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Tough tone from State of the Union has futures soft

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In last night's State of the Union address, President Bush said that his administrations top focus would be the recovery of the U.S. economy, but the bulk of his speech addressed the threats he felt Iraq's President Saddam Hussein presented to the world and expressed deep resolve in either disarming Iraq, or removing Hussein from power.

Shortly after the Presidents speech began, S&P futures (sp03h) started to weaken from their 854.50 settlement and have continued that trend lower, reaching a session low of 836.00. As the opening bell approaches, S&P futures have been improving from their lows, but still trade down 6.7 points at 847.80. NASDAQ futures (nd03h) are down 4.50 points at 994.00, while Dow futures are off 65 points at 7,980.

Fair value for the S&P 500 today is $0.11. That price will not change during the session. HL Camp & Company has their computers set for program buying at $0.16 and set for program selling at $-2.90. Fair value for the NASDAQ-100 today is $1.71.

As U.S. investors look for a lower open, the President's speech and firm talk on Iraq has Asian markets under selling pressure, while European markets see a mixed to lower trade. In Asia and the Pacific Rim, Hong Kong's Hang Seng is lower by 0.94%, Japan's Nikkei 225 is down 2.28%, while South Korea's Seoul Composite is down 2.87%. In Europe, France's CAC 40 is showing a gain of 0.45%, Germany's DAX is down 0.91% while the United Kingdom's FTSE-100 is modestly lower by 0.17%.

Pre-market action here in the U.S. has shares of semiconductor equipment giant Applied Materials (NASDAQ:AMAT) $13.24 gaining 26-cents a share to $13.50 and the most actively traded stock in the pre-market after UBS upgraded the stock to "buy" from "neutral" based on valuation and the implied return to UBS's 12- month price target of $18. UBS did caution that a 12-month investment horizon and near-term trading direction are not related as the semiconductor equipment arena and lowering of capex expenditures cast a cloud over any short-term catalysts for equipment sales growth.

After trading a fresh 52-week low for a seventh consecutive session, Deutsche Securities is cutting their estimates on DRAM maker Micron Technology (NYSE:MU) $7.94. Deutsche cut their FY03 estimates to ($2.25) from ($1.53), versus consensus of ($1.34), due to their lower DRAM average selling price forecast. The firm also raises their FY04 estimates to ($1.05) from ($1.22) due to lower revs and lower costs; on the basis of these revisions, firm believes MU's cash balance will reach critically low levels by fiscal Q4, implying the need for capital raising in the next 1-2 quarters. A note here is that this morning, MU announced a $500 million convertible offering. However, firm believes that estimates cuts could be a catalyst for market expectations reaching a trough, and says their bias on their "hold" rating is becoming more positive. Deutsche stated a price target for MU at $13.

Jeff Bailey

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