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From Briefing.com: 4:30PM: The market's major averages spent the session locked inside a tight trading range, closing in mixed fashion as inflation concerns and soaring bond yields weighed upon sentiment...

A lack of influential leadership and a better than expected September ISM Index read sparked selling pressure across the equity market and reversed an upside open while simultaneously sending the bond market sliding. Checking in at 59.4, the data reflected a 10.8% jump in manufacturing growth over last month and far surpassed the 52.0 read that economists had expected. While the data were essentially bullish for stocks, the figure showed that, even post-Katrina, strong economic growth can also trigger expectations that the Fed has more hikes in store to stave off rising inflationary pressures...

With respect to sector performance, the Financial sector's day-long 0.2% effectively stunted the overall market's upward advances, as weakness in thrifts and mortgages as well as in a variety of insurance issues overshadowed a 0.5% rise in brokers for which Merrill Lynch (MER 62.20 +0.85) - following a cover story in Barron's that named the issue the most fundamentally compelling investment opportunity in the space - was largely responsible. Continued focus upon the Fed's tightening policy, the flattening yield curve, and consequential weakness in the bond market kept banks at the flat line, further contributing to the overall market's static stance... Healthcare (-0.01%) turned in a passive performance, suffering from broad-based selling pressure that negated the effect of a surging biotech group (+2.3%) and further halted the indices' attempts to break from the day's trading range...

10:01AM Synopsys HSPICE high-voltage MOS transistor model adopted by UMC (SNPS) 18.91 +0.01: -Update- Co announces that UMC (UMC), a semiconductor foundry, has adopted Synopsys' new high-voltage MOS transistor model and is distributing model parameters to UMC customers who use the HSPICE simulator. This new model will help UMC customers improve the quality of results and time to results for their design projects.

9:16AM Zoran announces MediaTek Patent Claims Declared Invalid (ZRAN) 14.30 :Judge Barton of the ITC found that none of Zoran's optical disk controller chips infringe any claim of the two patents asserted against Zoran. In a further blow to MediaTek, Judge Barton found each of the asserted claims of the '031 patent invalid. Judge Barton further found that MediaTek failed to establish that it has a domestic industry in the United States relating to the MediaTek patents. The result of these findings is a complete victory for Zoran over MediaTek's retaliatory counter-suit.

9:38AM NDCHealth (NDC) Banc of America Sec downgrades Buy to NEUTRAL. Target $20 to $19.5. BofA downgrades NDC citing the early termination of the Hart-Scott-Rodino waiting period for the co's sale to Per-Se Technologies, with no apparent interest from other bidders.
9:37AM Blue Nile (NILE) Legg Mason upgrades Hold to BUY. Target $40. Firm says they have previously stated that they would be purchasers of NILE shares at opportunistic entry points, and believe they are currently at such a point.

9:37AM LTX Corp (LTXX) Morgan Stanley upgrades Underweight to EQUAL-WEIGHT. Target $5.5 to $4.5. Firm says that two factors are likely to limit any near-term underperformance: 1) recovery in the T.A.P. industry should benefit LTXX in terms of orders and more stable pricing, and 2) recent sell-off has reduced near tern downside risk.

9:34AM Casual Male (CMRG) WR Hambrecht initiates BUY. Target $9. WR Hambrecht initiates CMRG as they believe a premium is warranted given the initiatives that the co has undertaken as part of its turnaround strategy, combined with its strong balance sheet and the strength for its mgmt team. They believe this will enable the co to grow its niche position within the men's apparel mkt.

9:34AM Cybex International Inc. (CYB) Adams Harkness downgrades Buy to MKT PERFORM. Adams Harkness downgrades CYB as they believe that the co will be unable to meet their EPS ests for the remainder of the year. Firm cuts their FY05 and FY06 ests as they believe business has been challenging in recent months and will likely continue in the near future. They are also concerned that certain new products may get pushed into next year.

9:33AM Nara Bancorp (NARA) Harris Nesbitt upgrades Neutral to OUTPERFORM. Target $14 to $18. Harris Nesbitt upgrades NARA following the co's confirmed previous EPS guidance of $1.00-$1.04. Firm says despite their previous concerns about the regulatory MOU and personnel changes since the beginning of this year, mgmt's guidance confirms a continued strong EPS outlook. Firm also raises their ests for FY05 and FY06 based on a higher loan growth outlook and expected margin expansion.

2:59PM Wal-Mart (WMT)
43.97 +0.15: Wal-Mart on Saturday estimated that same store sales for September rose 3.8% from a year ago - near the high end of its 2% to 4% forecast - providing fresh insight into consumer spending patterns, particularly within its core low income customer base, and the combined impact of Hurricanes Katrina and Rita. The company said demand for hurricane-related supplies (e.g. bottled water, canned food, batteries, etc.), as well as better than expected results from its Sam's Club division due to higher gasoline prices, helped boost sales for the period. Excluding the impact of gasoline, the same store sales gain would have been a still impressive 3.2%.

During the month of September, Wal-Mart had to close 126 locations due to Hurricane Katrina and 155 locations due to Hurricane Rita. However, as of Saturday, October 1st, all but 15 locations have been reopened. The company said 3 supercenter locations due to the impact of Rita and 12 locations due to Katrina remain closed. Despite this, Wal-Mart, which was largely expected to bear the brunt of higher energy costs, provided an encouraging number, considering that the results were completely post-Katrina yet showed solid growth.

While the estimated sales results for September were comforting, analysts will undoubtedly be focused on Wal-Mart's updated quarterly outlook and further indications on the impact of rising gasoline prices on lower to middle income consumers. During the second quarter, Wal-Mart grew at the slowest pace in nearly four years and offered a disappointing third quarter profit outlook, as gas prices continued to hamper discretionary spending within its core customer base.

Wal-Mart, as well as other major retailers, are expected to report September sales results on Thursday. Furthermore, the company is expected to provide an updated profit forecast for the fiscal third quarter, lending additional insight into the spending behavior of consumers given rising energy costs. The company, which has warned that high gasoline prices will reduce consumer spending, as well increase transportation costs, predicted in August that Q3 earnings would be between $0.55 and $0.59 per share. Analysts are currently expecting EPS of $0.58, according to Reuters Estimates.

For the near term, Wal-Mart continues to cope with challenging conditions, with gas prices showing little signs of easing. Although it faces relatively easier comps in the months ahead (September 2004 comps rose 2.3%, October +2.8%, November +0.7%, and December +3.0%) lower gas prices are the catalyst needed to move the stock.

Shares of Wal-Mart rose as high as 1.7% to $44.42 during the regular trading session. Year-to-date, the stock is down nearly 17%, as the company continues to face a tough operating environment, punctuated by higher gasoline prices. However, given the recent sell-off in the stock, Wal-Mart presents an interesting value play. On a forward basis, shares are trading at 16.5x the estimated FY06 EPS of $2.67 compared to its 5-year historical average of 30.9x. With much of the downside risk due to higher energy prices largely factored into the stock, the longer-term upside potential appears attractive. --Richard Jahnke, Briefing.com

11:20AM NRG Energy (NRG)

44.09 +1.49: NRG Energy announced Sunday that it plans to acquire privately held Texas Genco for approximately $5.8 billion, bolstering its portfolio of assets amid growing consolidation in the merchant power generation industry. The deal includes $4 billion in cash and $1.8 billion in stock, plus the assumption of $2.5 billion in debt - valuing the deal at roughly $8.3 billion. According to the company, the acquisition is expected to be completed in the first quarter of 2006 and should be immediately and significantly accretive to both earnings and cash flow.

"With Texas Genco, NRG will have the broadest geographic reach and an unmatched portfolio of quality power generation assets of any independent power producer, with a significant presence in the key competitive wholesale power markets in the U.S," the company said. Furthermore, "the combination is expected to drive substantially greater earnings and cash flow per share for NRG that will enhance the company's financial strength and flexibility and enable it to pursue additional growth opportunities."

"Texas Genco is an ideal strategic fit with NRG," added David Crane, NRG's President and CEO, in a statement. It is one of the largest wholesale electric power generating companies in the United States and the second largest generator in its region, which includes most of Texas. The company operates 11 power stations, with more than 11,000 megawatts of generating capacity. As such, once the deal is completed, NRG will have U.S. generating capacity of approximately 24,000 megawatts that is fuel, dispatch, and geographically diverse.

Since emerging from bankruptcy in December 2003, NRG, led by CEO David Crane and a newly installed management team, has established an exceptional record, albeit brief, of meeting or surpassing both operational and financial targets. As a result of its reorganization, the company has implemented a number of efficiency and cost initiatives to help restore its financial health. The recently announced transaction represents an important step for the company. With Texas Genco, "we will further increase our financial strength and flexibility and enhance our geographic breadth, technical expertise and diversity of fuel sources," Mr. Crane said. Furthermore, he believes these advantages will allow the company to "make even more of a difference as our country faces up to the challenging energy environment that currently exists."

The deal, which must still meet other closing conditions, including state and federal regulatory approval, should enable NRG to provide more stable and lower cost energy solutions to its regions. As such, the combination of Texas Genco makes strategic sense and represents a necessary move in the face of continued consolidation in the industry. --Richard Jahnke, Briefing.com

11:16AM DVD Wars

The DVD industry, which is suffering from slumping sales, is undergoing a massive upgrade cycle over the next decade to high definition DVD. There is a war brewing, however, over the next-generation DVD technology. Last week, both Microsoft (MSFT) and Intel (INTC) came out in support of the competing Toshiba-led format, called HD DVD. Paramount Home Entertainment, meanwhile, stated today it will release high-definition movies on the Sony-led Blu-ray standard. To make the battle even more interesting, though, Paramount also plans to release movies in rival format, HD DVD.

The motivation for the mounting battle is clear. The Sony and Toshiba-lead consortiums are competing to becoming the next standard to replace VCRs and DVD recorders in the evolution to HDTV. The battle is reminiscent of the one fought and lost by Sony over Betamax vs. VHS. This time, Sony is hard pressed not to repeat the loss. The pioneer of the portable audio player, known as the Walkman, back in 1979 has lost considerable ground to rival Apple. Now under a new CEO, it is attempting to reverse course after years of declining profits due to slumping sales, flat-panel price erosion, and slow market response, to reclaim its brand cache and market-leading status. Back in May, both Sony and Toshiba failed to unify the standards. In the end, one format will become the standard in PC data storage and HD movies.

The format battle between Blu-ray and HD DVD is likely to continue and the victor will not be known for some time. Both sides are vying for support from computer companies and content producers, including the movie studios. Nonetheless, studios are likely to release titles in both formats, since it will be the consumer, not the studios, that decide on the technology. Toshiba will launch HD DVD players and recorders in Japan by the end of this year and in the US by early 2006. Sony's Blu-ray players and discs are also expected to hit the market in early 2006, with its next generation PlayStation 3 coming out next spring. Yet, mainstream adoption will likely not be achieved until 2007, according to industry analysts.

Blu-ray, also known as Blu-ray Disc (BD), is a next generation optical disk format created jointly by the Blu-ray Disc Association - a group of leading consumer electronics companies including Sony, Apple, Dell, Hitachi, HP, JVC, LG, Mitsubishi, Panasonic, Pioneer, Philips, Samsung, Sharp, TDK and Thomson. Studio backers include Lions Gate Films and Disney. A single layer of Blu-ray Disc can hold 25 GB (giga-bytes) and can be used to record 2 hours of HDTV, or more than 13 hours of standard definition TV. Blu-ray is named for the blue-violet laser vs. the standard red used for its shorter wavelength. The blue laser achieves greater precision to read and write data using less space, therefore the disc can pack more data even though it's the same size. They have a data transfer rate of 36 Mbps, enough to record and playback HDTV while maintaining original picture quality. Consumers will be able to play back video and simultaneously record their favorite show.

The High Density Digital Versatile Disc or HD DVD is a digital optical media formation by Toshiba, NEC, and Sanyo. It's backed by four major studios, including New Line (TWX), Universal Studios, Warner Bros (TWX), and now Paramount Studios. It has a single layer capacity of 15 GB (Blu-ray 25) and a dual-layer capacity of 30GB (Blu-ray 50 GB). By comparison, a current DVD has capacity of 4.7 GB. Toshiba announced a triple-layer disc is in development that would offer 45 GB of storage. The main difference between the two is the numerical aperture of the optical pick-up head. HD DVD is 0.65, meaning it's less expensive than Blu-ray disc. Both standards are backwards compatible meaning they will play current DVDs.

The evolution to HDTV is taking shape, as the consumer demand for HD programming increases. Whether it is HD DVD or Blu-ray, consumers will receive better picture quality and greater recording capacity. And no matter how hard the battle is fought by the hardware makers and the content producers, in the end it is the consumer that will decide. ----Kimberly DuBord, Briefing.com

8:51AM Page One - Mini-Rally Continues

The S&P 500 index has been up for seven straight sessions. Stock futures indicate a higher open this morning.

Corporate news is light. There are no earnings reports and only a few warnings from small companies. The dearth of earnings warnings ahead of the upcoming reports is impressive and suggests that it will be a strong quarter. Wall Street is already looking for 18% growth in third quarter operating earnings for the S&P 500 in aggregate. The final number will probably exceed that.

Wal-Mart reported that same store sales for September were up 3.8% from a year ago. That was at the high end of its 2% to 4% forecast, and the gain would have been a still impressive 3.2% excluding the impact from gasoline sales. This is a very comforting number given that it is completely post-Katrina yet shows good growth for a retail chain that was expected to bear the brunt of the impact from higher energy costs. It reflects little impact from Katrina.

At 10:00 ET today, the September ISM survey on national manufacturing conditions will be released. Expectations are for a reading of 54.0. Anything above 50 is intended to reflect growth, and any growth in the month after Katrina would be a good sign for the economy.

There is some merger activity. NRG Energy has announced it will purchase privately held Texas Genco for $5.8 billion. There was also a deal involving a British drugstore company and a European drug company, as well as rumors that Spanish phone company Telefonica would buy Dutch phone company KPN.

Oil is up $0.10 this morning to $66.35 a barrel.

The situation in October this year is eerily reminiscent of the situation last October. At that time, the S&P 500 index had been flat through 2004 despite strong economic and earnings growth. High energy prices were the major concern. Valuation metrics had declined. Last year, a rally in November and December led to good gains for the S&P for the year. This morning's Big Picture column on Briefing.com reviews the major issues facing the market today, and suggests a similar development this year is possible. -- Dick Green, Briefing.com

http://biz.yahoo.com/mu/story.html