Analyst upgrades:

• JP Morgan upgraded O'Reilly (NASDAQ: ORLY) to Overweight from Neutral, citing increased demand and CSK acquisition synergies.
  
• Yamana Gold (NYSE: AUY) was raised to Outperform from Sector Perform by RBC Capital, based on valuation and the firm's expectation that gold will rally.
  
• HSBC upgraded KLA-Tencor (NASDAQ: KLAC) to Overweight from Neutral with a $44 target.

Analyst downgrades:

• Bernstein dropped DISH Network (NASDAQ: DISH) to Underperform from Market Perform, citing continued weak operations, declining cash flow, and satellite sector headwinds, among other reasons.
  
• Macy's (NYSE: M) was downgraded to Neutral from Buy by Goldman Sachs based on valuation.
  
• Kohl's (NYSE: KSS) was also dropped to Neutral from Buy by Goldman based on valuation.
  
• UBS downgraded Dr Pepper Snapple (NYSE: DPS) to Neutral from Buy based on valuation.

Analyst initiations:

• Salesforce.com (NYSE: CRM) was started with a Buy rating by Kaufman Bros., which believes the core on-demand CRM application market is nowhere close to full penetration.
  
• Caris initiated Eli Lilly (NYSE: LLY) with a Below Average rating, citing the company's Zyprexa and Cymbalta patent expirations.
  
• Leerink Swann assumed coverage of Amgen (NASDAQ: AMGN) with an Outperform, as the firm predicts that the company's denosumab will allow the company to substantially increase its earnings starting in 2010.

HSBC upgrades KLA-Tencor (NASDAQ: KLAC) to Overweight from Neutral, according to Briefing.com. The news services also reports that Caris initiates Eli Lilly (NYSE: LLY) with a Below Average rating.

Comverge (NASDAQ: COMV) was cut to Neutral at Broadpoint Capital, according to 247wallst.com. DISH Network (NASDAQ: DISH) was cut to Market Perform at Bernstein.

EchoStar (NASDAQ: DISH) closed at $26.70 Monday, near five-year low. DISH August option implied volatility of 57 is above its 26-week average of 45 according to Track Data, suggesting larger price movement.

Financial Select Sector-XLF overall volatility at 43; 26-week average is 34

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

MAJOR PAPERS:

• Three years into its $35B takeover of Nextel, the Wall Street Journal reported that Sprint Nextel Corporation (NYSE: S) is considering selling or spinning off the troubled unit. Few details were available and a deal is not imminent.
• The Wall Street Journal also reported that pressure is mounting on Citigroup Incorporated's (NYSE: C) CEO Vikram Pandit to show that he can turn around the troubled bank. Executives believe Pandit, who has been praised for his cautious and deliberate approach, has been taking "too long" to make crucial decisions.

WEB SITES:

• According to a person close to Google Inc (NASDAQ: GOOG), Reuters reported that Google and Yahoo! Inc (NASDAQ: YHOO) are still "hammering out the intricacies" of a potential advertising and search deal. The source said no final agreement has been reached yet.
• ABC News learned that if Rupert Murdoch does not testify in a lawsuit accusing one of his companies of "corporate espionage," it may cost News Corporation (NYSE: NWS) hundreds of millions of dollars, a federal judge overseeing the trial said. News Corp has denied any wrongdoing, and lawyers maintain Murdoch had no direct knowledge of the unit's alleged hacking into EchoStar Corporation's (NASDAQ: SATS)/DISH Network Corporation's (NASDAQ: DISH) security code and posting it on the Internet.

Cable operator Comcast (NASDAQ: CMCSA), a competitor of DirecTV (NYSE: DTV) and DISH Network (NASDAQ: DISH), issued its first-quarter earnings report on Thursday, and overall it was a satisfying set of data. Revenues grew 14% to $8.4 billion. Adjusted earnings per share increased 12% to $0.19 (on a reported basis, however, they did decline by 8%). One of my favorite things to look at is free cash flow -- Comcast scored here, as free cash jumped 59% to over $700 million.

I've never owned Comcast stock, and I'm on record as preferring content companies over distribution platforms. That being said, I do have to say that Comcast is a pretty good name in its industry, and that it seems to be doing quite well with its various offerings. Looking through the earnings release, I see that Comcast added close to half-a-million digital cable customers. The high-speed internet service and digital-phone service also seem to be performing (on an anecdotal level, it does feel like more and more people are taking up the triple-play suite that Comcast is constantly promoting). The programming segment, which includes channels such as E! and The Golf Channel, saw revenues increase 20% and it delivered a nice stream of cash flow. The company bought back almost 2% of its outstanding shares, and management plans to buy more under its repurchase initiative.

If you're looking to get in on the stock, I'd wait for a pullback after Thursday's 8% pop in share price. Like I say, I do like content companies, but Comcast might be an interesting long-term idea, since it will probably be the beneficiary of a desire on the part of media conglomerates such as Disney (NYSE: DIS), Time Warner (NYSE: TWX), and Viacom (NYSE: VIA) to engage more digital distribution via video-on-demand and to, in fact, experiment with day-and-date release (which I talked about in a recent piece). If this paradigm ever hits a critical mass, then Comcast should do well with it.

Disclosure: I own shares in Disney; positions can change at any time.

Sterne Agee intiated Baidu (NASDAQ:BIDU) as a "buy: with a price target of $350 according to Briefing.com. The news service also writes that Keefe Bruyette lowered earnings estimates on several financial firms including Goldman Sachs (NYSE:GS), Merrill Lynch (NYSE:MER), and Morgan Stanley (NYSE:MS).

DISH Network (NASDAQ:DISH) was raised to "neutral" at Credit Suisse according to 24/7 Wall St.

MOST NOTEWORTHY: The Cable and Satellite Pay TV industry and FPIC Insurance were today's noteworthy initiations:

• UBS assumed coverage of The DIRECTV Group Inc (NASDAQ: DTV) and Comcast Corporation (NASDAQ: CMCSA) with Buy ratings and Time Warner Cable Inc (NYSE: TWC), Cablevision Systems Corporation (NYSE: CVC) and DISH Network Corporation (NASDAQ: DISH) with Neutral ratings.
• Suntrust is positive on FPIC Insurance Group Inc's (NASDAQ: FPIC) valuation and book value growth. The firm initiated shares with a Buy rating and $50 target.

OTHER INITIATIONS:

• Morgan Stanley started Citadel Broadcasting Corporation (NYSE: CDL) with an Equal Weight rating.
• UBS initiated Accuray Incorporated (NASDAQ: ARAY) with a Neutral rating and $11.50 target.
• Credit Suisse reinstated Ternium SA (NYSE: TX) with a Buy rating.

MOST NOTEWORTHY: Entropic Comm, Epix Pharma and Hiland Partners were today's noteworthy initiations:

• JMP Securities is positive on Entropic's (NASDAQ: ENTR) business with Verizon (NYSE: VZ) Fios and Dish/Echostar (NASDAQ: DISH) and expects other high volume deployments to be announced with other cable service providers. The firm assumed coverage with a Strong Buy rating and $10 target.
  
• RBC Capital initiated Epix Pharma (NASDAQ: EPIX) with an Outperform rating and $6 target, as they are positive on the company's four programs targeting novel GPCR receptors, partnership deals with GlaxoSmithKline (NYSE: GSK) and Amgen (NASDAQ: AMGN), and low valuation.
• Morgan Keegan initiated Hiland Partners (NASDAQ: HLND) with an Outperform rating, as they view the company's units as undervalued.

OTHER INITIATIONS:

• JP Morgan initiated Comverge (NASDAQ: COMV) with a Market Perform rating.
  
• UBS initiated Danaher (NYSE: DHR) with a Buy rating and $95 target.
  
• Benchmark Electronics (NYSE: BHE) was initiated with an Equal Weight rating and $18 target at Lehman.

TheStreet.com's Jim Cramer says this major player's lowered guidance shows why its whole sector is uninvestible.

Is it EchoStar (NASDAQ: DISH) (Cramer's Take)? Or is it foreclosures? Is it DirecTV (NYSE: DTV) (Cramer's Take) or is it bills that are too high? Is it Verizon (NYSE: VZ) (Cramer's Take) or is it house poor fears?

We will debate the Comcast (NASDAQ: CMCSA) (Cramer's Take) blowup -- it just cut its forecasts for 2007 sales, new subscribers and cash -- for a long time. Trying to figure out how a monopoly utility that we used to regard as a utility that could no more be shut off than Con Ed, has become a totally discretionary competitive item that needs to be sold and can't be pulled.

The implications either way show you the limits of this former wonder industry. For all of the years I have been in the business, investing in cable stocks worked. The companies always grew with consistent cash flow and that was enough. They were utilities that always talked about how dividends weren't tax-advantaged and instead focused on the broad expansion and cash flow growth.

Technology insider blog, TechCrunch, ran a thought-provoking post yesterday about Google (NASDAQ: GOOG) entitled, The Google Set-Top Box. The article speculates that the search-engine giant may leverage its new open-source operating system, Android, to address TV advertising in a revolutionary way. Google is already testing a new ad platform for TV with Echostar (NASDAQ: DISH), being propped up with data provided by a recent deal with Nielsen. But this just addresses the way ads are bought and sold. According to TechCrunch, almighty Google's ambitions for television go way beyond just ad delivery.

In short, the article posits that Google's aspirations for the mobile phone can be applied to the set-top box, itself essentially a computer. Android's open-source application platform can be used to help promote and support new developments that would turn TV watching more like Internet browsing. "In many ways," says Google's head of TV development, Vincent Dureau, "we think that television is becoming like the Internet in that there is a multiplication of channels. This creates challenges for viewers, advertisers and creators."

So, what does this mean in practice?

Restoration Hardware (NASDAQ: RSTO) up 16% on a potential buy-out from Sears Holdings (NASDAQ: SHLD).

DH Horton (NYSE:DHI) trading higher by 6% due to better-than-expected earnings.

Freddie Mac (NYSE: FRE) trading down 13% on poor earnings and a concern it may cut its dividend.

Echostar Communications (NASDAQ: DISH) is off over 6% on news that AT&T (NYSE: T) will probably not make a buy-out offer.

Stocks may trade at different prices when they open in the regular session.

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

The rumor mongers on Wall Street took the bait on the EchoStar Communications (NASDAQ: DISH) buyout by AT&T (NYSE: T). The satellite TV company's shares rallied from just above $39 on Friday to a high of $50.29 yesterday.

Never give a sucker an even break. After the close of the market, The Wall Street Journal said that it was all just speculation. The paper says, "one person close to AT&T says the two sides aren't even talking about an M&A deal."

Today, EchoStar shares may well go back below $40 and a lot of people will lose money. DISH traded close to 22 million shares yesterday.

The incident is a hard lesson in buying on rumors. The AT&T deal seemed to be such a clear "win" for both companies. Having a national TV play would make it easier for the telephone company to compete with cable. No one bothered to mention that a partnership between the two companies would probably work nearly as well as AT&T spending $25 billion to buy DISH.

Listen for some cries of pain at the open today.

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

EchoStar Communications (NYSE: DISH) is up $9.07 to $48.63 on renewed chatter that AT&T (NYSE: T) will acquire DISH. DISH call option volume of 32,468 contracts compares to put volume of 4,426 contracts. DISH December option implied volatility of 100 is above its 26-week average of 34 according to Track Data, suggesting larger price risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

EchoStar (NYSE: DISH) closed at $39.83 Friday.

• Smith Barney upgraded DISH from Hold to Buy on: "1) attractive valuation, and 2) our ongoing conviction that there's a 65% chance that AT&T (NYSE: T) acquires DISH over the next 12 months. We still view $52 as fair value for DISH shares. Maintain $52 target price DISH within 12-month."
  
• DISH announced on 9/26/07 the proposal to spin off its technology and infrastructure assets.
  
• DISH overall of 50 is above its 26-week average of 34 according to Track Data, suggesting larger price risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

MAJOR PAPERS:

• According to people familiar with the situation, the Wall Street Journal reported that Hurray! Holding Co Ltd (NASDAQ: HRAY) and Enlight Media have agreed to a merger valued at about $160M, that could be announced as early as Monday afternoon.
• The Financial Times reported that anti-corruption investigators are probing payments by Chevron Corporation's (NYSE: CVX) ChevronTexaco and Royal Dutch Shell PLC (NYSE: RDS.A) to a company owned by powerful Nigerian politician James Ibori, whom they suspect has laundered tens of millions of dollars in British banks, cars and property.
• The Financial Times also reported that Vodafone Group Plc (NYSE: VOD) is looking to increase its presence in China through a government-led restructuring of the country's telecommunications industry.
• According to Barron's "The Trader," there is speculation that the decline in the shares of Echostar Communications Corporation (NASDAQ: DISH) last week has reinvigorated AT&T Inc's (NYSE: T) interest in buying the company.

OTHER PAPERS:

• Citigroup Incorporated (NYSE: C) is said to have "informally" approached The Royal Bank of Scotland Group Plc's (NYSE: RBS) CEO, Sir Fred Goodwin, the Telegraph reported.