.

Late-Night Trading
Asian indices are higher, +.25% to +1.25% on average.
S&P 500 indicated +.29%.
NASDAQ 100 indicated +.38%.

BOTTOM LINE: I expect U.S. stocks to open modestly higher in the morning on gains in Asia, optimism over weekend retail sales, declining energy prices and a stabilizing dollar. The Portfolio is 125% net long heading into tomorrow.

Sunday, November 28, 2004

Weekly Outlook

There are a number of economic reports and some significant corporate earnings reports scheduled for release this week. Economic reports include Preliminary 3Q GDP(Tues.), Consumer Confidence(Tues.), Chicago Purchasing Manager(Tues.), Personal Income/Spending(Wed.), PCE Deflator Y-o-Y(Wed.), Construction Spending(Wed.), ISM Manufacturing/Prices Paid(Wed.), Fed's Beige Book(Wed.), Vehicle Sales(Wed.), Initial Jobless Claims(Thur.), Factory Orders(Thur.), Unemployment Rate(Fri.), Average Hourly Earnings(Fri.), Change in Non-farm Payrolls(Fri.), Average Weekly Hours(Fri.), and ISM Non-Manufacturing(Fri.). GDP, Consumer Confidence, Chicago Purchasing Manager, ISM Manufacturing, Change in Non-farm Payrolls and ISM Non-Manufacturing all have market-moving potential.

OSI Pharmaceuticals(OSIP-Mon.), Chico's FAS(CHS-Tues.), Omnivision Technologies(OVTI-Tues.), Neiman Marcus Group(NMG/B-Wed.) and Synopsys(SNPS-Wed.) are some of the more important companies that release quarterly earnings this week. There are also some other events that have market-moving potential. The CSFB Tech Conference(Tues.-Fri.), The Homebuilding Industry Conference(Tues.-Wed.), Merrill Health Services Conference(Tues.), INTC mid-quarter update(Thur.), Fed's Bernanke speaking(Thur.), Fed's McTeer speaking(Fri.) and Fed's Santomero speaking(Fri.) could also impact trading this week.

Bottom Line: I expect U.S. stocks to finish the week higher on seasonal strength, better-than-expected economic reports, strength in technology shares, more optimism, a rebound in the US dollar, declining energy prices, short-covering and bargain-hunting. The most important day of the year for retailers was Friday and it appears the holiday shopping season is off to a strong start. Research firm ShopperTrak said overall U.S. retail sales climbed 10.8% over last year and Visa, the No. 1 issuer of credit cards, said sales on its cards soared 15.5% from last year. The S&P 500 and Russell 2000 are at their highs for the year. The DJIA and NASDAQ will likely test their yearly highs this week. My short-term trading indicators are still giving Buy signals and the Portfolio is 125% net long heading into the week.

Saturday, November 27, 2004

Market Week in Review

S&P 500 1,182.65 +1.07%

Click here for the Weekly Wrap by Briefing.com.

Bottom Line: U.S. stocks finished moderately higher last week in another win for the bulls. It was the fourth weekly rise for the S&P 500 in 5 weeks. Gains were especially frustrating for the bears considering the decline in the dollar, rising energy prices and worries over inflation. Small-caps again outperformed as the Russell 2000 hit another ALL-TIME high and breadth was very healthy. Commodity-related stocks were the top-performers for the week, led by steel and oil service companies. Moreover, the AAII % Bulls fell 22.81% to 49.48%, which is big positive considering recent complacency. While perpetually negative pundits and analysts paint a bleak picture for U.S. stocks on inflation and profit fears, the overall technical picture of the market appears the healthiest to me since 1995.

Economic Week in Review

ECRI Weekly Leading Index 132.70 +.08%

Existing Home Sales for October were 6.75M versus estimates of 6.72M and 6.76M in September. "With low interest rates and an improving job market we're seeing some extraordinary numbers in housing," said the CEO of Foxtons North America, a real estate brokerage firm. October's sales were the fourth-highest ever, Bloomberg said. The median selling price of an existing home was $187,000 last month, up 8.8% from the same month last year. "As long as mortgage rates stay at about the 6-6.5% level, I think the housing market should be strong," said Bruce Harting, a senior analyst who covers mortgage companies at Lehman Brothers. Re-sales were the strongest in the South and West, rising 3.7% and 3.6% for the month respectively. While prices have increased, America's homeowners are not over-leveraged, according to the Homeownership Alliance. The latest Federal Reserve data show that mortgage payments accounted for 9.87% of disposable incomes in the second quarter of this year, down from over 10% in 1990-1992, Bloomberg said.

Durable Goods Orders for October fell .4% versus estimates of a .5% rise and an upwardly revised .9% gain in September. Durable Goods Orders Less Transportation for October fell .7% versus estimates of a .2% fall and an upwardly revised 2.8% increase in September. After the September revisions, the October dollar volume was close to estimates, Bloomberg reported. Shipments, which the government uses to calculate quarterly GDP, rose 3.1%, the biggest rise since March, Bloomberg said.

Initial Jobless Claims for last week were 323K versus estimates of 335K and 335K the prior week. Continuing Claims were 2755K versus estimates of 2795K and 2784K prior. The four-week moving average of claims dropped to a four-year low of 332,000. "Labor markets are improving, and we expect to see that reflected in payroll gains for November," said Gary Bigg, an economist at Banc of America Securities. A survey by the National Assoc. of Business Economists released on Nov. 22 showed economists expect the labor market to give a boost to the economy next year, with the unemployment rate falling to 5.2%, from its current 5.5%, Bloomberg reported. Moreover, economists project 2.2 million jobs will be created in 2005.

The Final Univ. of Mich. Consumer Confidence reading for November was 92.8 versus estimates of 96.0 and a prior forecast of 95.5. "With the election over, energy prices declining, and the labor market improving, we would have expected a more significant boost to attitudes," said Stephen Stanley, chief economist at RBS Greenwich Capital. However, the University's current conditions index, which reflects Americans' perception of their financial situation and whether it's a good time to buy big-ticket items, rose to 104.7 from 104 in October, Bloomberg said. As well, the expectations index, based on optimism about the next one to five years, rose to 85.2 from 83.8 last month. "Based on the positive momentum over the past three weeks, Visa maintains an optimistic outlook for the holiday shopping season," said Wayne Best, senior vice president of strategic and economic analysis at Visa USA. Finally, the National Retail Federation is now projecting a fairly strong 4.5% gain in retail sales during the holiday season.

New Home Sales for October rose to 1226K versus estimates of 1200K and 1224K in September. This was the third fastest rate on record, Bloomberg said. The median price jumped to $221,800, up 14% from a year ago. The U.S. gained the most jobs in seven months during October and mortgage rates remain within a percentage point of an all-time low, helping boost sales, Bloomberg reported. "We are still seeing extremely strong traffic and demand," said Alan Levan, CEO of Levitt, a homebuilder based in Fort Lauderdale, Florida. Sales of new and existing homes will reach an all-time record this year, according to a forecast from the National Assoc. of Realtors. Sales were the strongest in the Northeast and West, rising 20% and 13% respectively.

Bottom Line: Overall, last week's economic data were mildly positive. The Weekly Leading Index has now risen 4 consecutive weeks since the election. Housing remains a pillar of strength for the U.S. economy and will remain so, barring an unexpected substantial rise in interest rates. The decline is Durable Goods Orders was a result of the significant upward revision to the prior month and is not of concern. The better jobless claims readings over the past few weeks suggest another good month for employment is in the offing. This should definitely result in better consumer confidence in the very near future, notwithstanding high energy prices. As well, stock market gains, less negativity by politicians and a strong housing market should also boost sentiment going forward. I continue to expect U.S. economic growth to surprise on the upside over the next few months. Data in December should confirm this view.

Thursday, November 25, 2004

Friday Watch

Earnings of Note
Company/Estimate
None of note.

Splits
None of note.

Economic Data
None of note.

Recommendations
Saks Inc.(SKS), which operates 350 traditional and luxury department stores, owns a high portion of is shops, making its stock an attractive buy, Business Week reported. Shares of Boston Scientific(BSX) are worth buying because the company has a "rich" pipeline of products, Business Week said. Shares of Bioenvision(BIVN), a maker of drugs to treat cancer, are expected to rise as the U.S. FDA considers approving the company's Clofarabine drug, Business Week said.

Holiday News
U.S. experts expressed reservations over an accord signed by European officials and Iran to stop the country's uranium enrichment program, the NY Times reported. U.S. Steel is interested in bidding for two steel operations of insolvent Stelco, possibly provoking a bidding war, the Globe and Mail reported. A laboratory for the manufacture of chemical weapons was found in the Iraqi city of Fallujah, Reuters reported. The Ukrainian Supreme Court today suspended publication of the Nov. 21 presidential election results until it can examine an opposition appeal challenging them, Agence France-Presse reported. The European Central Bank is waiting for the right moment to sell euros or buy dollars and curb the European currency's record-breaking rally, Reuters said. TiVo's plan to use pop-up ads is too intrusive, the AP reported. Companies plan to hire 20% more college graduates this year, Business Week reported, citing a study of 582 companies by Collegiate Employment Research Institute at Michigan State. American Express said it would replace Ernst & Young LLP as the company's independent auditor. The U.S., as a net international borrower, has "little to fear" from the dollar's slide, said Paul McCulley, a managing director at PIMCO. The European Union and Russia clashed over the results of Ukraine's presidential election, with the EU rejecting the vote outcome and Russian President Putin urging other countries to stay out of Ukraine's domestic affairs, Bloomberg said. Warehouse Group, New Zealand's largest retailer, is betting it can revive flagging sales in its peak Christmas season by adding name-brand products such as Eastman Kodak digital cameras and Dell notebook PCs, Bloomberg reported. Asian stocks are mixed tonight, with a regional benchmark set for its sixth straight weekly gain, the longest winning stretch in 14 months, Bloomberg said. China's government has cut its holdings of U.S. Treasury bonds in the nation's foreign-exchange reserves to $180 billion, First Economic and Finance Daily said. Cell phones are increasingly becoming attractive targets to computer hackers, the Washington Post says. Asian steelmaker shares are advancing, led by Nippon Steel and Posco, on speculation automakers including Toyota Motor and Nissan will pay higher prices, Bloomberg reported. Crude oil futures may decline next week on speculation the U.S. is importing enough to boost inventories, easing concern about a shortage of winter fuel, according to a Bloomberg survey.

Late-Night Trading
Asian indices are mixed, -1.25% to +.25% on average.
S&P 500 indicated -.16%.
NASDAQ 100 indicated +.06%.

BOTTOM LINE: I expect U.S. stocks to open modestly lower on worries over higher interest rates and energy prices. However, stocks should rally later in the day on short-covering and more optimism as interest rates stabilize. The Portfolio is 125% net long heading into tomorrow.

Wednesday, November 24, 2004

HAPPY THANKSGIVING

I will resume blogging tomorrow night with the Friday Watch. Check out this long-term chart of the DJIA.

Mid-day Report

S&P 500 1,180.12 +.27%
NASDAQ 2,097.52 +.64%


Leading Sectors
Airlines +2.66%
Papers +1.18%
Internet +1.0%

Lagging Sectors
Defense unch.
Retail -.04%
Telecom -.63%

Other
Crude Oil 48.60 -.69%
Natural Gas 7.16 +5.4%
Gold 449.00 +.25%
Base Metals 120.24 +1.22%
U.S. Dollar 82.43 -.61%
10-Yr. T-note Yield 4.19% +.23%
VIX 12.82 +1.26%
Put/Call .61 -22.78%
NYSE Arms 1.08 -11.48%

Market Movers

Economic Data
Durable Goods Orders for October fell .4% versus estimates of a .5% increase and an upwardly revised .9% gain in September.
Durable Goods Orders Less Transportation for October fell .7% versus estimates of a .2% fall and an upwardly revised 2.8% gain in September.
Initial Jobless Claims for last week were 323K versus estimates of 335K and 335K the prior week.
Continuing Claims were 2755K versus estimates of 2795K and 2784K prior.
Final Univ. of Mich. Consumer Confidence for November was 92.8 versus estimates of 96.0 and a reading of 95.5 in October.
New Home Sales for October were 1226K versus estimates of 1200K and 1224K in September.
Help Wanted Index for October was 37 versus estimates of 37 and a reading of 36 in September.

Recommendations

Mid-day News

Bottom Line: The Portfolio is higher mid-day on strength in my medical instrument, gaming and internet longs. I took profits in an internet long this morning and added BWLD long, thus leaving the Portfolio 125% net long. I am using a stop-loss of $32.50 on this position. Overall, today's economic data was mildly positive. While durable goods orders unexpectedly fell, the upward revisions for last month were significant. I would have liked to see Consumer Confidence at higher levels, however this reading should continue higher through at least year-end. Considering the small gains by the major indices, today's breadth is very healthy. I expect U.S. stocks to trade modestly higher into the close as higher energy prices are more than offset by short-covering.

Tuesday, November 23, 2004

Wednesday Watch

Earnings of Note
Company/Estimate
PDCO/.32
HRL/.49

Splits
None of note.

Economic Data
Durable Goods Orders for October estimated to rise .5% versus a .2% increase in September.
Durable Goods Orders Less Transportation for October estimated to fall .2% versus a 1.8% increase in September.
Initial Jobless Claims for last week are estimated at 335K versus 334K the prior week.
Continuing Claims are estimated at 2795K versus 2792K prior.
Final Univ. of Michigan Consumer Confidence for November is estimated at 96.0 versus a prior estimate of 95.5.
New Home Sales for October are estimated at 1200K versus 1206K in September.
Help Wanted Index for October is estimated at 37 versus 36 in September.

Recommendations
Goldman Sachs reiterated Outperform on PFE, GE, NKE and ACN. Goldman reiterated Underperform on HRB and GCO.

Late-Night News
Asian indices are higher, led by financial, basic material and technology companies in the region. Newmont Mining will study Gold Fields' mines outside South Africa in case they are sold to defend against a hostile takeover bid, Reuters said. Shandong TV-net Media Development is preparing for China's first initial share sale of a business that directly controls tv channels, the Financial Times reported. South Korea's government will ask companies to refrain from aggressively selling dollars, Edaily reported. China's central bank considers growth in fixed-asset investment too fast and is monitoring the economy to gauge whether to boost interest rates again, the Financial Times said. China may relax the yuan's decade-old peg to the dollar by April 1 as the government attempts to slow inflation and cool economic growth, analysts at Banc of America and Merrill Lynch said. Intel said it's helping Chinese and Indian customers build personal computers that use the Linux operating system, an alternative to Microsoft's Windows software, Bloomberg reported. India's investment climate has improved over the past three years and it has overtaken China on "some indicators," the Financial Times reported, citing a World Bank study. The U.S. Postal Reserve will seek a bigger-than-expected increase in postage rates early next year, the Wall Street Journal reported. The Fed will raise the interest-rate target for overnight loans between banks a quarter point to 2.25% next month, said 20 of the 22 largest bond-trading firms. Russian President Putin's support for Ukrainian Prime Minister Yanukovych after Sunday's disputed presidential election may aggravate relations with the U.S. and Europe, Bloomberg reported.

Late-Night Trading
Asian Indices are +.25% to 1.0% on average.
S&P 500 indicated +.25%.
NASDAQ 100 indicated +.41%

BOTTOM LINE: I expect U.S. equities to open higher on better-than-expected economic reports, lower energy prices, short-covering and more optimism. The Portfolio is 125% net long heading into tomorrow.

Tuesday Close

S&P 500 1,176.94 -.03%
NASDAQ 2,084.28 -.04%


Leading Sectors
Restaurants +1.66%
Oil Service +1.16%
Airlines +1.11%

Lagging Sectors
Papers -.50%
Drugs -.59%
Semis -.73%

Other
Crude Oil 48.74 -.41%
Natural Gas 6.77 -.34%
Gold 447.00 -.20%
Base Metals 118.79 +1.19%
U.S. Dollar 82.94 -.30%
10-Yr. T-note Yield 4.18% +.09%
VIX 12.67 -2.31%
Put/Call .79 +11.27%
NYSE Arms 1.22 +23.23%

After-hours Movers
GOOG +5.4% after Goldman Sachs rated it Outperform, target $215.
CWTR +3.7% after beating 3Q estimates.
ELN +4.4% after winning FDA approval for its Tysabri drug to treat multiple sclerosis.
STCR +27.0% after Quantum Fuel Systems(QTWW) agreed to buy it for $185 million in stock and assumed debt.
TSA +7.8% after meeting 3Q estimates and reiterating 4Q guidance.
MIK -7.3% after meeting 3Q estimates and lowering 4Q outlook.
SEAC -9.1% after missing 3Q estimates and lowering 4Q guidance.

Recommendations
Goldman Sachs reiterated Underperform on DE and PVH. Goldman rated GOOG Outperform, target $215.

After-hours News
U.S. stocks finished quietly lower today, pressured by mild declines in semiconductor shares. After the close, the SEC and the NASD are starting an informal inquiry into gifts given to mutual fund executives by brokerage firms, CNBC reported. Users of Nokia's 7610 mobile phone are being warned about a virus that generates skull images and makes some functions on the so-called smartphone difficult to use, BBC reported. GM may use BMW's high-performance diesel engines in its Cadillac models in Europe, the Financial Times said. Sumner Redstone, CEO of Viacom, said his daughter is taking an increasingly important role at the media company, Bloomberg reported. Biogen and Elan won FDA approval of their multiple sclerosis drug, which will be called Tysabri, Bloomberg said. The U.S. said a screening test that last week indicated a possible case of mad cow disease was a "false positive," based on a more complete exam of the animal's brain tissue at a government lab, Bloomberg said. Women hold more top jobs on Wall Street than ever before, according to the Securities Industry Association. The NFL, undeterred by last week's brawl between NBA players and fans, will put spectators on the sidelines this weekend to test a new premium seating program, Bloomberg reported. Supporters of Ukraine's Viktor Yushchenko, who declared himself president after the Nov. 21 election, are surrounding the presidential office in Kiev demanding Yushchenko is allowed to begin managing the country, Bloomberg reported.

BOTTOM LINE: The Portfolio finished higher today on gains in my security, Chinese ADR, internet and retail longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. The underlying tone of the market was pretty good today as most stocks advanced and volume increased. As well, energy prices fell from their daily highs into the afternoon. I expect U.S. stocks to rise tomorrow on better-than-expected economic reports, falling energy prices, strength in the tech sector, short-covering and more optimism.

Mid-day Report

S&P 500 1,172.29 -.42%
NASDAQ 2,071.72 -.65%


Leading Sectors
Oil Service +2.33%
Energy +1.13%
Restaurants +1.00%

Lagging Sectors
Broadcasting -.99%
Semis -1.14%
Biotech -1.18%

Other
Crude Oil 49.93 +2.65%
Natural Gas 6.82 +.93%
Gold 448.40 -.11%
Base Metals 118.79%
U.S. Dollar 82.86 -.40%
10-Yr. T-note Yield 4.14% -.87%
VIX 12.86 -.85%
Put/Call .86 +21.13%
NYSE Arms 1.14 +15.15%

Market Movers

Economic Data
Existing Home Sales for October were 6.75M versus estimates of 6.72M and 6.75M in September.

Recommendations

Mid-day News

Bottom Line: The Portfolio is modestly higher mid-day on strength in my security, internet, retail, oil service and Chinese ADR longs. I have not traded today and the Portfolio is still 125% net long. I will be looking to add semi, semi-equipment and networking stocks on any near-term weakness as these areas should outperform over the intermediate-term. The underlying tone of the market is mildly positive today considering losses in the major indices. I expect U.S. shares to rise modestly into the close on optimism over future economic growth.

Tuesday Watch

Earnings of Note
Company/Estimate
ADI/.33
DE/.99
DLTR/.28
EV/.52
HRB/-.16
HNZ/.59
MIK/.30
SEAC/.12
WIND/.03
TECD/.55

Splits
STJ 2-for-1
VIP 3-for-1

Economic Data
Existing Home Sales for October estimated at 6.72M versus 6.75M in September.

Recommendations
Goldman Sachs reiterated Outperform on EMC, GE, NUE, X, XRX and Underperform on MMC, ELX.

Late-Night News
Asian indices are higher, led by Hong Kong shares, as cyclicals in the region are advancing. Cendant Corp., the U.S. lodging and travel group, will build mid-priced hotels in Russia and other former Soviet Union states, the Financial Times said. Porsche AG has asked Toyota Motor for its gasoline-electric hybrid technology to use with its Cayenne sport-utility vehicles, the Asahi newspaper said. The Chicago Mercantile Exchange may be interested in buying Reuters Group Plc's Instinet Group, the Financial Times reported. The U.S. said terrorist attacks on U.S. interests may be "imminent" in the Indian cities of Mumbai and New Delhi, Agence France-Presse reported from Washington. McDonald's said CEO and President Charlie Bell has resigned, Bloomberg reported. U.K. authorities foiled a plan by al-Qaeda to carry out an attack on London's Canary Wharf similar to the Sept. 11, 2001 attacks on the World Trade Center, the Sun reported.

Late-Night Trading
Asian Indices are +.25% to +1.25% on average.
S&P 500 indicated +.08%.
NASDAQ 100 indicated +.10%

BOTTOM LINE: I expect U.S. equities to open higher in the morning on declining energy prices, a strong home sales report and more optimism. The Portfolio is 125% net long heading into tomorrow.

Monday, November 22, 2004

Monday Close

S&P 500 1,177.24 +.59%
NASDAQ 2,085.19 +.70%


Leading Sectors
Boxmakers +2.59%
Utilities +1.78%
Iron/Steel +1.42%

Lagging Sectors
Drugs +.12%
Biotech +.04%
Telecom -.38%

Other
Crude Oil 48.30 -.70%
Natural Gas 6.67 -1.29%
Gold 449.20 +.04
Base Metals 117.39 -.97%
U.S. Dollar 83.10 -.25%
10-Yr. T-note Yield 4.17% -.60%
VIX 12.97 -3.93%
Put/Call .71 -11.25%
NYSE Arms .99 -20.80%

After-hours Movers
SGTL +6.0% after boosting 4Q estimates.
CMNT +18.7% after substantially beating 3Q estimates.
DY -20.5% after missing 1Q estimates and lowering 2Q guidance.

Recommendations
Goldman Sachs reiterated Underperform on HMT, MHX and IHR.

After-hours News
U.S. stocks finished modestly higher today on optimism over future U.S. economic growth, short-covering and bargain-hunting. After the close, New York Democratic Attorney General Spitzer has told people that he plans to run for governor in 2006, the AP reported. BT Group Plc would de-list from the U.S. stock market due to the "great burden" of the cost of the Sarbanes-Oxley corporate governance legislation, the Financial Times reported. Viacom Chairman and CEO Redstone said he has "reason to believe" other suitors may be interested in buying video-game maker Midway Games, Bloomberg reported. Childhood obesity leads to enlarged heart muscles and a higher risk for heart failure later in life, according to a study published today by the American Heart Assoc. Citigroup agreed to sell its transportation-finance business to GE for about $4.4 billion in cash, Bloomberg reported. Owens-Illinois said its biggest shareholder, KKR, plans to sell all or some of its shares in the company "shortly", Bloomberg said. ABC's "Desperate Housewives" drama, featured in a promotion before last week's "Monday Night Football" that is being reviewed by the FCC, drew the best big-city ratings in its seven-episode history last night, Bloomberg reported. Marsh & McLennan may settle claims of rigged bids and kickbacks with a month, CEO Cherkasky said. Oracle said it is at an impasse with PeopleSoft, signaling the two software makers will wage a proxy battle to resolve Oracle's $8.8 billion takeover bid, Bloomberg reported.

BOTTOM LINE: The Portfolio finished slightly higher today on strength in my steel, internet and nanotechnology longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. The tone of the market improved throughout the day as and finished near their best levels. As well, small-caps and cyclicals outperformed and interest rates fell. Economic data should begin to exceed expectations over the next few weeks on more optimism, hurricane rebuilding, an end to the depressing effects of the election, larger year-end bonuses, lower commodity prices, pent-up demand, year-end budget flushes and corporate spending before tax incentives expire. I continue to expect U.S. stocks to rally at least through year-end with minor pullbacks along the way.

Mid-day Report

S&P 500 1,175.00 +.40%
NASDAQ 2,077.68 +.34%


Leading Sectors
Boxmakers +2.21%
Transports +1.36%
Iron/Steel +1.31%

Lagging Sectors
Semis -.14%
Telecom -.17%
Biotech -.33%

Other
Crude Oil 48.60 -.59%
Natural Gas 6.79 -4.57%
Gold 448.50 +.43%
Base Metals 117.39 -.97%
U.S. Dollar 83.16 -.18%
10-Yr. T-note Yield 4.16% -.83%
VIX 13.21 -2.15%
Put/Call .71 -11.25%
NYSE Arms 1.15 -8.0%

Market Movers
KKD -17.6% after missing 3Q estimates and BB&T downgrade to Underweight.
SIRI +11.0% on continued optimism over the hiring of Karmazin.
AAPL +10.3% after Piper Jaffray reiterated Outperform and raised target to $100 from $52.
AGIX -13.4% after the company said an experimental drug was ineffective in one of two tests.
TASR -6.8% on continued selling from worries over insider selling.
FRX -7.4% after BofA downgrade to Sell.
PCSA +22.4% after Alamosa Holdings offered to buy it for about $354.3 million in stock.
PTZ +15.2% after the company said it's considering a possible sale.
BTU +6.6% on continued optimism over demand for coal.
INCX +12.6% after announcing that it has licensed its Local Direct search and advertising platform to Internet Yellow Pages provider, MyePages.
ADBL +11.7% on Piper Jaffray upgrade to Outperform, target $35.
ACI +5.6% on continuing optimism over coal demand.

Economic Data
None of note.

Recommendations
-Goldman Sachs reiterated Outperform on AA and AMGN.
-Banc of America downgraded FRX to Sell, target $34.
-Citi SmithBarney reiterated Sell on SUP and GNTX. Citi reiterated Buy on BWA. Citi reiterated Buy on AIQ, target $12. Citi reiterated Sell on WOOF, target $18. Citi removed PBG, WMT and MDT from Recommended List and added JNJ, VIAB, L, DE and MAY. Citi reiterated Buy on DIS, target $31. Citi reiterated Sell on MYG, target $14. Citi reiterated Buy on UNM, target $20. Citi reiterated Attractive view of Oil Service sector, favorites remain RIG, DO, SII, SLB and BHI. Citi upgraded Semi/Semi Equipment sectors to Market Weight and raised Media sector to Overweight.
-UBS reiterated Reduce on GOOG.
-JP Morgan raised FO to Overweight.
-Deutsche Bank raised GCI to Buy, target $90. Deutsche rated HURN Buy, target $24.

Mid-day News
U.S. stocks are modestly higher mid-day on strength in computer and cyclical shares. Growth in U.S. employers' health-care costs rose 7.5% in 2004, the smallest such rise in five years, and may slow next year, the Wall Street Journal reported. U.S. local-telephone companies and satellite tv companies have been able to win customers from cable with packages combining phone and satellite service, the NY Times reported. NY's port is reversing a decades-long decline as Chinese imports increase, with container traffic up 65% from 1998, the NY Times reported. AOL will focus on increasing Internet ad revenue by promoting its free AOL.com Web site instead of primarily trying to build a subscriber base, the NY Times reported. EBay has begun using a direct-mail catalog to lure new customers to its Web site, hoping to duplicate the success of retailers such as Ice.com, which sells jewelry on the Internet, the NY Times reported. Advertising companies are expected to account for about $5.2 trillion, or 20%, of the U.S. economy in 2005, the Wall Street Journal reported. PIMCO last week sold some of its German government debt and bought U.S. Treasuries, Barron's reported. The third quarter's average one-way U.S. business airfare of $217, which is the lowest in five years of quarterly tracking, is also 11% less than the average fare for 2003, USA Today reported. Eastman Kodak shipped 990,000 consumer digital cameras in the third quarter, only 10,000 fewer than Sony, the U.S. market leader, the AP reported. California Democratic lawmakers plan to reintroduce bills to legalize same-sex marriages and allow illegal immigrants to get drivers' licenses when the legislative session begins Dec. 6, the San Jose Mercury News reported. Pfizer's Liptor, Merck's Zocor and Bristol-Myers' Pravachol carry low risk of a deadly side effect that led to the withdrawal of Bayer's Baycol, a FDA study found. The pentagon will open to new bidders a contract to provide aerial-refueling tankers to the U.S. Air Force after Congress withdrew an earlier proposal worth $23 billion to Boeing, Bloomberg reported.

Bottom Line: The Portfolio is slightly higher mid-day on gains in my steel, wireless and internet longs. I added some new security, internet, semi and networking longs this morning, bringing the Portfolio's market exposure to 125% net long. I added to my long TASR position and I am using a stop-loss of $48.15 on my new shares. The tone of the market has improved substantially from the open and I now feel the recent correction has run its course. I expect U.S. stocks to rise into the close on short-covering, bargain hunting and optimism over future U.S. economic growth.

Monday Watch

Earnings of Note
Company/Estimate
BRCD/.06
CPB/.52
KKD/.13
TIVO/-.43
TOY/-.15

Splits
None of note.

Economic Data
None of note.

Weekend Recommendations
Louis Rukeyser's Wall Street had guests that were positive on MMM, CSCO, WFMI, GE, SAP, INTC, MSFT, DISH and AIG. Forbes on Fox had guests that were positive on JWN, COH, GM and mixed on FD, MAY, ACE. Cashin' In had guests that were positive on GWR, MEE, CWT, PNX, PKZ, ELN, FRO, negative on AIG, KKD and mixed on EV. Barron's had positive comments on JNJ, PFE, MRK, NOC, HL, HZO, NEM and SAP. Goldman Sachs reiterated Outperform on BBY, CAL, EBAY and Underperform on BA.

Weekend News
The Paris Club group of creditor governments agreed to write off about 80% of Iraqi debt, Agence France-Presse reported. Rofin-Sinar Technologies, a laser maker trading in Germany and the U.S., may make acquisitions as it adds products and expands in markets including Asia, CEO Wirth told the Boersen-Zeitung. Television production in the LA-area has risen 29% this year from the year-earlier period, helped by an increase in reality and cable-tv shows, the LA Times reported. European leaders have appeared optimistic to news Condoleezza Rice will replace Colin Powell as U.S. secretary of state, the NY Times reported. Coal production is increasing amid U.S. concern supplies of natural gas, electricity's other main fuel source, won't keep pace with demand, the NY Times reported. U.S. casino companies, such as Las Vegas Sands Inc., boosted by strong results in their Las Vegas markets, will likely perform even better as more ventures open in Macau and draw gamblers from Asia, Barron's reported. Mobile phone companies' revenue from carrying voice calls will fall 70% to 80% by 2010 as customers switch to using cheaper voice over Internet technology, the Sunday Times newspaper reported. State governments are seeking to cut the costs of purchasing drugs for Medicaid patients through a variety of initiatives, setting the stage for a showdown with the pharmaceutical industry, the NY Times reported. Ford sold 5,500 of its new model Focus car in Germany in the first seven days it was for sale, Automobilwoche said. The Port of Seattle's cargo volume is soaring this year and may set a record because of traffic congestion at Southern California waterway entries and the nation's trade with China, the Seattle Times said. More than 700 union officials representing New Jersey and Pennsylvania workers were paid more than $100,000 last year, the Philadelphia Inquirer said. NTT DoCoMo is focused on reviving its flagging stock price with a new pricing plan and technological innovations, Barron's reported. Foreigners have been taking advantage of a weaker dollar to buy up NYC real estate, reported Crain's New York Business. A slowdown in China's economy may benefit steelmakers because it would make over-investment in new projects less likely, the Financial Times reported. China, which has more mobile phone subscribers than the U.S. population, may fuel growth in the telecom industry as the country upgrades its networks, Bloomberg reported. President Bush said he is committed to a "strong dollar" and cutting the U.S. budget deficit, Bloomberg said. China, the world's largest coal producer and user, plans to spend $10 billion over the next decade on plants that turn coal into motor fuel, Bloomberg reported. Oil inventories should begin to rise soon, as refinery capacity comes back online, resulting in falling crude prices, the EIA said. General Electric won a contract valued at $200 million over eight years to provide digital imaging systems to more than 70 U.K. National Health Service hospitals and clinics, the Wall Street Journal reported.

Late-Night Trading
Asian indices are lower, -2.25% to -.50% on average.
S&P 500 indicated -.28%.
NASDAQ 100 indicated -.51%.

BOTTOM LINE: I expect U.S. stocks to open modestly lower in the morning on continued profit taking, losses in Asia and rising energy prices. The Portfolio is 75% net long heading into tomorrow.

Sunday, November 21, 2004

Chart of the Week

CPI/PPI


Bottom Line: While some measures of inflation have spiked recently, due mainly to the effects of the hurricanes, they are not even to levels seen in 2000. As well, it is highly unlikely the CRB index, the broadest measure of commodity prices, will continue to rise near recent rates. The rise in commodity prices has been the main source of inflation thus far. Unit labor costs, which account for more than 70% of inflation, have remained well-contained.

Weekly Outlook

There are a few economic reports and some significant corporate earnings reports scheduled for release this week. Economic reports include Existing Home Sales(Tues.), Durable Goods Orders(Wed.), Initial Jobless Claims(Wed.), Final Univ. of Mich. Consumer Confidence(Wed.), New Home Sales(Wed.) and the Help Wanted Index(Wed.). Home Sales and Consumer Confidence have market-moving potential.

Campbell Soup(CPB-Mon.), Analog Devices(ADI-Tues.), Deere & Co.(DE-Tues.) and H&R Block(HRB-Tues.) are some of the more important companies that release quarterly earnings this week. Finally, the bond market will close at 2 p.m. ET on Wednesday and Friday, and the stock market will be open for a half day on Friday.

Bottom Line: I expect U.S. stocks to finish the week modestly higher on seasonal strength, better economic reports, declining energy prices, short-covering and bargain-hunting. New inflows into equity funds should also continue to boost shares. I still believe any pullback over the next few weeks will be mild as investors who missed the rally jump in, shorts cover to protect gains and new inflows are put to work on the long side. As I forecasted a few months ago, technology shares have substantially outperformed the market since August lows. I expect their outperformance to continue over the intermediate-term. My short-term trading indicators are still giving Buy signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

S&P 500 1,170.34 -1.2%

Click here for the Weekly Wrap by Briefing.com.

Bottom Line: U.S. stocks declined last week for the first time in a month on concerns over rising energy prices, higher inflation readings and a falling US dollar. The decline in the S&P 500 snapped the biggest three-week rally for the index in two years. Market action, while mildly negative, was healthy given recent gains. From their respective lows on 8/12/04, the S&P has returned 10.6% and the NASDAQ has soared 18.4%. I continue to expect oil to head towards $40/bbl. within the next few months. As I stated in the previous post, inflation readings should show deceleration in the near future. Almost all of spike in the latest PPI/CPI was a result of the hurricanes. Even with these spikes, readings are still very close to the historical averages for inflation. As far as the decline in the US dollar, I believe this is a positive as long as it stays orderly and doesn't go too far. Even gloomy Morgan Stanley economist Stephen Roach said, "Provided the currency shift doesn't get out of hand, a sustained but managed weakening of the dollar is good news for the global economy and world financial markets." Moreover, the most recent 20% decline in the dollar was accompanied by a 48.2% increase in the S&P 500.

Saturday, November 20, 2004

Economic Week in Review

ECRI Weekly Leading Index 132.70 +.38%

Empire Manufacturing for November was 19.76 versus estimates of 20.60 and a reading of 17.43 in October. Readings above zero indicate expansion. Shipments of goods accelerated this month, while new orders and hiring slowed in the region. "For the moment, we're looking at an economy that is likely to achieve 3.5% growth next year, which is perfectly acceptable," said Joseph Abate, an economist at Lehman Brothers.

The Producer Price Index for October rose 1.7% versus expectations of a .6% increase and a .1% gain in September. The PPI Ex Food & Energy rose .3% in October versus estimates of a .1% increase and a .3% gain in September. Energy costs rose 6.8%, the most since February 2003. However, the increases may not stick because crude oil prices have retreated 15% since peaking Oct. 25, Bloomberg reported. As well, the 1.6% surge in food prices and 2.7% surge in costs for construction equipment also may have been temporary, after September's hurricanes in Florida, Bloomberg said. "Publicly the Fed is in a position of saying that inflation remains well-contained, and I don't think this report will change their stance," said John Ryding, chief U.S. economist at Bear Stearns.

The NAHB Housing Market Index for November was 71 versus estimates of 70 and a reading of 71 in October. The last time the group's index was higher was in October 2003. The index "indicated that housing activity is holding at high levels, supported by better labor markets and still low mortgage rates," said Robert Mellman, an economist at JP Morgan.

The Consumer Price Index for October rose .6% versus estimates of a .4% increase and a .2% gain in September. CPI Ex Food & Energy for October rose .2% versus estimates of a .1% gain and a .3% increase in September. Consumer prices for all goods and services were up 3.2% for the 12 months that ended in October, slightly higher than the long-term average of 3.0%, Bloomberg reported. As a result of the hurricanes, last month's increase in food costs was led by the biggest gain in prices for fruits since June 1984 and the biggest for vegetables since February 1997, Bloomberg reported.

Housing Starts for October were 2027K versus estimates of 1960K and 1905K in September. Building Permits for October were 1984K versus estimates of 2000K and 1998K in September. The 6.4% surge in housing starts was a high for the year, suggesting home construction is helping economic growth accelerate. Demand in the northeast was the strongest as starts surged 20%. Toll Brothers, one of the largest U.S. builders, last week said backlogs in its fiscal fourth quarter rose 68% to a record $4.4 billion. "Housing demand continues to remain quite healthy," said Elisabeth Denison, an economist at Dresdner Kleinwort Wasserstein. The National Assoc. of Realtors recently raised its estimate of sales on new and existing homes for this year to an all-time record of 6.55 million, Bloomberg reported.

Industrial Production for October rose .7% versus estimates of a .4% increase and a .1% gain in September. Capacity Utilization for October was 77.7% versus estimates of 77.4% and 77.3% in September. Manufacturing, restrained since July, rose with gains by carmakers and the biggest gain in home electronics since March, Bloomberg said. Mining, which includes oil and gas extraction, rebounded after four hurricanes in August and September curtailed production, Bloomberg reported. "It's a surprisingly good report on manufacturing, with broad-based gain in durable goods," said Chris Low, chief economist at FTN Financial.

Initial Jobless Claims for last week were 334K versus estimates of 330K and 337K the prior week. Continuing Claims were 2792K versus estimates of 2800K and 2808K prior. The decline brings the weekly average of claims this year to 344,109 versus 402,000 for all of 2003, a sign businesses are holding on to workers as demand improves. Lower oil prices, reduced terror concerns and the resolution of the presidential election may continue to boost hiring, Bloomberg said. As well, productivity gains slowed in the third quarter from an annualized rate of 3.9% to 1.9%, suggesting additional orders may need to be filled by more workers. "We are seeing more job opportunities," said Jeffrey Taylor, founder and CEO of Monster.com, the biggest Web site for hiring. Openings for finance, accounting, health-care, administrative support, sales and construction positions have increased in the last few months, he said.

Leading Indicators for October fell .3% versus estimates of a .1% decline and a .3% fall in September. The Philadelphia Fed. Index for November was 20.7 versus estimates of 23.1 and 28.5 in October. "The recent declines in the leading index have not been large enough, nor have they persisted for long enough, to signal an end to the current economic expansion," the Conference Board said in a statement. The leading indicators were also affected by record-high oil prices, slumping stocks and bitter political rhetoric in October. "I'm upbeat about the economy in general and the fourth quarter in particular," said Ron Sargent, CEO of Staples. While the Philly Fed declined in November, a measure of expectations for business 6 months from now soared to 52.1 from 27.6 in October. The jump in the outlook suggests the economy should accelerate shortly, economists said. The prices paid measure was 53.9 versus a reading of 57.1 in October. Finally, 90% of Philly Fed. survey respondents said wages and salaries would rise next year, Bloomberg reported.

Bottom Line: Overall, last week's economic data were mildly positive. Measures of manufacturing activity were pretty decent and show strong signs of acceleration. Inflation is currently showing a temporary spike as a result of the record-setting hurricanes. However, I expect inflation to decelerate into next year. The housing market remains exceptionally strong and should stay relatively healthy for the foreseeable future. While some markets still remain exuberant, many have downshifted to more sustainable levels. Signs the job market is continuing to improve are evident, thus I expect better jobs reports through year-end. The weakness in the Leading Indicators for October is not of concern as it was greatly affected by the election. Over the last 3 weeks, the Weekly Leading Index has climbed.

Friday, November 19, 2004

Weekly Scoreboard*

Indices
S&P 500 1,170.34 -1.2%
Dow 10,456.91 -.8%
NASDAQ 2,070.63 -.7%
Russell 2000 613.44 -1.4%
S&P Equity Long/Short Index 1,001.88 +.9%
Put/Call .80 +6.7%
NYSE Arms 1.25 +50.6%
Volatility(VIX) 13.5 +1.3%
AAII % Bulls 64.10 +2.6%
US Dollar 83.31 -.6%
CRB 288.98 +2.0%

Futures Spot Prices
Gold 447.00 +1.9%
Crude Oil 48.89 +2.9%
Unleaded Gasoline 131.09 +4.4%
Natural Gas 7.11 -.6%
Heating Oil 148.26 +8.8%
Base Metals 118.54 +.2%
10-year US Treasury Yield 4.2% +.6%
Average 30-year Mortgage Rate 5.74% -.4%

Leading Sectors
Oil Service +3.2%
Semis +1.9%
Energy +1.3%

Lagging Sectors
Biotech -2.69%
Banks -2.9%
Airlines -3.6%

*% Gain or loss for the week

MId-day Update

S&P 500 1,171.89 -.99%
NASDAQ 2,077.87 -1.26%


Leading Sectors
Oil Service +1.51%
Energy +.93%
Commodity +.53%

Lagging Sectors
Homebuilders -2.54%
Semis -2.60%
Airlines -3.20%

Other
Crude Oil 47.70 +3.20%
Natural Gas 6.87 -.04%
Gold 447.80 +1.13%
Base Metals 118.03 -1.40%
U.S. Dollar 83.05 -.76%
10-Yr. T-note Yield 4.19% +1.96%
VIX 13.55 +4.47%
Put/Call .93 +52.46%
NYSE Arms 1.37 +47.31%

Market Movers
OSIP -9.0% after CSFB analyst Mark Augustine said estimates for Tarceva sales are unrealistically high and reiterated his underperform.
TASR -7.7% on Business Week report of insider selling.
NVDA +4.6% after it signed a multi-year agreement to cross-license some patents with INTC.
PLAY +55.6% on strong demand for IPO.
INCX +25.1% after beating 3Q estimates and raising 4Q outlook.
SRNA +18.5% after beating 3Q estimates and raising 4Q guidance.
ADSK +7.5% after beating 3Q estimates, eliminating dividend, announcing 2-for-1 split and boosting guidance.
ATU +7.1% after agreeing to buy Key Components from an investor group.
MMS +10.2% on Legg Mason upgrade to Buy.
JLG -14.9% after lowering 2005 estimates and CSFB downgrade to Neutral.
BCSI -11.3% after missing 2Q estimates and lowering 3Q guidance.

Economic Data
None of note.

Recommendations
-Goldman Sachs reiterated Outperform on INTC, MRVL, DNA, DIS, FSH, PETC, PG. Goldman downgraded MU, AMAT, AEIS to Underperform. Goldman raised NSM to Outperform.
-Citi SmithBarney upgraded RSH to Buy, target $40. Citi reiterated Buy on WYE, target $44. Citi reiterated Buy on G, target $48. Citi downgraded ANN, LTD and TLB to Sell. Citi reiterated Buy on UNM, target $20. Citi reiterated Buy on GE, target $38. Citi reiterated Buy on PETC, target $42.
-JP Morgan downgraded IRM to Underweight. JP Morgan rated MYK Overweight.
-UBS cut NCX to Reduce, target $40.
-CSFB cut TMK to Underperform.
-Banc of America rated AMZN Sell.
-Morgan Stanley cut IRM to Underweight, target $27.
-Legg Mason raised MMS to Buy, target $38.

Mid-day News
U.S. stocks are lower mid-day on rising oil and interest rates. Bank of France Governor Noyer said the central bank will sell 500 to 600 tons of gold over the next five years and increase reserves denominated in currencies to improve revenue and pay a higher dividend to the state, Bloomberg said. Pennsylvania's Senate approved a bill that would require utility companies to use alternative energy sources to generate 18% of the state's electricity by 2020, the AP reported. The median price of a home in the San Francisco Bay Area climbed to $552,000 in October, the San Francisco Chronicle reported. San Francisco International Airport expects to serve 840,000 travelers during Thanksgiving, the busiest holiday for the airport since 2000, the San Francisco Chronicle reported. Russia plans to auction control of OAO Yukos Oil's main business for as little as $8.6 billion to collect back taxes, threatening to bankrupt the country's biggest oil exporter after a 16-month dispute, Bloomberg reported. Oracle CEO Ellison probably won enough support among PeopleSoft investors to press on with his 17-month fight to buy the business-management software company, Bloomberg said. The dollar fell to its lowest in more than four years against the yen and dropped versus the euro after Fed Chairman Greenspan said foreign investors will tire of financing the record current-account deficit, Bloomberg reported. Crude oil is rising as bad weather disrupted tanker shipments from southern Iraq and attacks on pipelines threatened to slow exports from the north, Bloomberg said. Dolby Labs, the developer of a music and motion picture sound system that won Academy Awards, said it plans to raise $460 million by selling shares to the public for the first time, Bloomberg said.

Bottom Line: The Portfolio is slightly lower mid-day as my declining semi and software longs are more than offsetting my rising oil service and Russian ADR longs. I have not traded today and the Portfolio remains 100% net longs. Option expiration, rising oil and profit-taking are the main culprits behind today's losses. The declining dollar is not of great concern at this point as interest rates remain very low by historic standards. Those that missed the recent rally should use any weakness over the next few days to add long exposure. I continue to believe equities will extend recent gains as economic data show acceleration this quarter. I expect U.S. stocks to rise modestly into the close on short-covering and bargain-hunting.

Friday Watch

Earnings of Note
Company/Estimate
DWSN/.38
CHP/.10
SJM/.74

Splits
SSD 2-for-1

Economic Data
None of note.

Recommendations
Goldman Sachs reiterated Outperform on FSH, SYMC, DNA, NKE and Underperform on DDS, UNM. TheStreet.com(TSCM) shares may rise after Dow Jones agreed to buy MarketWatch.com, Business Week reported.

Late-Night News
Asian indices are mostly lower, led down by South Korea. OMI Corp., a NY-listed oil tanker owner, said it won't bid a second time for competitor Stelmar Shipping, TradeWinds reported. Short sellers of Kmart Holding and Sears Roebuck stock helped boost the companies' share prices yesterday, the Wall Street Journal reported. Allegations of anti-competitive practices against some individuals in the U.S. should not be applied to the whole of the insurance market, the Financial Times said. Texas Instruments and rival Qualcomm said they aim to make their first chips in China, the world's biggest handset market, as early as next year, Bloomberg reported. Citigroup invested $6.8 million for Yasser Arafat, Palestinian Authority documents show. At the same time, the late Palestinian leader was paying militants and channeling Authority funds into his personal accounts, Bloomberg reported. European drug stocks may fall after a U.S. health official said AstraZeneca Plc's Crestor cholesterol reducer and GlaxoSmithKline Plc's Serevent asthma drug need close safety reviews, Bloomberg said. Crude oil futures may extend four weeks of declines, a Bloomberg survey shows, after producer and consumer groups cut estimates for global demand and inventories rose in the U.S., Bloomberg reported. U.S. companies such as FedEx Corp. and NY Life Insurance are pleading with President Bush to start discussions on a Pacific Rim free-trade bloc as he heads to this weekend's regional economic summit, Bloomberg said.

Late-Night Trading
Asian Indices are -.50% to unch. on average.
S&P 500 indicated -.11%.
NASDAQ 100 indicated -.19%

BOTTOM LINE: I expect U.S. equities to open modestly higher and trade mixed into the afternoon. The market will likely end the week relatively flat, however I expects U.S. stocks to begin moving higher again next week. The Portfolio is 100% net long heading into tomorrow.

Thursday, November 18, 2004

Thursday Close

S&P 500 1,183.55 +.14%
NASDAQ 2,104.28 +.22%


Leading Sectors
Oil Service +2.43%
Semis +1.32%
Energy +.92%

Lagging Sectors
Retail -.60%
Drugs -1.28%
Iron/Steel -1.34%

Other
Crude Oil 46.22 unch.
Natural Gas 6.83 -.63%
Gold 442.50 -.09%
Base Metals 119.70 +.91%
U.S. Dollar 83.87 +.70%
10-Yr. T-note Yield 4.11% -.37%
VIX 12.98 -1.74%
Put/Call .61 -6.15%
NYSE Arms .93 +24.0%

After-hours Movers
MRVL +6.4% after beating 3Q estimates.
ADSK +6.7% after beating 3Q estimates, eliminating dividend, announcing 2-for-1 split and boosting guidance.
UNM +7.4% after settling with state and federal regulators who were investigating allegations the company improperly stopped paying benefits to clients.
SRNA +10.7% after beating 3Q estimates and raising 4Q guidance.
INCX +17.31% after beating 3Q estimates and raising 4Q outlook.
SIRI +18.2% after naming former Viacom President Mel Karmazin CEO.
BCSI -11.0% after missing 2Q estimates and lowering 3Q guidance.
LONG -6.46% after disappointing 3Q results.

Recommendations
Goldman Sachs reiterated Underperform on MMC, UNM and Outperform on ENH, DIS, DKS. BioLase Technology(BLTI), which makes laser dental and cosmetic systems, is luring investors following changes in its management and the introduction of a new product, Business Week reported. Tractor Supply(TSCO) shares may rise after the company increased prices in response to higher costs of fuel, steel and freight, Business Week reported.

After-hours News
U.S. stocks finished modestly higher today on led by a rebound in semiconductor shares and strength in the energy sector. After the close, Nike founder Phil Knight resigned as president and CEO of the company, the Wall Street Journal reported. Sirius Satellite Radio name former Viacom President Karmazin as CEO, Ad Age reported. Matsushita Electric, NEC and NTT DoCoMo have developed an operating platform using Linux for 3G phones, the Financial Times reported. Most German companies with U.S. stock market listings would like to quit the NYSE due to the increased cost of complying with U.S. regulations, the Financial Times said. Formosa Plastics' two naphtha cracking plants in Texas shut from Nov. 16 because of power outage, causing U.S. ethylene prices to rise by $50/ton, the Economic Daily News said. China's central bank my raise interest rates again as rising costs of steel, fuel and other raw materials stoke inflation concern, the Hong Kong Economic Journal reported. HannStar Display President Ding-hui expects the flat panel display industry to recover as early as March next year after clients digest their inventories, the Commercial Times reported. Disney said fiscal fourth-quarter profit rose 24% as its ESPN cable sports network boosted results, Bloomberg said. Genentech and OSI Pharmaceuticals said their Tarceva lung cancer drug won U.S. Food and Drug Administration approval. Vodafone, Telefonica SA, BT Group and France Telecom pledged to increase dividends and share buybacks, Bloomberg reported.

BOTTOM LINE: The Portfolio finished higher today on strength in my semi, oil service, wireless, RFID and telecom equipment longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market improved into the afternoon. Technology shares continue to display bottoming characteristics. The Bears must be very disappointed that AMAT's results were unable to send semis lower. Moreover, after-hours action bodes well for tech stocks tomorrow. I would still like to see measures of investor anxiety rise from current levels. Hopefully this will happen shortly to set table for another significant move upwards I foresee over the coming weeks.

Mid-day Update

S&P 500 1,182.59 +.05%
NASDAQ 2,099.27 -.02%


Leading Sectors
Oil Service +.91%
Airlines +.77%
HMOs +.40%

Lagging Sectors
Retail -.58%
Iron/Steel -1.31%
Broadcasting -1.62%

Other
Crude Oil 45.75 -2.33%
Natural Gas 6.85 -5.95%
Gold 441.10 -.90%
Base Metals 119.70 +.91%
U.S. Dollar 83.89 +.71%
10-Yr. T-note Yield 4.13% +.09%
VIX 13.06 -1.14%
Put/Call .69 +6.15%
NYSE Arms .86 +14.67%

Market Movers

Economic Data
Initial Jobless Claims for last week were 334K versus estimates of 330K and 337K the prior week.
Continuing Claims were 2792K versus estimates of 2800K and 2808K prior.
Leading Indicators for October fell .3% versus estimates of a .1% fall and a .3% decrease in September.
Philadelphia Fed. for November fell to 20.7 versus estimates of 23.1 and a reading of 28.5 in October.

Recommendations

Mid-day News

Bottom Line: The Portfolio is modestly higher mid-day on gains in my wireless and RFID longs. I have not traded today and the Portfolio remains 100% net long. The tone of the market is mildly negative as most stocks are falling on lighter volume. I am not paying too much attention to most economic numbers at this point due to the fact that most still reflect pre-election worries. I expect data to show U.S. economic acceleration within the next few weeks. Stocks will likely trade mixed into the close as falling energy prices offset economic worries. As well, measures of investor anxiety are still showing too much complacency.

Thursday Watch

Earnings of Note
Company/Estimate
ARO/.54
ADSK/.34
CLE/.29
DKS/.04
DITC/.27
ELBO/.29
GPS/.28
LTD/.10
MRVL/.21
NOVL/.05
VIP/1.94
DIS/.17
WSM/.23

Splits
FINL 2-for-1

Economic Data
Initial Jobless Claims for last week estimated at 330K versus 333K the prior week.
Continuing Claims are estimated at 2800K versus 2813K prior.
Leading Indicators for October are estimated down .1% versus a .1% decline in September.
Philadelphia Fed. for November estimated at 23.1 versus 28.5 in October.

Recommendations
Goldman Sachs reiterated Outperform on DHR, DO, RIG, XRX, AHC, DVN, MUR, NFX, PXD, SUN, XOM and Underperform on CVH.

Late-Night News
Asian indices are quietly mixed on a continuing consolidation of recent gains. Saddam Hussein diverted money from the UN oil-for-food program to pay millions of dollars to families of Palestinian suicide bombers who carried out attacks on Israel, the Sidney Morning Herald reported. Reuters Group Plc, the world's biggest publicly traded provider of financial information, may say it will start a fixed income trading system, the Financial Times said. European governments must cut bureaucracy to encourage drug development and accept the price they pay for medicines, the Financial Times said, citing a World Health Organization report. The U.S. and Australia won a trade complaint against European Union rules that protect traditional food names such as "feta" cheese and "Parma" ham, Bloomberg said. Iran must understand it is time to help Iraq as its neighboring country prepares to hold elections in January, U.S. Secretary of State Colin Powell said.

Late-Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated -.16%.
NASDAQ 100 indicated -.41%

BOTTOM LINE: I expect U.S. equities to open modestly lower and trade mixed into the afternoon. The Portfolio is 100% net long heading into tomorrow.

Wednesday, November 17, 2004

Wednesday Close

S&P 500 1,181.94 +.55%
NASDAQ 2,099.68 +1.01%


Leading Sectors
Semis +2.86%
Disk Drives +2.81%
Boxmakers +2.35%

Lagging Sectors
Biotech -.08%
Utilities -.90%
Airlines -1.07%

Other
Crude Oil 46.60 -.51%
Natural Gas 7.27 -.18%
Gold 445.10 unch.
Base Metals 118.62 +1.27%
U.S. Dollar 83.33 -.56%
10-Yr. T-note Yield 4.13% -1.78%
VIX 13.21 unch.
Put/Call .65 -5.80%
NYSE Arms .75 -55.62%

After-hours Movers
NFLX +10.3% after boosting 4Q subscriber growth and revenue estimate.
ISSC +9.8% after strong 4Q results.
HOTT +5.95% after meeting 3Q estimates.
NABI -12.6% after announcing disappointing results from its Phase II clinical trial for Altastaph.
MGAM -9.78% after meeting 4Q estimates and raising 1Q guidance.
CRM -9.3% on profit-taking after beating 3Q estimates and raising 05 guidance.

Recommendations
Goldman Sachs reiterated Underperform on PVH.

After-hours News
U.S. stocks finished higher today on strong economic reports, falling interest rates and optimism in the technology sector. After the close, senior presidential adviser Karl Rove called Nebraska Senator Ben Nelson, a Democrat, a few days ago to ask if he would like to succeed Ann Veneman as Agriculture Secretary, CNN reported. Pakistan's government said India's withdrawal of a first group of soldiers from Jammu and Kashmir with help the peace process between the South Asian neighbors, Agence France-Presse rerpoted. U.S. lawmakers agreed on a plan to ban taxes until 2007 on Internet access provided by companies such as MSN and AOL, Bloomberg said. Medtronic, the world's largest maker of devices that regulate heart rhythm, said fiscal second-quarter profit rose 13% because of higher sales of defibrillators, Bloomberg reported. Applied Materials, the world's biggest maker of semiconductor-production equipment, said fourth-quarter profit rose to its highest level in four years on demand from computer-chip makers for new machines, Bloomberg reported.

BOTTOM LINE: The Portfolio finished higher today on strength in my retail, semi, steel and RFID longs. I exited an internet long in the afternoon and added NTE long, thus leaving the Portfolio 100% net long. I am using a $18.75 stop-loss on this position. The tone of the market deteriorated modestly throughout the afternoon on rising oil prices and profit-taking. However it was still a very good day for the Bulls considering recent gains. I continue to expect U.S. stocks to rally, at least through year-end, as accelerating economic growth results in companies easily beating recently lowered 4Q estimates. Shorts will continue to cover, funds will chase performance and new inflows will result in continued bargain-hunting on the long-side.

Mid-day Update

S&P 500 1,187.25 +1.0%
NASDAQ 2,109.52 1.49%


Leading Sectors
Semis +4.14%
Disk Drives +3.82%
Boxmakers +3.0%

Lagging Sectors
Hospitals +.41%
Airlines +.20%
Utilities -.55%

Other
Crude Oil 46.08 -.02%
Natural Gas 7.14 +.22%
Gold 445.00 +1.02%
Base Metals 118.62 +1.27%
U.S. Dollar 83.37 -.51%
10-Yr. T-note Yield 4.14% -1.55%
VIX 13.00 -1.59%
Put/Call .63 -8.70%
NYSE Arms .52 -68.64%

Market Movers
S +22.5% after Kmart agreed to buy the company for $11 billion to create the third-biggest U.S. retailer. KMRT +17.6%.
HPQ +5.1% after beating 4Q estimates and raising 1Q/2Q 05 guidance.
NTAP +16.6% after beating 2Q estimates and raising 3Q outlook.
MO +4.6% after cigarette makers asked a federal appeals court to block the Justice Department from using an organized crime statute to get $280 billion from the industry in a civil court lawsuit now on trial in Washington.
MSO +17.0% on optimism over greater sales due to S/KMRT merger.
INSP -9.1% on Merriman Curhan downgrade to Neutral.

Economic Data
Consumer Price Index for October rose .6% versus estimates of a .4% rise and a .2% gain in September.
CPI Ex Food & Energy for October rose .2% versus estimates of a .1% increase and a .3% rise in September.
Housing Starts for October were 2027K versus estimates of 1960K and 1905K in September.
Building Permits for October were 1984K versus estimates of 2000K and 1998K in September.
Industrial Production for October rose .7% versus estimates of a .4% gain and a .1% rise in September.
Capacity Utilization for October was 77.7% versus estimates of 77.4% and 77.3% in September.

Recommendations
-Goldman Sachs reiterated Outperform on MERQ and BAX.
-Citi Smith Barney said to switch from RSAS to VRSN, target $38. Citi reiterated Buy on KMB, target $72. Citi reiterated Buy on MAR, target $63. Citi reiterated Buy on WTS, target $35. Citi reiterated Buy on HD, target $48. Citi reiterated Buy on SPLS, target $37. Citi reiterated Buy on WMT, target $65. Citi reiterated Buy on JCP, target $50.
-JP Morgan raised RSG to Overweight. JP Morgan rated HGR Underweight.
-Prudential Equity downgraded WMT to Underweight, target $57.
-Bear Stearns raised CTMI to Outperform, target $18.
-Merrill Lynch raised DOW to Buy, target $65.
-Morgan Stanley raised UTSI to Overweight, target $28.70.
-Raymond James raised TSRA to Outperform, target $40.

Mid-day News
U.S. stocks are higher mid-day on optimism over the prospects for technology shares and better economic growth. Microsoft will buy a stake in Vintela, which makes software to connect Windows operating system computers with those running other systems such as Linux or Unix, the Wall Street Journal reported. About 205,000 nurses have been hired by U.S. hospitals and medical facilities since 2001, lured by higher wages and better benefits, and more are needed to ease a shortage, the Wall Street Journal reported. SBC Communications plans immediately to charge a fee for Internet phone calls connected through its local phone network, and may have the fee in place by tomorrow, the Wall Street Journal reported. Trump Hotels & Casino Resorts will file for Chapter 11 bankruptcy protection as early as Monday, the Philadelphia Inquirer reported. Iran is producing enriched uranium at a secret facility in Tehran that United Nations inspectors haven't been told about, according to an Iranian opposition group, the NY Times reported. Motorola expects sales of new cell phones to more than quadruple in 2005, Reuters reported. A Walt Disney promotion of its ABC show "Desperate Housewives" that featured partial nudity during a Monday Night Football broadcast will be reviewed by the U.S. FCC, CNBC reported. SBC Communications selected Microsoft to provide the software for a tv-over-Internet service, Bloomberg said. U.S. housing starts rose 6.4% in October to the highest level of the year, suggesting home construction is helping drive economic growth, Bloomberg reported. U.S. industrial production increased by the most in three months in October, helped by a jump in manufacturing of automobiles and home electronics, Bloomberg said. Kmart, the retailer controlled by billionaire Edward Lampert, agreed to buy Sears for $11 billion to create the third-biggest U.S. retailer, Bloomberg said. JetBlue Airways may accelerate plans to begin flights to Chicago by bidding on Midway Airport gates leased by bankrupt ATA Holdings, Bloomberg said. U.S. Treasury notes rose after the CPI failed to increase as much as some traders expected, Bloomberg reported.

Bottom Line: The Portfolio is substantially higher mid-day on strength in my retail, semi, wireless and steel longs. I have not traded today and the Portfolio is still 100% net long. The tone of the market is very strong today as volume very healthy and many more stocks are advancing than declining. Interest rates are falling again, notwithstanding the Bears and pundits attempts to paint inflation as a serious problem. It is very good to see the outperformance by semis and this should continue through year-end as accelerating demand eliminates most of the inventory issues plaguing these stocks. I expect U.S. equities to trade mixed into the close as positive news is offset by low levels of investor anxiety.