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Telecom Downgraded

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Merrill Lynch sees the mobile infrastructure market shrinking by 5 percent over the next year, and downgraded shares of Marconi (MONI) and Alcatel (ALA). Motorola (MOT) and Ericsson (ERICY) were also downgraded.

UBS Warburg upgraded broker-dealers on the belief that the sector is due for a rebound. Lehman Brothers (LEH), Goldman Sachs (GS), Merrill Lynch (MER), and Morgan Stanley (MWD) were upgraded to a buy.

Second quarter productivity was revised lower by the Labor Department, but not as low as economists had anticipated. Productivity rose 2.1%, not the 2.5% increase that was initially reported, but above consensus estimates of 1.9%. Factory productivity rose a better than expected 1.1%, which helps to confirm yesterday's NAPM data.

U.S. auto sales fell 6% in August, but price incentives are helping to maintain demand. DaimlerChrysler (DCX) experienced the biggest decline, with sales dropping 24%. Sales at Ford (F) and General Motors (GM) fell 7.5% and 7.6% respectively.

A Tokyo newspaper is reporting that Japan's economy may have contracted by as much as 1.2% in the second quarter. That keeps the world's second largest economy mired in a ten-year slump. The Nikkei closed down 1.61%.

When we add it all up, Dow futures are down 9 points, S&P and Nasdaq futures are up 2.5. According to HL Camp & Company, fair value for the S&P 500 is $1.47, with buy programs set at $2.98, and sell programs ready to go at $0.36.

Bond yields have backed off this morning after yesterday's big gains, and look like they won't be breaking any resistance levels today.

Jeff Canavan
Assistant Analyst

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