Analyst Upgrades

• Wells Fargo upgraded Accenture (ACN) to outperform from market perform following the company's Q4 results, citing improved tone and increased visibility. The firm raised its target range for shares to $51 to $53 from $41 to $44.
• Macquarie upgraded FirstMerit (FMER) to outperform from neutral and has a $21 price target on the stock. The firm cites FirstMerit's strong fundamentals and competitive advantage for the upgrade.
• Macquarie transferred coverage on Marshall & Ilsley (MI) with a neutral from an underperform based on improved risk/reward.
• Eaton (ETN) was upgraded to overweight from neutral at JPMorgan.
• HSBC (HBC) was upgraded to conviction buy from buy at Goldman.
• Walgreen (WAG) was upgraded to overweight from equal weight at Morgan Stanley.

More Monday merger fun, this time from the airline sector. Reportedly, Southwest Airlines (LUV) announced that it will purchase AirTran Airlines for roughly $1.42 billion.

This move will be funded mainly with debt, and it will help Southwest establish a larger presence in cities like Boston and New York. What's more (as the article points out), Southwest will now be in "head-to-head competition with Delta Air Lines in Delta's home base of Atlanta."

I hope your seat belt is fastened and your tray table is in its full upright position because the parent company of United Airlines -- UAL Corporation (UAUA) -- is ready for take off.

Thanks to a 27% jump in passenger revenue per available seat mile, United just posted its first quarterly profit in three years and its highest quarterly profit in 11 years. The company reported net profit of $430 million, or $1.95 per share -- well above the consensus estimate of $1.77 per share.

Business is looking particularly good in the Pacific and Latin America regions where the company saw growth rates of 52% and 63%, respectively

United (UAUA) and Continental (CAL) announced a merger of equals on May 3. CAL shareholders will receive 1.05 shares of UAUA common stock for each CAL common share they own. UAUA shareholders would own approximately 55% of the equity of the combined company and CAL shareholders would own approximately 45%, including in-the-money convertible securities on an as-converted basis. UAUA overall option implied volatility of 56 is below its 26-week average of 73, according to Track Data, suggesting decreasing price movement.

Early this morning, United Airlines (UAUA) and Continental Airlines (CAL) announced that they will join forces to create the world's largest airline in a $3 billion deal.

The new airline will be bigger than Delta Air Lines (DAL) and will send flights as far as Shanghai and South America. The companies believe that the span of destinations should attract more business travelers and their higher fares. The deal, which will need approval from shareholders and antitrust regulators, is expected to close in the fourth quarter. The new company will be known as United Continental Holdings and will be based in Chicago. The airline's largest hub will be located in Houston.

UAL Corp (UAUA) and Continental (CAL) announced a merger of equals. AMR Corp (AMR) May put option implied volatility is at 65, June is at 64, August is at 63, below its 26-week average of 68, according to Track Data, suggesting decreasing price movement.

Intermune's (ITMN) pirfenidone PDUFA date is May 4. Pirfenidone is a treatment for IPF (Idiopathic pulmonary fibrosis). May put option implied volatility is at 231, June is at 155, July is at 125, according to Track Data, suggesting large May price movement.

Update is by Stock Specialist Paul Foster of theflyonthewall.com.

United Airlines parent UAL Corp. (UAUA) was singled out for a directionally neutral spread strategy on Wednesday, with one options trader betting on near-term volatility for the airline issue. Shortly after the opening bell, a block of 325 contracts changed hands on UAUA's June 24 call for the ask price of $1.32, indicating they were purchased. Simultaneously, a matching block of 325 June 16 puts traded at the ask price of $0.50, revealing these contracts were also bought.

US Airways Group (LCC) has been in the spotlight ever since word hit the street that the airline was considering a potential merger with UAL Corp.'s (UAUA) United Airlines. Now the shares are attracting even more attention, thanks to an industry report suggesting that average summer airfares could rise 25% on a year-over-year basis.

As a result, LCC's call options have been drawing a crowd. On Tuesday alone, call volume surged to more than double the norm, with 7,345 contracts crossing the tape. During the course of the session, traders on the International Securities Exchange (ISE) alone bought to open 4,129 calls on the airline, compared to just one put.