Morning Update

"If you would only recognize that life is hard, things would be so much easier for you." - Louis D. Brandeis

Morning News of Note:

• AAPL: Apple Looks to Sell Videos -- and Maybe iPods to Play Them Apple helped ignite the digital music craze. The next possibility: video. The Cupertino, Calif., computer and electronics company has recently held discussions with major recording companies, seeking to license music videos to sell through Apple Computer Inc.'s iTunes Music Store, according to several people in the media industry briefed on the discussions. (Full Story) WSJ
• SCHL: A Magical Moment for Publishing New Harry Potter Book Flies Off Shelves in U.S., Breaking One-Day Record Readers are still wild about Harry. Scholastic Corp., the U.S. publisher of J.K. Rowling's Harry Potter series, said a record 6.9 million copies of "Harry Potter and the Half-Blood Prince" were sold in the first 24 hours in the U.S. after the book went on sale at 12:01 a.m. Saturday. There was so much interest in the sixth title in the wildly popular series that the New York publisher rushed out a second printing of 2.7 million copies before the official release date, bringing the total number of books in print in the U.S. to 13.5 million. (Full Story) WSJ
• Semi-Cap Equipment: After a Big Year, Semi-Cap-Equipment Sector Braces for a Downturn in Sales ONE THING IS CONSTANT about the semiconductor capital-equipment industry: Eventually, there will be a slowdown. You may not know when, how long or how low business will go, but you know that it will slump. That was the ax hanging over the heads of the thousands attending the world's largest semi-cap-equipment show last week in sunny San Francisco. (Full Story) BARRONS
• Defense Contractors: Crunch Time Guns, Butter and Budget Battles THE GLOBAL WAR ON TERRORISM IS ONLY beginning, the experts say, but the party for old-line defense and aerospace stocks may be just about over. Big defense companies like General Dynamics, Lockheed Martin and Raytheon have handily beat the broad market so far this decade, the result of both rising global tensions after 9/11 and an earlier effort by the Pentagon to lift the profitability of contractors. A Dow Jones index of U.S. aerospace and defense companies is up more than 70% for the past five years, while the Dow Industrials are off 3.4%. (Full Story) BARRONS
• ANF: Abercrombie & Fitch stock may gain more - Barron's (70.01 ): Barron's discusses Abercrombie & Fitch, saying that denim is enjoying a revival as the most versatile fashion item for stylish teens and young adults, regardless of whether they're dressing up or down. The trend has made Abercrombie & Fitch stock fashionable. The shares, recently around 70, have soared nearly 80% in the past 12 months. The catalysts: robust sales growth and solid operating margins.

Market Comments: The market opens down this am. CNBC has been citing a weak earnings reports from Citigroup and 3M as the reason, but don't discount the fact that the market has been up for 7 straight days and needs to take a breather as investors ring the register on some of the gains.

Earnings seasons picks up the pace this week, and should give us a better idea of how the market is prepared to handle this round of earnings reports. I think that current consensus estimates are reasonable, and could continue to be revised slightly higher going forward. This should help to keep a bid under the market.

long C