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Positive comments gives retailers a boost

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Retailers as depicted by the S&P Retail Index (RLX.X) 280.54 +2.5% are getting a shot in the arm after some positive comments from Prudential. According to Prudential, the broadline retail group began November on solid footing; noting that TGT $31.28 +4.9% was above plan during the week. Prudential's favorite growth stocks at these prices include TGT, FDO $30.61 +2.37%, WMT $54.11 +2.09%, JWN $22.20 +3.88%, DLTR $25.14 +2.94% and HD $27.17 +3.58%. Prudential also said it finds FD $29.99 +2.81% and S $22.71 -1.64% most attractive on the value side. However, Prudential says it would continue to avoid the wholesale clubs.

Shares of trading firm Knight Trading (NASDAQ:NITE) $4.50 -5.85% disclosed in its 10-Q filing today, that the SEC has issued a formal order of investigation into allegations by a former employee of improper trading practices. NITE notes that this allegation was reported in a June 4 Wall Street Journal article in which the Journal reported that the that company was the subject of an SEC and NASD probe into allegations by a former senior executive that it engaged in improper trading during the technology stock boom. The former head of Knight's institutional trading desk alleges an elaborate system of trading-rule violations (including front running) at the company that cost investors millions of dollars. The filing claimed that most of the questionable trading was done by two employees.

United Microelectronics (NYSE:UMC) $4.35 +3.81% trades higher despite trading floor talk that Salomon Smith Barney is making a proprietary call on UMC capex for 2003, based on comments form UMC's CEO that 2003 capex would be well below 2002. Salomon saying it now sees a 56-63% decrease to $300-$350 million in 2003. Though UMC is only 1.5% of total semiconductor capex, the sharp decline could have a psychological impact in semi equipment stocks.

However, today's "psychology" toward semiconductors appears to be on the mend after a dose of losses yesterday as the Semiconductor Index (SOX.X) 300.24 +6% battles back to the psychologically important 300 level. Semi-equipment heavyweights has Applied Materials (NASDAQ:AMAT) $15.30 +5% bouncing from its test of upward trend 21-day SMA, KLA-Tencor (NASDAQ:KLAC) $36.23 +3.57% and Novellus Systems (NASDAQ:NVLS) $31.72 +5.34% acting technically similar.

The Dow Industrials (INDU) 8,486 +1.52% has recouped the bulk of yesterday's 188 point decline with a 127 point recovery today, with shares of Hewlett Packard (NYSE:HPQ) $15.51 +4.37% recouping 1/3 of yesterday's decline after the company's President resigned to pursue other interests. Also showing gains are cyclical names Alcoa (NYSE:AA) $23.21 +3.6% and Du Pont (NYSE:DD) $42.61 +3.44%.

On the downside in the Dow, shares of Philip Morris (NYSE:MO) $40.50 -5.7% are hit lower after the company says it expects to meet 2002 EPS growth target of 3-5%. However, given soft domestic tobacco industry volume, MO is not in a position to confirm previous 2003 forecast of 8-10% underlying diluted EPS growth, saying industry volume, as reported by Management Science Associates, is softer than originally anticipated, due primarily to a greater influx of both cheap imported cigarettes and counterfeit cigarettes. Philip Morris expects to provide 2003 guidance when it reports Q4 results in late January.

Volume is still rather anemic as traders return from yesterday's Veteran's Day. NYSE volume is running just under 800 million shares, while NASDAQ volume is approaching the 1 billion mark.

Breadth is positive at both the NYSE and NASDAQ with advancer outnumber decliners on both exchanges by a 2 to 1 margin.

New highs versus new lows shows some weakness with 16 stocks achieving new 52-week highs versus 31 stocks trading new lows, while NASDAQ has 25 stocks trading new highs versus 39 stocks hitting new lows.

Bond traders have been bidding Treasuries higher with the 10-year December futures (ty02z) 115'095 +0.21% showing gains, while the benchmark bond's YIELD ($TYX.X) falls to 3.819%.

Jeff Bailey

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