Bear Stearns upgraded the financial sector to "market weight" from "market under weight," according to CNBC.

Qwest (NYSE: Q) was upgraded from "hold" to "buy" at Soleil and Boston Scientific (NYSE: BSX) was upgraded from "neutral" to "buy" at Bank of America, according to Briefing.com.

Douglas A. McIntyre is an editor at 247wallst.com.

For the first time, the amount that an average American household spends on its cellphone service is passing spending on traditional landlines.

According to The Associated Press ,""the most recent government data show that households spent $524, on average, on cell phone bills in 20qa06, compared with $542 for residential and pay-phone services. By now, though, consumers almost certainly spend more on their cell phone bills, several telecom industry analysts and officials said."

The news sets up some probable winners and losers over the next several years. AT&T (NYSE:T) and Verizon (NYSE:VZ) should both come out ahead, but not by as much as investors may think. Each of the companies has large cell phone operations, but the number of US cell customers is beginning to reach a point of saturation, just as landline customers did years ago. Cellular revenue will continue to grow, along with operating profits. But, landline revenue at these companies is likely to shrink, and that may accelerate as more people move to VoIP and cell phones.

The big loser will be Qwest (NYSE:Q). Most of its revenue come from landlines. It has no cellular business to speak of, so it is on the losing end of a trend, but does not have a play at the winner's table.

Of course, handset companies are likely to benefit. Motorola (NYSE:MOT) is still the leader in US handset sales. Nokia (NYSE:NOK), the world's largest handset company, would like to change that. And, there is always the Apple (NASDAQ:AAPL) iPhone. These days Apple always wins.

Douglas A. McIntyre is an editor at 247wallst.com.

The following excerpt originally appeared as part of the Israel Opportunity Investor, a monthly newsletter I publish for paid subscribers.

Gilat Satellite Networks Ltd. (Nasdaq: GILT) provides Internet Protocol [IP] based digital satellite communication and networking products and services. The Company designs, produces, and markets very small aperture terminals (VSATs), two-way satellite ground stations with dish antennae smaller than 3 meters, and related network equipment. Gilat has customers in over 85 countries. Its products are primarily sold to communication service providers and operators that use VSATs to serve enterprise, government, and residential users. The company also provides services directly to end users in various market segments in the United States and Latin America. The Company competes with Hughes Network Systems, Viasat, Inc. (NASDAQ: VSAT), iDirect, AT&T, Inc. (NYSE: T), Verizon Communications (NYSE: VZ) and Qwest Communications International Inc. (NYSE: Q).

Investment Thesis

Gilat focuses on niche markets within emerging markets and the government sector, with a lot of opportunity for new deal flow in markets like Africa, Latin America, and Eastern Europe. A recent win with the US. Postal Service could be a good springboard to more deals of the sort. In the deal, Gilat's wholly-owned subsidiary, Spacenet Inc., is working with Verizon Business to deploy a custom satellite network for the Postal Service. The satellite network will provide high performance broadbandcommunications for over 5,000 Postal Service sites in the continental United States, Hawaii, Alaska, and Puerto Rico.

Monday, December 17

• Qwest (NYSE: Q) to hold operational review conference call at 8:30am.
• International Paper (NYSE: IP) to hold conference call at 1pm to discuss North American uncoated freesheet paper market.
• Adobe (NASDAQ: ADBE) to report Q4 earnings; conference call at 5pm.

Tuesday, December 18

• Best Buy (NYSE: BBY) to report Q2 earnings; conference call at 10am.
• Goldman Sachs (NYSE: GS) to report Q4 earnings; conference call at 11am.
• Palm Inc. (NYSE: PALM) to report Q2 earnings; conference call at 4:30pm.

Qwest Communications International Inc. (NYSE: Q) shares are rising this morning following yesterday's announcement that the company will begin paying quarterly dividends again in February. The company had halted its dividend program in 2001. Q will pay a quarterly dividend of 8 cents per share on February 28 to shareholders of record on February 1. Analysts called the move a sign that Q is being repositioned for better long-term growth. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on KO.

After hitting a one-year high of $10.45 in May, the stock hit a one-year low of $6.23 in November. Q opened this morning at $7.33. So far today the stock has hit a low of $7.08 and a high of $7.35. As of 11:00, Q is trading at 7.18, up 0.22 (3.2%). The chart for Q looks bearish but improving slightly, while S&P gives Q a neutral 3 Stars (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider an April bull-call debit spread at the $7.50 level. A bull-call debit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 35% return in four months if Q is above $7.50 at April expiration. Qwest would have to fall by more than 11% before we would start to lose money.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in Q.

Before the bell: Futures lower ahead of CPI; Citi, Novell in focus

JetBlue Airways Group (NASDAQ: JBLU) announced Thursday that Deutsche Lufthansa had agreed to take a 19% equity stake. JBLU shares closed up 14.4% to $7.15. Lufthansa will buy , 42 million newly issued common shares of JetBlue in a private placement for $7.27 a share -- a 16% premium over Wednesday's close, or a total of about $300 million. This cash infusion will help the low-cost carrier face the high fuel prices and new competition.

Palm Inc. (NASDAQ: PALM) laid off about 10% of its work force this week to cut expenses. Palm issued a statement Thursday confirming some layoffs were made as part of a restructuring, but according to "persons familiar with the situation," CNNMoney eliminated more than 100 jobs of its 1,150 staff.

Qwest Communications International Inc. (NYSE: Q) decided to resume its quarterly dividend for the first time since 2001 and will pay shareholders a quarterly dividend of 8 cents per share, payable Feb. 28 to shareholders of record on Feb. 1. Analysts think the move shows "that the telecommunications company is positioning itself for better long-term growth."

Cell phones and VoIP are killing the regular old home phone business. Reviewing a new study from a Citigroup analyst, Barron's said, "The telcos continue to lose residential phone subscribers to both cable VoIP and wireless subscriptions at a steady 7%-8% a year."

The number of consumers who use only a wireless phone at home is expected to hit 27% in 2010. And the penetration of cable VoIP is expected to be 25% by then.

It might seem bad news for AT&T (NYSE: T) and Verizon (NYSE: VZ), but both do have large wireless businesses that should help offset attrition among home phone users. They are also selling new fiber-to-the-home broadband, which will also supplement revenue.

It is usually an interesting read to see what is going on in overall NYSE, AMEX, and NASDAQ short selling. Today we looked over various short interest reports based upon November 15, 2007, on the NYSE, which is fresh data for U.S. traders because of the Thanksgiving holiday. The total NYSE Short Interest went up from 11.932 billion shares on October 31 up to 12.387 billion shares as of November 15. This is the second increase in a row but within recent month data.

Below is a summary of some key NYSE short interest changes:

Stock	(Ticker)	11/15/2007	10/31/2007	%Change
Corning	(NYSE: GLW)	12,678,622	16,112,839	-21.31%
EMC 	(NYSE: EMC)	50,028,872	61,281,674	-18.36%  
VMware	(NYSE: VMW)	11,681,831	10,440,110	+11.89%

There were also many key net share changes in short interest, and here are a few of the key names:

Stock		(Ticker)	11/15/2007	10/31/2007	Net Change
CVS Caremark 	(NYSE: CVS)	67,661,461	37,871,140	+29,790,321
Mirant Corp 	(NYSE: MIR)	50,241,294   	23,796,710   	+26,444,584
Qwest Comm. 	(NYSE: Q) 	66,747,528   	82,000,170   	-15,252,642
General Electric(NYSE: GE) 	61,608,091   	66,708,279   	-5,100,188

Out of financials, Countrywide Financial NYSE:CFC) led the charge with more than 112 million shares. Here are some expanded short interest notes:

• Financial and general
• Key decreases in NYSE short interest
• Key increases on NYSE short interest

MOST NOTEWORTHY: GPC Biotech, Akamai, Qwest, Shutterfly and LDK Solar were today's noteworthy downgrades:

• GPC Biotech (NASDAQ: GPCB) was downgraded to Sell from Neutral at Goldman, to Sell from Hold at Deutsche Bank and to Underweight from Overweight at Lehman after the company's phase III trial of satraplatin to treat prostate cancer did not meet its primary endpoint.
  
• Deutsche Bank downgraded shares of Akamai Technologies (NASDAQ: AKAM) to Hold from Buy on valuation following the recent rally as they believe concerns around slowing growth, margins and capital efficiency will limit upside.
  
• Qwest Communications (NYSE: Q) was downgraded to Sector Performer from Outperformer at CIBC and to Neutral from Overweight at JP Morgan following the company's disappointing Q3 results.
  
• Jefferies downgraded shares of Shutterfly (NASDAQ: SFLY) following the better-than-expected Q3 results due to valuation.
  
• Piper downgraded shares of LDK Solar (NYSE: LDK) to Market Perform from Outperform, as they expect higher blended poly cost for the company due to tightening scrap poly supply and increased competition.

OTHER DOWNGRADES:

• Maxwell Technologies (NASDAQ: MXWL) was downgraded to Underperform from Market Perform at JMP Securities.
  
• UBS downgraded Estee Lauder (NYSE: EL) to Sell from Neutral.
  
• Merrill downgraded CommScope (NYSE: CTV) to Neutral from Buy.
  
• Under Armour (NYSE: UA) was downgraded to Underperform from Market Perform at Raymond James.
  
• RBC Capital downgraded Beckman Coulter (NYSE: BEC) to Sector Perform from Outperform.

Before the bell: Investors unsure before the Fed; Stock futures lower

Sirius Satellite Radio Inc. (NASDAQ: SIRI) narrowed its third-quarter loss to $120.1 million and recorded a surge of 524,938 in new subscribers ahead of its planned merger with larger rival XM Satellite Radio Holdings Inc. (NASDAQ: XMSR). Sirius reported a loss of 8 cents per share, in line with expectations. Revenue rose 45% to $241.8 million, but fell short of Wall Street's expectation of $244.3 million. SIRI shares are up 2.5% in premarket trading to $3.70.

Apple Inc. (NASDAQ: AAPL) - Jeff Zucker, president and CEO of NBC Universal, explained yesterday why he didn't renew his contract with Apple's iTunes, saying last year's revenue from the digital model was just $15 million.
Apple also announced today it sold or delivered over 2 million copies of its Mac OS X Leopard released on Friday, far outpacing the first weekend sales of Mac OS X Tiger.

Boeing (NYSE: BA) shares are up 0.8% this morning in premarket action after the company announced yesterday its board of directors authorized the repurchase of up to $7 billion in common stock. The new plan follows a $3 billion buyback approved by the board in August 2006, which is nearing completion.

Liz Claiborne (NYSE: LIZ) shares are tumbling over 13.5% in premarket trading after the company reported third quarter earnings this morning and cut its 2007 outlook. If the company expected $1.9-2.0 earnings per shares for the year, it now expects $1.7-1.8 EPS. The reason - weak performance of several of the brands. As it is, profit in its third quarter dropped 65% due to hefty charges and a drop in sales in the company's partnered brands division. Excluding charges the company earned 63 cents per share, below analysts' estimates of 68 cents per share. Revenue fell 4% to $1.26 billion. Analysts predicted sales of $1.33 billion.

Verizon Communications Inc. (NYSE: VZ) shares are up 2.2% in premarket trading after the telco reported third-quarter earnings yesterday that were largely in line with expectations, reflecting steady growth in its wireless operations and a slow decline in its wired telephone business. Verizon earned, excluding one-time charges, 63 cents per share compared to 53 cents a year ago period. These were inline with estimates. Revenue came to $23.8 billion, up 5.8%, slightly beating the $23.7 billion expected.

Qwest Communications Inc. (NYSE: Q) shares are down over 4.6% in premarket trading following its earnings report this morning. That's despite third-quarter profit jumpimg. For the period, Qwest earned $2.07 billion, or $1.08 per share, which included a $2.15 billion tax benefit. Operating revenue declined slightly year over year to $3.43 billion from $3.49 billion. Analyst had expected revenue of $3.49 billion.

General Motors (NYSE: GM) shares are up over 1.1% in premarket trading after UBS upgraded the shares from Sell to Buy. UBS also upped the target price from $24 to $48.

MOST NOTEWORTHY: BEA Systems, Nokia, Medco Health, Quest Diagnostics and PetSmart were today's noteworthy downgrades:

• Citigroup downgraded shares of BEA Systems (NASDAQ: BEAS) to Hold from Buy on valuation following the $17/share offer by Oracle (NASDAQ: ORCL) as they think a public bidding war for the company is unlikely.
  
• ABN Amro downgraded shares of Nokia Corporation (NYSE: NOK) to Hold from Buy on valuation and believes above consensus Q3 results are already priced into shares.
  
• Wachovia downgraded Medco Health Solutions (NYSE: MHS) to Market Perform from Outperform on valuation.
  
• The firm also downgraded Quest Diagnostics (NYSE: DGX) to Market Perform from Outperform, as they believe the prospects from stabilizing volumes and cost savings are reflected in valuation and Street estimates.
  
• Credit Suisse downgraded shares of PetSmart (NASDAQ: PETM) to Neutral from Outperform citing aggressive pricing at Petco, accelerating growth initiatives, limited visibility around expense management, and lack of consistent results.

OTHER DOWNGRADES:

• Methanex Corporation (NASDAQ: MEOH) was downgraded to Sector Underperformer from Sector Performer at CIBC.
  
• Rochdale downgraded Heico Corporation (NYSE: HEI) to Neutral from Buy.
  
• JP Morgan downgraded BankUnited Financial Corp (NASDAQ: BKUNA) to Neutral from Outperform and removed Qwest Communications (NYSE: Q) from its Focus List.
  
• Goldman removed MetLife (NYSE: MET) from its Conviction Buy List.
  
• Coldwater Creek (NASDAQ: CWTR) was downgraded to Hold from Buy at Standford and at Stifel.

While investors are focusing on the ensuing battle between AT&T (NYSE: T) and the big cable companies over providing voice, video and data to the home, many might need to be reminded that the telco giants have a massive enterprise business that is ripe to benefit from improved pricing.

Remember there are few companies that can provide high-level enterprise service on a nationwide basis -- AT&T and Verizon Communications (NYSE: VZ) are pretty much it. You would be hard pressed to name another. Qwest Communications (NYSE: Q) has not said much about what it wants to do with its fiber network and although Level 3 Communications (NASDAQ: LVLT) is picking up its business, it will not be enough to threaten the positions of the two behemoths.

AT&T and Verizon's stock performance, while doing well recently, has been held back by investors wondering where the revenue growth is. Now it appears that growth might be ready to return. Jim Crowe, Level 3's CEO, said a few months back that one issue the industry no longer has is pricing, a big change from a few years ago.

Verizon and AT&T have been written about more positively over the past few days, as Bear Stearns and Citigroup are both recommending the stocks. Sometimes the best stocks are in the most obvious places. AT&T and Verizon are two large companies that are worth looking at again.

The short interest for the NYSE is out for the second half of September. The NYSE Euronext (NYSE: NYX) actually showed a small increase in the total shares short on the NYSE: the September 28 settlement short interest was 11,878,834,897, above the 11,841,051,529 reading of September 14, 2007. This represents 3.1% of the total shares outstanding.

The raw truth is that this is actually a very small gain of only just over 37,000,000 shares. But it follows what was a large drop from mid-August to mid September as mid-August was in the midst of the market malaise with 12,466,511,521 shares listed as being short. Just at the end of last month I had noted that short selling Internet stocks showed mixed results. There had previously been a large drop in major banking stock short interest, but we also showed how housing and retail stocks had been under short selling pressure.

You can see the full list of the September 28 settlement date short stocks at the site, but here are the top 10 (with short interest):

• iShares Russel 2000 Index (NYSE: IWM) 258,152,676
• Ford Motor (NYSE: F) 177,621,324
• Qwest Communications (NYSE: Q) 84,338,020
• Advanced Micro Devices (NYSE: AMD) 76,350,102
• Countrywide Financial (NYSE: CFC) 76,100,928
• General Electric (NYSE: GE) 65,851,636
• Time Warner Inc. (NYSE: TWX) 64,874,719
• Best Buy (NYSE: BBY) 62,259,216
• Tenet Healthcare (NYSE: THC) 57,387,316
• General Motors (NYSE: GM) 56,515,532

Firms in the communications sphere seem to be constantly readjusting themselves, to find the most successful balance between size and efficiency. The most recent move involves an Englewood, Colorado outfit that is leaning toward a spin-off. There is also talk that the company may be an acquisition target.

EchoStar Communications (NASDAQ: DISH) offers satellite digital television to customers in the United States. The firm's DISH Network delivers programming to more than 13 million subscribers and subsidiary EchoStar Technologies provides dishes, set-top boxes and other digital equipment to both the DISH Network and others. EchoStar has formed alliances with Internet service providers and voice communications companies to offer combined services. Among those partners are EarthLink (NASDAQ: ELNK), Qwest Communications (NYSE: Q) and Sprint Nextel (NYSE: S).

The stock popped last week, on good news for the firm and a subsequent rumor. The first jump was on Tuesday, when the Board decided to pursue a possible separation of its businesses into two distinct publicly traded companies. EchoStar's consumer pay-TV business would continue to operate as the DISH Network and most of the firm's other technology assets would be spun-off. Shareholders would receive pro rata ownership interests in each of the new entities. Then, on Thursday, the brokerage community renewed speculation that DISH might be acquired by AT&T (NYSE: T). Oppenheimer seemed to think the move was reasonably certain. Kaufman Brothers later viewed such a transaction as possible.

MOST NOTEWORTHY: Websence (WBSN), RF Micro Devices (RFMD), Fiserv (FISV), Qwest (Q), and OSI Pharma (OSIP) were today's noteworthy upgrades:

• JP Morgan upgraded shares of Websence (NASDAQ: WBSN) to Overweight from Underweight ahead of the renewal period starting in the December quarter and expects this momentum to drive shares higher.

• RF Micro Devices (NASDAQ: RFMD) was raised to Buy from Hold at Citigroup, who said the Sirenza Microdevices (SMDI) deal gives the company its first real prospect for gross margin expansion in years.

• Matrix USA upgraded Fiserv (NASDAQ: FISV) to Buy from Sell, and expects the company to benefit from the Checkfree (CKFR) acquisition.

• Lehman upgraded shares of Qwest (NYSE: Q) to Overweight from Equal Weight, citing the hiring of industry veteran Ed Mueller as CEO. The firm believes the new CEO removes an overhang and could lead to a change in strategic direction and significantly increase capital spending.

• JP Morgan upgraded OSI Pharma (NASDAQ: OSIP) to Overweight from Underweight based on valuation and upcoming catalysts for Tarceva that should be seen in the next year...

OTHER UPGRADES:

• UBS upgraded Allstate (NYSE: ALL) to Neutral from Sell.

• ThinkEquity raised Hansen Medical (NASDAQ: HNSN) to Buy from Accumulate.

• Stanford upgraded Leap Wireless (NASDAQ: LEAP) to Buy from Hold.

• FTN Midwest upgraded shares of Lexmark (NYSE: LXK) to Neutral from Sell.

• Hambrecht upgraded NetGear (NASDAQ: NTGR) to Buy from Hold.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).