CLOSING COMMENTS 10-11-04

Following weeks of ignoring soaring energy prices, tepid economic data and many corporate earnings warnings, stocks staged a broad retreat last week, as record energy prices, soft retail sales and a disappointing jobs report sent all of the indexes lower for the week. The Russell and NASDAQ, which led the recent rally, fell the furthest, as small-cap stocks fell 9 points, or 1.6%, but are still up 3.4% for the year. The NASDAQ lost 22 points, or 1.1% to end the week at 1,919, down 4.2% for the year. The Dow dropped 137 points, or 1.3% and is off 3.8% this week. The S&P 500 lost 9 points last week, or 0.8%, but is up 0.9% for the year, closing at 1,122.

The steady rise in crude oil prices has truly been relentless, and likely contributed to the sluggish September retail sales. The breakdown of peace talks in Nigeria, weaker than expected U.S. oil inventories, the threat of a labor strike in Norway, and continued shutdowns in the Gulf Coast following Hurricane Ivan all contributed to an 8% increase in crude prices last week. In fact, oil has increased in price for 15 of the last 17 trading sessions. Crude oil surged to a record $53.40 a barrel on Friday.

The pharmaceutical sector has often been widely regarded as a "safe haven" during tough economic times, but the withdrawal by Merck (MRK) of their blockbuster arthritis drug Vioxx a negative tone the sector has emerged, raising concerns at Pfizer (PFE) and Johnson & Johnson (JNJ) as well. Since Merck announced the withdrawal, its shares have lost one-third of their value, in the process wiping out over $30 billion of market capitalization. Pfizer, which is off 15.6% for the year, fell to its lowest level since March 2003. Johnson & Johnson fell 3% last week, helping the American Stock Exchange Pharmaceutical Index set a new 52-week low. If President Bush is re-elected, pharmaceutical stocks could rally, setting up a potential trading scenario.

What can investors expect this week? Earnings Season begins, and Tuesday morning it begins with Merrill Lynch (MER) and State Street (STT) releasing results. After the close, Intel (INTC), Linear Tech (LLTC) and Yahoo! (YHOO) post results. Intel had previously reduced expectations during its mid-quarter update. Wednesday afternoon, Apple Computer (AAPL), Novellus (NVLS), Lam Research (LRCX) and QLogic (QLGC) release results. Thursday morning, Abbott Labs (ABT), Bank of America (BAC), Citigroup (C), General Motors (GM) and Nokia (NOK) announce quarterly results. After the close, Juniper Networks (JNPR) posts earnings. Conferences this week include, SG Cowan who holds their 7th Annual Therapeutic Conference beginning Tuesday for two days in New York. Bear, Stearns & Co. holds a two-day Retail Investor Outing beginning Wednesday. BIO holds an Emerging Company Investor Forum in San Francisco starting Wednesday for three days. The final Presidential Debate is scheduled for Wednesday evening. Much of the economic data will be released late in the week, as Thursday brings initial weekly jobless claims, while on Friday Retail Sales, Industrial Production and Capacity Utilization, the Michigan Consumer Confidence Index and the Producer Price Index will all be announced.

Stay Tuned!