The Bear Stearns IntraDay Trader ... Generic Drugs and Auto

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• Cosmic Forces, Wall Street, and What Makes Stocks
  Move

Tom Ward Senior Managing Director Bear Stearns
Co, Inc 212-272-2148 tward_at_bear.com
March 2004
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The Big Picture
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Chief Financial Officer
INVESTMENT BANKING
THE CENTER OF THE UNIVERSE Equities
Fixed Income
Rights Common Stock Preferred
Money Corporate
Junk Warrants with Yield Stock
Markets Bonds
Bonds Common Convertibles
Commercial Municipals
Mortgages Stock

Paper 0 0 2
5 6 7 3
4 6 8 8.5 11
U.S. Treasury
Derivatives Chief Investment Officer
Derivatives Chief Investment Officer
SALES TRADING
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Four Criteria For A Superpower

• A Strong Political System
• The Individual matters
• Contract Law also matters
• A Strong Military
• A Culture that Spreads Around the World
• A Strong Economic System
• Central Bank important

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Other Important Considerations

• Capitalism vs.
• Socialism vs.
• Communism
• The American Revolution Goes on Each Day
• Human Happiness and Finance

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The Classic Cycle
BULL MARKET
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B
2
1a
3
13
5
ACCELERATING UPTREND
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11
6
9
10
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UPTREND
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UPTREND
C

• 1. Bonds
• 1a. Bond Alternate
• 2. Federal Debt
• 3. Food - Soft Drinks
• 4. Drugs - Tobaccos
• 5. Autos - Money Center Banks - Commercial
  Real Estate
• 6. Biotech
• 7. Environment
• 8. Gold
• 9. Tokyo
• 10. Capital Goods
• 11. Oil Service - Drillers
• 12. Natural Gas - Telecommunications
• 13. Casualty Ins. - Semi-Conduc. - Computer Svcs
  Software

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BEAR MARKET
B
C
A
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What Moves Stocks
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4 Major Equity Investment Styles

• Traders
• Earnings Momentum
• Value
• Risk Arbitrage

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Understand the Importance of...

• Growth
• Fear and Greed
• Relative Value
• (ex price/earnings multiple)

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Wing Chow list of variables
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Information, Information, Information -- NOW!!

• The Bear Stearns IntraDay Trader
•  
• Sal Catrini, Matt McCloskey, Adam Crisafulli,
  Jessie Barter, Patrick McHale 212.272.4249
  scatrini_at_bear.com January 9, 2004
• Bear Stearns does and seeks to do business
  with companies covered in its research reports.
  As a result investors should be aware that the
  Firm may have a conflict of interest that could
  affect the objectivity of this report.
• Investors should consider this report as only
  a single factor in making their investment
  decision.
• Please read the important disclosure
  information on the last page of this report.
•  
• Market Highlights
• Overview Equity indices have reversed earlier
  losses SPX near down 2 to 1129-Technology again
  outperforming with the COMP up 7 points to
  2107-Disappointing Payrolls result, a weak ,
  Crude above 34 per barrel, the CRB at a record
  high and a rally that many believe is
  extended-arent enough to keep this market down
  Volumes are very good once again-700 million
  traded on the NYSE at noon-particularly good
  number for a Friday A/D on NYSE is 18/13 after
  being nearly 2 to 1 in favor of decliners early
  on in the session Treasuries rallied sharply on
  disappointing payrolls number-10-year yield fell
  straight through resistance at 4.15 from 4.25
  pre-release and is holding around 4.12 midday
  Gold up more than 1 to 425/oz.-selloff in
  Dollar post the economic numbers helped the
  commodity move higher Dollar is mixed-stronger
  vs. yen as BOJ intervention starts to lend
  support to the , while the euro spiked higher
  vs. the after the employment number Oil up
  0.50 to 34.48-9-month high-XOI under pressure
  amidst concerns of RD/SCs reserve drawdown
  small caps continue to outperform-Russell 2000
  hits another high US lowers terror alert level.
• Sectors Outperforming Networking, Semi
  Equipment, Towers and Credit Cards, while
  underperforming sectors are Homebuilders, Luxury
  Goods, Generic Drugs and Auto Retailers.
• Select Stories US lowers Terror Alert Level
  to Elevated from High AA drops 3 after earnings
  disappoint expectations KLIC up more than 2
  after company reaffirmed expectations during its
  mid-quarter update.
• Europe down 1.20. Oils worst performers down
  3.50. RD SC down 7.50. Company lowered its
  oil and gas reserve estimates. BP down 2.00
  after refining margins fell from Q3 to Q4.
  Retails reported sales figures. Ahold ( 9.20)
  sales figures in line. Metro ( -1.40) and
  Carrefour (- 5.00) both reported light 4Q sales
  figures. Nok continues to outperform up 1.60 on
  several broker upgrades. ERICY also up 5.50.
• Corp Bonds Spreads are generally wider on the
  weaker-than expected employment report. Auto
  spreads initially widened 10 bps after the 830
  number but are now 7 wider. Telecom and media
  spreads were 5-6 bps wider initially but are now
  roughly 3-4 bps wider. Bank spreads are unchanged
  to a basis point wider.
• Treasuries Treasury market has rallied
  significantly after the weaker-than-expected
  employment report. The 10-year yield blew through
  the 4.15 resistance level and was knocking at
  the door of the 4.08 resistance level before
  backing off to 4.10. The 5-yr/10-yr curve is 3.1
  bps steeper and the 10-yr/30-yr curve is 3.4 bps
  steeper.
• Dollar BOJ buys another estimated 10 billion
  overnight driving /Yen up to 108.30 from 106.15,
  but gains are very short lived and it pulls back
  below 107. Much weaker than expected non-farms
  data sends the dollar sharply lower with Euro
  powering through its all time highs setting off
  fresh momentum demand to 1.2850 and GBP hitting
  1.8450
• Equity Derivatives Call option flows are still
  outpacing puts by a margin of 21, but we're
  seeing some profit taking ahead of the weekend in
  some JAN calls like MSFT (JAN 27 1/2) MOT
  (rolling JAN 12.5 into FEB 14). Oils Drillers
  seeing call buyers in WFT (FEB 40), ESV (FEB 30),
  RIG (JAN 25), XOM (JUL 45), on the index side
  OSX (FEB 100s). Indexes volatility is flat
  after getting crushed this week. VIX is .02
  15.63 SPX activity is light, but there are some
  scattered buyers of MAR 1125 FEB 1150 puts.
• ETFs Very busy today. We are 2-ways in the
  Spiders and Qs as well as the OIH, XLE, XLU and
  SMH.
• Convertible desk Everything is being bid
  higher in the Oil service area. AMGN and MDT both
  acting well. Seeing two-way action in all of
  these names. IN bonds have come in amidst
  speculation of a takeover. Also seeing a good
  deal of buying interest in SBGI.

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•  Equity Highlights
• Technology Stocks opened at the lows of the
  day but have since rebounded. We are seeing a
  bid underlying the networking and semi names for
  the most part - def. More tired on open than
  earlier in week on rallies. Seeing buyers vs.
  sellers 31 on OTC - we would expect more buyers
  to come in over the next few days if the tape
  doesnt come in as many are anticipating. NWX
  and SOX both making gains today - telco and
  networking names still acting the best. Action
  seems to be quieting down as lunch approaches.
• Wireless semis again outperforming to the
  upside on continued enthusiasm for NOK
  announcement yesterday (even though upside at NOK
  from infrastructure, not handsets) - SWKS is the
  leader, up nearly 7, through its 100day MA for
  the first time since late Oct. RFMD, SLAB strong
  also - some positive comments made around the St
  today on wireless semis. QCOM remains
  unstoppable, rising to levels not seen since
  mid-01.
• Optical components remain very strong, spurred
  by prospects of higher carrier spending - AVNX
  and JDSU again making strong moves. BKHM, NUFO
  lagging slightly.
• ASML is standout in semi equip - they are among
  the first of that sector to report (scheduled for
  next Thurs) - most think will return to
  profitability in the Q. Watch the 60-62ish range
  on KLAC - has been resistance in recent past.
• ANDW, PWAV, both very strong movers yesterday,
  following pattern of most in tech and both are
  now positive on the day
• Storage is notable underperformer, but has
  outperformed slightly the rest of tech recently.
  STX is underperforming the rest of the drives and
  tech in general, but has outperformed recently.
• IBM is underperforming slightly today after
  getting Wells Notice from SEC yesterday - watch
  the 93-94ish range on it - has been resistance
  recently. HPQ is fractionally lower today, but
  still broke through recent resistance yesterday.
  
• Enterprise networkers among the strongest
  groups in tech today - AV is leader, up nearly 5
  on back of Prudential upgrade, reaching levels
  not seen since mid-01. EXTR, FDRY both strong
  today, up more than 2 each. On the carrier
  side, ADCT and NT are both VERY strong again
  today.
• RBOCs are all getting hit today on back of
  negative Merrill call - VZ, SBC, BLS each dwn
  more than 2. Group has been very strong
  recently.
• Media Vegas names acting well following
  positive comments from another broker-CES
  conference in Vegas also helping sentiment as
  conference has been well attended helping hotel
  bookings. As a whole, Media underperforming as we
  are seeing profit taking in names that have had
  the greatest run. MGM TWX both lagging amidst
  speculation that the two are not in merger talks.
  Lodging is holding its own-trading around flat on
  the day. RCL leading leisure sector higher after
  being added to SSBs top picks list-piggybacks on
  recent optimism in the Cruiseline names.
• Healthcare The group still acts as a source
  of funds. HMOs coming off a bit on the news that
  PHS would be negatively impacted by California
  Grocer strikes. FRX reverses earlier losses as
  company says 2004 eps will come in at the high
  end of expectations. The DRG is lower on the day,
  but has bounced from its worst levels-activity is
  quiet in large cap pharma and the group is
  mirroring the broader tape. Flow is biased about
  2 to 1 on the buyside on relatively light
  volumes.
• Biotech Group is acting strong across the
  board with flow biased 2 to 1 on the
  buyside-volumes are ok. Traders focused on next
  weeks JP Morgan Healthcare conference, which is
  the first big conference of the year. BTK is
  trading nearly 1 higher, led by GILD and ENZN.
• Financials Outperforming broader tape today,
  even on pullbacks. Insurance continues to
  outperform - ALL is leading the pack today on
  back of upgrade. TAP, ORI, XL, PGR, MFC, AEG
  also strong. AXA is among the best performing
  financial today - it did reaffirm its commitment
  to MNY deal last night.
• Brokers underperforming a bit, but none are
  down too significantly and all have been strong
  recently SCH, GS, MWD, MER leaders to the
  downside.
• Trust/processors are among the best performing
  in financials today - NTRS, MEL, STT, PNC are
  leading to the upside, although BK is notable
  laggard, off fractionally.
• INGP is among the best performing financial
  stocks today on back of our upgrade this morning
  and announcement last night of additional cost
  cuts - it is trading up 9 into midday, off
  highs of early this morning. NITE off
  fractionally, but it has outperformed INGP
  recently.
• BAC underperforming broader financials - might
  be on news that the co's Milan offices were
  raided in conjunction w/Parmalat investigation

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• Broadlines dept stores and discounters trading
  in line w/ mkt KSS (flat after 7 drop yest) -
  Mer d/g
• Hardlines grp mixed home improvers HD, LOW
  slightly up here - perhaps due to ongoing low
  interest rate env't after today's uninspiring
  econ. data CENT (-1.5) - acquired KentMarine
  HVT (1) - cont'd gains after competitor u/g and
  good SSS yest. BBY slowing wk's tear upwards as
  CC, RSH rebound from depressed levels movie
  retailers finish up a busy news wk - HLYW down
  2 over 4 sessions
• Softlines slightly outperforming, thanks in
  part to GPS (.66) which seems to have a found a
  bottom after yest's SSS dispptmt -- most names
  slightly in the green TLB continues run through
  200MA despite yest's lowered guid. TOY (3) -
  ratings services placed on neg. watch, SP cut to
  junk WTLSA - Wach. d/g to U but stock rebounding
  from yest's big dip ANF (3) - PRU u/g to
  neut., rebounding from lows yest.
• Restaurants grp down w/ mkt in both QSRs and
  casusal dining cos. EAT (-2) - Suntrust d/g to
  U CPKI (-1.5) - CFO left
• Food/Bev grps trading w/ mkt, large cap foods
  down fractionally SJM (2) - Mer init at buy
• Manuf. KWD (flat) - after small acquisition
  FOSL (2) - SG init w/ O MAT (3.5) - BSC u/g
  to O TOM (-2) - debt cut to junk status -- in
  part ahead of acquisition intention
• Energy - Oil Service stocks continue to be our
  most active stocks and are up 4 with aggressive
  buyers in the names. EP stocks are outperforming
  the market as well. Major Oils spent most of the
  morning lower on the heels of the Royal Dutch
  Shell news but some are turning higher now.
  Utility stocks are weaker today but no
  significant decliners.
•  
• Economics John Ryding (212-272-4221) Conrad
  DeQuadros (212-272-4026)
• Nonfarm payrolls were much weaker than
  expected, rising only 1K in Dec. In addition
  there were downward revisions to the prior two
  months totaling 51K. The unemployment rate,
  however, fell to 5.7 in Dec, the lowest in 15
  months, from 5.9 due to declining labor force
  participation of 66.0 from 66.2. The
  private-sector workweek fell 0.2 hours to 33.7
  hours resulting in a 0.6 decline in private
  hours worked. For Q4 as a whole, private hours
  worked rose 2.2 at an annual rate (the strongest
  gain since 1Q00).
• Manufacturing employment fell 26K, in stark
  contrast to the robust reading on ISM employment.
  The factory workweek fell 0.1 hour, resulting in
  a 0.4 decline in manufacturing hours worked.
  Average hourly earnings rose 0.2, which resulted
  in the 12-month increase in wages slowing to 2.0
  from 2.2. A surprising report on all fronts.
• Payrolls barely expanded in Dec contrary to the
  indications from initial jobless claims and ISM
  employment. On the other hand, the unemployment
  rate posted a surprise decline to 5.7 from 5.9.
  On the face of it, the fall in hours worked
  paints a fairly weak picture for economic
  activity at the end of last year, but this is
  marked contrast to the strength shown by ISM.
• We do not believe this report paints a
  plausible picture of the economy in December.
  However, payrolls play an extremely important
  role in Fed policy and the weaker-than-expected
  readings on jobs and hours worked have lowered
  the odds of a May interest rate hike.
•   
• Futures (Bill Byers 212-272-2716)
• STOCK INDICES - Looks like the PM jury votes to
  buy. Futures are running ahead of stocks.
  NASDAQ 100, Midcap and Russell have already
  erased payroll impact. Probably will be some
  additional "rethinking" IF SP 500 trades to a
  new high 1131.92.
• FIXED INCOME - "Lower longer" M4-M5 euros saw
  very good buying. 5 10-year yields to lowest
  since October. Flows havew slowed and seeing
  spec and local profit taking against 3.07 in 5s
  and 4.10 in 10s.
•   
• Converts Rao Aisola 212-272- 5988

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• Equity Derivatives (Gary Semeraro 212-272-4800)
• See Above
•  
•  
• Program Trading Sean Wagner
• See Above
•  
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• Corporate Bonds (Mike Mutti 212 272 5349)
• See Above
•  
•  
• High Yield (Michael Taylor (212-272-7791)
• Some profit-taking late in the afternoon was
  not enough to prevent issues in the Bear Stearns
  High Yield Index (BSIX) from gaining 1/4 pt on
  avg yest. WTD total returns are now 1.6 .
• HY mutual funds reported 506mm in wkly flows
  and 538mm for monthly reporters which are now
  posting Dec flows, according to AMG. Flows for
  Dec totaled about 1.5 bn and raised 4Q03 inflows
  to about 5 bn, up from 1 bn in 3Q03.
•  
•  
• Foreign Exchange (David Shoenthal (212 272-7683)
  and Andy Wilkoff (212-272.7807)
• BOJ buys another estimated 10 billion
  overnight driving /Yen up to 108.30 from 106.15,
  but gains are very short lived and it pulls back
  below 107

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The Media and Stock Trends
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December 9, 1974
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September 1999
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March 26, 2001
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