MOST NOTEWORTHY: American Capital (ACAS), Doral Financial (DRL), E-Trade Financial (ETFC) and Family Dollar (FDO) were today's noteworthy downgrade:

• Jefferies downgraded shares of American Capital (NASDAQ: ACAS) to Hold from Buy citing the slowing M&A market and risk characteristics of the company.

• Soleil downgraded Doral Financial (NYSE: DRL) to Sell from Hold, on the belief that the recent reverse stock split will increase short-selling activity and discourage speculative buying.

• E-Trade Financial (NASDAQ: ETFC) was cut to Neutral from Buy at UBS, citing deteriorating trends in the credit/mortgage markets, lack of near-term catalysts; the firm does not see an M&A deal occurring near-term.

• Goldman downgraded Family Dollar (NYSE: FDO) to Neutral from Buy, citing weakness in the low-end consumer and increased pressure from Wal-Mart (WMT)...

OTHER DOWNGRADES:

• Wachovia downgraded Tween Brands (NYSE: TWB) to Market Perform from Outperform.

• Estee Lauder (NYSE: EL) was downgraded to Neutral from Outperform at Credit Suisse.

• Deutsche Bank cut Pearson (NYSE: PSO) to Hold from Buy.

• Matrix downgraded Talisman Energy (NYSE: TLM) to Hold from Buy.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required

Ratings agencies have tremendous power in the financial markets because their ratings determine if a certain credit is "own-able" by funds, depending on their covenants. For example, low-risk pension funds can't own poorly graded credit simply because it increases the likelihood of losing money. When ratings agencies change their position on companies or sectors, the market listens. A perfect example of this was the recent subprime fall that resulted from S&P announcing it could downgrade some of the credit from the group.

Now the opposite has occurred -- Fitch announced that it has positive outlook for Doral Financial Corp. (NYSE: DRL). Fitch justified its optimistic outlook for Doral by mentioning the company's sale of a 90% stake in the company to Bear Stearns (NYSE: BSC) Merchant Banking, among other things.

Even though this upgrade was on the company's debt, the stock traded up as well. I think Doral is too speculative to play with, and the future of this company, especially the stock, is extremely up in the air at this point.

MOST NOTEWORTHY: Starbucks Corp (SBUX), Southwest Airlines Co (LUV), Pacific Sunwear (PSUN) and Molson Coors Brewing Co (TAP) were just some of today's notable upgrades:

• Goldman Sachs added Starbucks Corp (NASDAQ: SBUX) to its Conviction Buy List citing valuation and expectations for margin improvement.

• Southwest Airlines Co (NYSE: LUV) was upgraded to Outperform from Neutral at Raymond James.

• Roth Capital upgraded Pacific Sunwear (NASDAQ: PSUN) to Buy from Hold as they believe positive momentum is beginning to build.

• Molson Coors Brewing (NYSE: TAP) was upgraded to Peer Perform from Underperform at Bear Stearns.

OTHER UPGRADES:

• ThinkEquity upgraded WebEx Communications (NASDAQ: WEBX) to Source of Funds from Sell following the acquisition by Cisco Systems (NASDAQ: CSCO).

• XL Capital Ltd (NYSE: XL) was upgraded to Strong Buy from Strong Sell as the firm believes an unusually low number of natural disasters is causing a sharply positive reversal in fundamental trends.

• Soleil upgraded shares of Doral Financial Corp (NYSE: DRL) to Hold from Sell to reflect the recent sale of the company's New York branches and an improved outlook for the Puerto Rican economy.

• Bear Stearns upgraded Roche Holding Ltd (OTC: RHHBY) to Outperform from Peer Perform and Anheuser-Busch Cos (NYSE: BUD) to Outperform from Peer Perform.

• Countrywide Financial (NYSE: CFC) was upgraded to Market Perform from Underperform at Keefe Bruyette.

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