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President Bush submits $2.23 trillion budget plan

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The major indexes continue to hold the bulk of their morning gains after this morning's Institute for Supply Management said its January ISM reading 53.9% sipped from December's revised 55.2% reading, but still signaled modest expansion at the nation's industrials level.

The ISM news had the major indexes trading at their best levels of the session, but have been rather "flat line" for the latter- half of the morning session with the Dow Industrials (INDU) holding a 77-point gain at 8,130, while the broader S&P 500 Index (SPX.X) shows a 6-point gain at 862. The broader-yet NASDAQ Composite (COMPX) holds an 8-point gain with gains in Computer Technology (XCI.X) 500 +1.37%, Software (GSO.X) 106 _1.36% and Fiber Optic (FOP.X) 52.14 +1.30%, offsetting weakness in Telecom (IXTCX) 114 -1.05%.

In Washington, President Bush submitted a $2.23 trillion budget plan for fiscal 2004 to Congress, calling on lawmakers to boost spending on defense and homeland security while enacting $670 billion in tax cuts over the next 10 years.

Meanwhile, Secretary of State Colin Powell pledged to provide "straightforward, sober and compelling" proof this week that Iraq is hiding banned weapons in violation of U.N. demands.

This weekends Columbia space shuttle tragedy has Alliant Technology (NYSE:ATK) $48.40 -10.96% seeing the most downside action, and company officials have come out and confirmed previous guidance given in its third-quarter guidance issued on January 23rd, which had the company giving guidance for 2003 of $3.26 per share, versus consensus estimates at the time of $3.24 per share. The company was cautious in today's statement of reaffirming guidance, with the disclaimer of "In the forward looking statments, the company does note that actual results could differ materially from anticipated results, including unforeseen delays in NASA's Space Shuttle program, changes in governmental spending and budgetary policies, economic conditions and equity market returns."

While news out of Washington and President Bush's proposed budget have had little impact on the equity markets, treasury markets while under some selling pressure have seen the longer-dated 30- year March Treasury futures (us03h) 112'00 -0.16% rebound from their lows of the session after the President Bush unveiled his proposed budget. The President's five-volume plan projected increased deficits of $304 billion this year and $307 billion in fiscal 2004, which begins October 1, 2003. Under such a plan, deficits would total $1.08 trillion over the next five years according to the White House's estimates.

The increased "red ink" marks a line in the sand at which partisan lawmakers contend that the President's past tax cuts and call for further tax cuts threaten long-term fiscal stability.

A quick look at the February Gold futures contract (gc03g) 371.50 +0.86% has the contract threatening a closing contract high at current levels, and contract high of $373.70 from January 27. Precious metals equities as depicted by the Gold/Silver Index (XAU.X) 76.39 -0.79% are rather "quiet" in today's session and hovering near their morning lows.

The Morgan Stanley Healthcare Index (HMO.X) 510 -2.76% leads today's sector loser list after Accredo Health (NASDAQ:ACDO) $29.35 -21.75% reported earnings this morning for its recently completed Q2 (December) of $0.35, which beat estimates by a penny, but saw its shares sold lower after the company revised its 2003 revenue outlook to $1.40-$1.45 billion, which was lower than previous guidance for full-year revenues to be between $1.45-$1.50 billion.

Jeff Bailey

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