UBS upgraded Pacific Sunwear (NASDAQ: PSUN) to Neutral from Sell and said liquidity is no longer a near-term concern. The firm lowered Pacific Sunwear's target to $1.50 from $3. Citigroup upgraded shares to Hold from Sell on valuation following the recent weakness and believes Pacific Sunwear has sufficient liquidity to remain a going concern.
Calyon believes Reliant Energy (NYSE: RRI) will be successful in unwinding the Merrill Lynch Retail credit sleeve and obtaining alternative collateral. The firm upgraded shares to Buy from Add.
JP Morgan said Cogent's (NASDAQ: COGT) position in homeland security and the defense markets make it less sensitive to an economic downturn, making valuation attractive. JP Morgan upgraded shares to Overweight from Neutral and raised its target to $13 from $10.50.
Goldman added Research in Motion (NASDAQ: RIMM) to its Conviction Buy List and removed Riverbed (NASDAQ: RVBD) from the Conviction Sell List.
J.M. Smucker (NYSE: SJM) was raised to Buy from Underperform at Merrill Lynch.
I am the Global Editor at MoneyShow.com and each week I interview an investing expert. This week, I spoke with John Snowden, contributor to The IRS Report newsletter, who says the British economy will slide deeper into recession and the markets will move lower, too.
Q. What is your outlook for Great Britain's economy in the next 12 months?
A. We are on the cusp of a recession, but we have yet to feel the real crunch from a retailing viewpoint. The forthcoming all-important Christmas trading period will give more of a guideline by [the middle or end of] January. There is as yet no real sign of confidence returning, which would suggest we are in for a long haul. Borrowings are at an all-time high and will probably double again next year. This may mean higher taxes as well as labor unrest which would be detrimental for the economy.
Lower oil prices do help and commodity prices are falling, and will start to be reflected in government statistics by early next year. Hence, economy fears are turning towards deflation rather than inflation
Q: So, at what point do you expect to see actual recession in the UK?
A: My guess is that Christmas festivities may distort the reality, but I am sure that by February 2009, we in the UK will be feeling the full weight of recession.
Deutsche Bank upgraded shares of UBS (NYSE: UBS) to Buy from Hold following the company's Q3 update as they believe the quarter marks a turning point.
Merill raised BP Plc (NYSE: BP) and Total SA (NYSE: TOT) to Neutral from Underperform.
DISH Network (NASDAQ: DISH) was lifted to Hold from Sell at Soleil.
Friedman Billings upgraded Sovereign Bancorp (NYSE: SOV) to Market Perform from Underperform as they believe the company's deposits are showing stability despite the massive sell-off.
Kaufman Bros. raised Longtop Financial (NYSE: LFT) to Buy from Hold on valuation as they believe Chinese software service stocks now reflect the investment risks.
Lear (NYSE: LEA) was upgraded to Hold from Sell at Citigroup.
Analyst downgrades:
Morgan Stanley downgraded eBay (NASDAQ: EBAY) to Equal Weight from Overweight citing checks that indicate deteriorating trends are worst than expected.
Juniper (NASDAQ: JNPR) and Pediatrix Medical (NYSE: PDX) were downgraded to Market Perform from Outperform at Morgan Keegan.
Merrill cut StatoilHydro (NYSE: STO) to Underperform from Neutral.
HSBC (NYSE: HBC) was lowered to Market Perform from Outperform at Keefe Bruyette.
U.S. stock futures were higher today, indicating a possible positive start on Wall Street after the Federal Reserve, in a coordinated effort with other central banks acted to calm the markets, injecting $180 billion in to money markets. Also in focus are WaMu and Morgan Stanley, both are said to be on the block. Weekly initial jobless claims will be announced an hour before the market opens, and could sway sentiment in the face of the deteriorating employment picture. The Philly Fed survey for September and August leading indicators are also on tap.
The New York Times reported that according to its sources,Morgan Stanley (NYSE: MS) is considering a merger with Wachovia (NYSE: WB). Morgan Stanley is considering other options as well, but so far all talks are preliminary and no deal may emerge. According to CNBC, Chinese bank Citic is also in talks with Morgan Stanley. If a deal goes through, it would leave Goldman Sachs (NYSE: GS) as the last one of the large independent brokers. MS shares are up 4% in pre-market trade, WB's up 10%.
Another option for Morgan Stanley reported by CNBC is sale of a minority stake to China's sovereign wealth fund, China Investment Corporation(CIC), which already owns 9.9% of Morgan.
The New York Times also reported Wednesday that according to their sources, Washington Mutual (NYSE: WM) has also begun exploring a sale in the event that it cannot find some other way to raise additional capital. Washington Mutual has hired Goldman Sachs to assess its options, which could include Wells Fargo (NYSE: WFC), JP Morgan Chase (NYSE: JPM) and HSBC (NYSE: HBC). According to Bloomberg, Citigroup Inc (NYSE: C) and Bank of America Corp (NYSE: BAC) have also expressed interest. WaMu shares are up 14% in pre-market trade. In general, all finanacial are up in pre-market over 2% and higher.
TheStreet.com's Jim Cramer says it doesn't 'solve everything.' No one is saying it does.
The biggest canard of all: "This is not going to be a cure-all, nor will it solve the 'real problems' of the U.S. economy." Why is it a canard?
Because no one -- I repeat, no one -- is saying it is. Not even the biggest bulls.
This bailout of Fannie (NYSE: FNM) (Cramer's Take) and Freddie (NYSE: FRE) (Cramer's Take) is a piece of the puzzle that is meant to stop house price depreciation. It is one of the major pieces. Mortgage rates are being called down big this morning, big, with some mortgage brokers thinking we will lop a full percentage point off of rates. In case you think they are biased, these people had been forecasting a big gain in rates.
What's driving me crazy here is the falseness of the critics. They are all assuming that things won't be happy. It is about being happier.
Let's take Bank of America (NYSE: BAC) (Cramer's Take) and Wells Fargo (NYSE: WFC) (Cramer's Take). These changes are huge for them. If you owned them, you are going to make a lot of money. Why? Because the competition just got diminished, and the company that was making them pay more for money is gone.
No, that doesn't cure their bad loans. It does make it better!
Perhaps it is because so many banks in Europe and Asia hold preferred shares in Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Perhaps it is because the government takeover of the firms is viewed as a way to drop mortgage rates in the US and help housing. Whatever the reason, the move by the US government caused furious rallies in stocks in both Asia and Europe.
The Nikkei rose over 3% and the Hang Seng was up over 4%. Shares in big banks in mainland China which are believed to hold paper in the two US agencies rose over 4%. HSBC (NYSE: HBC) stock also had a sharp spike.
In Europe, Reutersreports that the FTSE and Daxx indexes were up over 3% and shares in UBS (NYSE: UBS) moved up 11%. Stocks in other major banks were up over 5%.
Watch for a tremendous rally at the open of US markets, whether the government's moves on Fannie and Freddie will help the US housing market long-term or not.
Douglas A. McIntyre is an editor at 247wallst.com.
Lehman Brothers (NYSE: LEH) is a dog of a brokerage house and a broken company. Yet, every time Wall Street turns around, some other financial company is considering investing in it. According to Reuters, "HSBC and the Chinese bank, along with top U.S. hedge funds, are competing with Korea Development Bank."
The fascination with Lehman is fascinating. While it may have a strong money management arm, the value of its commercial property portfolio is falling apart. It has the same kind of toxic mortgage-backed paper on its balance sheet as the one that plagues the balance of the financial industry. If they have any sense, top managers at Lehman will be getting out.
If investors are right about Lehman, the company may not make it. The stock trades at $16, down from a 52-week high of almost $68. With a market cap of only $11 billion, a $5 billion investment could push shares to below $9.
Credit markets are supposed to get worse this year. At least that is what the newspapers say. Lehman is as likely to be further damaged by that as any other large financial firm.
A few outside investors see something in Lehman that the markets don't. Perhaps they would be willing to share that with the rest of the world.
Douglas A. McIntyre is an editor at 247wallst.com.
Stock futures were lower this morning as investors digested the decline in commodity prices and awaited a slew of economic readings. Data on employment, manufacturing and auto sales will be reported during the morning and throughout the day. At 2:00 p.m., the Federal Reserve's Beige Book, which gives an overall picture on the economy will be released.
Coca-Cola Co. (NYSE: KO) said it is offering $2.4 billion for China Huiyuan Juice Group Ltd., triple Huiyuan's market value. This is Coke's largest acquisition by value to date in China and gives the company a leg in the fast-growing and dynamic Chinese juice market. Coke also said that it expects to buy back a total of $1 billion of its stock for the full year. The Boeing Co.'s (NYSE: BA) workers are prepared to vote Wednesday. Union members are scheduled to cast two ballots: one regarding Boeing's latest offer, which union leaders are recommending to reject, and another on whether to begin a strike. Results of the vote are expected Wednesday night.
More information is coming out regarding Korea Development Bank interest in Lehman Brothers (NYSE: LEH). According to reports in The Chosun Ilbo, South Korea's largest mass-circulation daily, state-owned KDB has made a proposal to acquire 25% of U.S. Lehman for as much as 6 trillion won ($5.3 billion). HSBC Holdings (NYSE: HBC) and an unnamed Chinese bank are said to be vying with the KDB for the Lehman stake.
Stock futures were lower Monday morning ahead of a wave of economic data, a tropical storm and, most important, the Federal Reserve meeting and decision Tuesday.
Before the opening bell, the economic calendar includes personal income and spending data for June, as well as the core PCE deflator, an inflation gauge the Federal Reserve eyes closely. Factory orders for June are also due after the open. Oil prices were steady near $125 a barrel Monday as the market kept on eye on both tropical storm Edouard that could turn into a hurricane and hit oil facilities in the Gulf of Mexico, and on further developments in Iran. But most of trading today will likely be affected by expectations the Fed will not change interest rates Tuesday, and issue a neutral statement with the focus changing to the weak economy.
Bank troubles aren't over. HSBC Holdings PLC (NYSE: HBC) reported a significant profit drop as costs for bad U.S. mortgage loans mounted. "HSBC Chairman Stephen Green said the first half of 2008 saw one of the most difficult financial markets for decades." As long as the housing market slump continues, and before the bottom can be seen, no doubt the financial sector will continue to suffer. And given that only about 40% on the $1 trillion expected writedowns were taken, the challenges for financials are far from over. For now, HBC shares are dropping about 3% in premarket trading.
HSBC Holdings (NYSE: HBC), a United Kingdom-based banking and financial services company, rallied on the Hong Kong stock exchange; following a report it held talks with China's sovereign wealth fund about a potential investment in the bank.
HBC is expected to report Q2 EPS in late July.
HBC August option implied volatility of 32 is near its 26-week average of 30 according to Track Data, suggesting slightly larger price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
MOST NOTEWORTHY: European banks, the Paper and Forest Products sector, Kindred Healthcare and Convergys were today's noteworthy upgrades:
Keefe Bruyette upgraded the European Banks sector to Neutral from Underweight on valuation as they see limited downside from current levels. Included in the firm's top picks are HSBC Holdings Plc (NYSE: HBC) and Banco Santander SA (NYSE: STD).
Credit Suisse upgraded the Paper and Forest Products sector to Overweight from Underweight citing valuations and expectations that fundamentals will bottom this fall. The firm raised shares of Temple-Inland Inc (NYSE: TIN) and Smurfit-Stone Container Corporation (NASDAQ: SSCC) to Outperform from Neutral.
Friedman Billings upgraded shares of Kindred Healthcare Inc (NYSE: KND) to Outperform from Market Perform on valuation following the recent pullback and believes the company is well-positioned to beat modest expectations over the remainder of the year. The firm raised their target to $36 from $29.
Oppenheimer raised Convergys Corporation (NYSE: CVG) to Outperform from Perform on valuation, as they believe investors should look at the company's business lines separately. Their sum of parts valuation yields an $18 target.
OTHER UPGRADES:
Suncor Energy Inc (NYSE: SU) was upgraded to Overweight from Neutral at JP Morgan and to Outperform from Market Perform at Friedman Billings.
UBS upgraded BT Group Plc (NYSE: BT) to Neutral from Sell.
It says a mouthful when banks start to call for higher interest rates. The view of managements at financial companies may be coming around to the point where they believe inflation is a bigger problem than rates are.
According toReuters, "The chief executive of Europe's biggest lender on Tuesday called on central bankers to raise interest rates in order to combat inflation." The head man at HSBC (NYSE:HBC) fears that there is no overall plan in the financial community to keep rising prices down.
The viewpoint about inflation is probably right, but that does not mean that governments will begin to up rates. In places like the US, where people are still defaulting on mortgages at record rates, and auto loans and credit card payments are under pressure, upping interest rates would be hard to swallow.
There is also the matter that increasing banking rates may do nothing to halt the spike in food and gas prices. These are being set, to a large extent, by demand outside the US, especially in developing nations. Messing with the cost of lending is not likely to fix that.
The Wall Street Journal reported that a federal judge said that the government had "sufficient evidence" for a jury to conclude that a conspiracy to fraudulently boost the financials of American International Group Inc (NYSE: AIG) began with former CEO Maurice R. "Hank" Greenberg. That led to a transaction that artificially inflated AIG's loss reserves.
Citigroup Incorporated's (NYSE: C) Falcon Strategies fixed income hedge fund is down 75%, the Wall Street Journal reported, bad news for the three U.S. banks that invested in it to help increase returns on employee life insurance. One of the banks, Fifth Third Bancorp (NASDAQ: FITB), is suing Transamerica Life and Smith Barney, both of whom helped to arrange the investment, and some are now questioning whether Citigroup will be forced to give back some of the investments as they have with individual investors.
After it stopped offering some mortgages last month because it was swamped by volumes of new applications, the Financial Times reported that First Direct, a unit of HSBC Holdings Plc (NYSE: HBC), has resumed lending to new customers. The bank said it has continued to receive "significant interest" in its mortgages from existing customers.
OTHER PAPERS:
In an effort to raise capital from shareholders, the Telegraph reported that Barclays Plc (NYSE: BCS) is considering a takeover bid for a rival in the U.S. or UK. Sources believe Barclays may attempt to acquire an investment bank, a struggling bank or a deal in a fast-moving economy. Potential names mentioned include UBS AG (NYSE: UBS) and Lehman Brothers Holdings Inc (NYSE: LEH).
According to the Wall Street Journal, former American International Group Inc (NYSE: AIG) CEO Maurice R. "Hank" Greenberg is pressing the troubled insurer to turn the company around. He says that he and other major shareholders have "deep concern about the persistent and seemingly endless destruction of value at AIG."
Hybrid Capital Second, a Morgan Stanley (NYSE: MS) investment vehicle, increased its stake in internet start-up Livedoor to 18.15% from 12.76% in March, the Financial Times reported, superseding the company's founder, Takafumi Horie.
OTHER PAPERS:
After it incurred $3.2B of bad debts in the first three months of the year, the Telegraph reported that Knight Vinke, an HSBC Holdings Plc (NYSE: HBC) shareholder, has renewed calls for the bank to shed its U.S. consumer finance business.
.gif){kind=logo}
Analyst upgrades:
I am the Global Editor at 
.gif){kind=logo}
U.S. stock futures were higher today, indicating a possible positive start on Wall Street after the Federal Reserve, in a coordinated effort with other central banks acted to calm the markets, 
Stock futures were lower this morning as investors digested the decline in commodity prices and awaited a slew of economic readings. Data on employment, manufacturing and auto sales will be reported during the morning and throughout the day. At 2:00 p.m., the Federal Reserve's Beige Book, which gives an overall picture on the economy will be released.
Here are some highlights from this past week's 
HSBC Holdings.gif){kind=logo}
.gif){kind=logo}
Comfort Zone Investing: Getting beyond today
Stock picks and pans for troubled times: RIMM, ED, ISRG, GLW, LEA, SLB, GOOG ...
Is Berkshire Hathaway better than S&P Index?
