MOST NOTEWORTHY: Procter & Gamble, Human Genome and Arcelor Mittal were today's noteworthy downgrades:

• Deutsche Bank downgraded shares of Procter & Gamble (NYSE:PG) to Hold from Buy on valuation and their expectation for slowing short-term industry growth, especially in beauty.
  
• Citigroup downgraded Human Genome (NASDAQ:HGSI) to Hold from Buy as they believe giving up Syncria's royalties removes an important value driver for the stock.
  
• HSBC downgraded shares of Arcelor Mittal (NYSE:MT) to Neutral from Overweight on valuation and believes the company needs to raise prices more than costs have risen for iron ore, coking coal and steel scrap.

OTHER DOWNGRADES:

• BAE Systems (NASDAQ:BAESY) was cut to Equal Weight from Overweight at Morgan Stanley.
  
• Merrill downgraded Zoltek (NASDAQ:ZOLT) to Neutral from Buy.
  
• Credit Suisse downgraded Illinois Tool Works (NYSE:ITW) and International Paper (NYSE:IP) to Neutral from Outperform.

While watching the Detroit Lions lose to the New York Giants, I was struck with a strange feeling. Once again, Detroit, the historical center of American business through the auto industry, will lose out to New York, the financial epicenter of the world. While millions of heartland Americans are stuck with mortgages they're struggling to pay back, New York and its financial machine continues to roll.

It's amazing how twisted stock picking can get after a couple of cold ones.

In all seriousness, I've been looking through a lot of the mess in housing and auto, and I have to admit, it's pretty slim pickings. What I did find, and my loss for not knowing about this jewel before, is a nifty company called Illinois Tool Works (NYSE: ITW). This company competes in industrial products in markets including welding, food equipment, polymers, industrial, construction, auto, and packaging. This company reminds me of the diversity of a General Electric (NYSE:GE) or Tyco (NYSE: TYC).

There is a Glenview, Illinois company with a name that leads one to believe it's in the business of making tools . . . and it is. There is rather more to it, though. The firm actually consists of about 750 decentralized business units in 49 countries, and tools are just the beginning.

Illinois Tool Works (NYSE: ITW) is a diversified manufacturer of highly engineered components, industrial systems and consumables. The company's Engineered Products segment provides the construction, automotive and consumer durables markets with plastic and metal components, trusses, fasteners, adhesives, cross-laminated plastic films and laminate flooring products. The Specialty Systems segment designs and manufactures machinery, packaging systems, tools, welding products, electronic assembly materials, cooking equipment and related consumables. General Electric (NYSE: GE) is among the firm's major competitors.

ITW investors were pleased last week, when Merrill Lynch (NYSE: MER) upgraded the stock from "neutral" to "buy." The broker said the base business growth rate is positioned to begin to accelerate, due to easier comparisons and on-going strength from international end markets. Also, the company affirmed guidance ranges. It still sees Q2 EPS of 86-90 cents (88 cent consensus) and FY07 EPS of $3.27-$3.39 ($3.33 consensus). The stock popped into a bullish "pennant" consolidation pattern on the news. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

MOST NOTEWORTHY: The environmental services sector, the machinery and capital goods sector and several bank holding companies were today's noteworthy initiations:

• Credit Suisse initiated shares of Allied Waste Industries Inc (NYSE: AW), Republic Services Inc (NYSE: RSG) and Waste Management Inc (NYSE: WMI) with Outperform ratings and a $16 target, $35 target and $45 target, respectively.
• Bernstein initiated the machinery and capital goods sector, initiating shares of Caterpillar Inc (NYSE: CAT) and Illinois Tool Works Inc (NYSE: ITW) with Outperform ratings and a $100 target and $68 target, respectively and Deere & Company (NYSE: DE), Eaton Corporation (NYSE: ETN), Ingersoll-Rand Company Ltd (NYSE: IR) and Parker-Hannifin Corporation (NYSE: PH) with Market Perform ratings.
• Sandler initiated shares of Preferred Bank Los Angeles CA (NASDAQ: PFBC) and UCBH Holdings, Inc (NASDAQ: UCBH) with Buy ratings and shares of Cathay General Bancorp (NASDAQ: CATY) and East West Bancorp, Inc (NASDAQ: EWBC) with Hold ratings.

OTHER INITIATIONS:

• Golfsmith International Holdings Inc (NASDAQ: GOLF) was initiated at Wedbush with a Buy rating and $8.75 target, as the firm believes the company is an attractive growth story and buyout candidate.
• Pharmasset Inc (NASDAQ: VRUS) was initiated with a Buy rating and $12 target at Banc of America, as the firm believes Clevudine has the potential to be best in class for the treatment of the hepatitis B virus.
• Ciena Corporation (NASDAQ: CIEN) was initiated with an Outperform rating and $40 target at Piper Jaffray.