"For two years chips stocks have unequivocally stunk; the industry has been mired in a host of problems, including massive overcapacity and shrinking demand," says Toby Smith, adding, "But that's changing."

In his ChangeWave Investing, he suggests, "One recommendation in this sector is SanDisk (NASDAQ: SNDK), the leader in flash memory -- one of the strongest segments in semis today."

"For the second quarter in a row the semiconductor sector is showing major signs of momentum that are so good that the industry ranked at the top of the nearly 20 industries we track each quarter.

"The bottom line is that these results clearly indicate that it is time to be invested in the semis, and the best way to do this is with two short-term plays.

Technology sector expert Paul McWilliams offers an intriguing look at the new iPhone from Apple (NASDAQ: AAPL) to uncover what tech companies are supplying components.

In his Next Inning -- a newsletter that focuses solely on high tech stocks -- the advisors offers a look at the players inside the iPhone.

McWilliams explains, "A few interesting notes have come from the folks busily tearing down the new Apple iPhone 3G S since its launch.

Today was one of those low news flow days where you never had any real solid feel for where the market would close until the very end of the session. We have seen too many rallies dashed by closing imbalances at the end of the day when there was thin volume.

Some Philly Fed data helped hold the market, and that was on the heels of the largest drop in continuing jobless claims since 2001. Some of the agriculture stocks staged a small comeback after yesterday's huge losses.

Here were the unofficial closing bell levels:

Dow 8,554.77 +57.59 (0.68%)
S&P 500 918.34 +7.63 (0.84%)
Nasdaq 1,807.72 -0.34 (-0.02%)

Top Analyst Upgrades
Top Analyst Downgrades

Analyst upgrades

• Baird upgraded Con-Way (NYSE: CNW) and Old Dominion (NASDAQ: ODFL) to Outperform from Neutral due to the benefits of a likely bankruptcy of YRC Worldwide (NASDAQ: YRCW). Old Dominion's target was raised to $40 from $26 and Con-Way's was raised to $42 from $22.
• Citigroup upgraded Pride International (NYSE: PDE) to Hold from Sell as it believes higher valuation levels are warranted with the upcoming spin-off of Seahawk Drilling. Citi raised its target on shares to $25 from $18.
• Jesup & Lamont upgraded FedEx (NYSE: FDX) to Buy from Hold with a $63 target as it believes the worst is largely behind the company.
• Hewitt Associates (NYSE: HEW) was upgraded to Neutral from Underweight at JPMorgan.
• ArvinMeritor (NYSE: ARM) was upgraded to Buy from Neutral at Goldman.
• Abercrombie & Fitch (NYSE: ANF) was upgraded to Buy from Neutral at SunTrust.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• American Express Co. (NYSE: AXP) Q1 profit blew away estimates, sending shares soaring.
• Apple Inc. (NASDAQ: AAPL) topped analysts expectations and offered conservative guidance.
• Boeing Co. (NYSE: BA) reported better-than-expected results but warned that if faced challenges.
• Coach Inc. (NYSE: COH) topped Q3 profit estimates and announced the start of quarterly dividends.
• Continental Airlines Inc. (NYSE: CAL) widened is net loss in Q1 but still beat low Wall Street estimates.

SanDisk (NASDAQ: SNDK - option chain) shares are headed higher today after reporting a first-quarter loss of $208 million, or 92 cents per share. SNDK's adjusted loss of 48 cents per share was not as bad as the 76-cent loss forecast by analysts. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on SNDK.

SNDK opened this morning at $14.86. So far today the stock has hit a low of $14.69 and at 11:30 is trading at the intraday high of $15.68, up 1.97 (14.4%). The chart for SNDK looks neutral and S&P gives SNDK a neutral 3 STARS (out of 5) hold ranking.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Alcatel-Lucent (NYSE: ALU) reported a huge Q4 loss on a charge and the economic slowdown.
• Avon Products Inc. (NYSE: AVP) fell short of Q4 expectations but announced a dividend increase.
• Carlisle Companies Inc. (NYSE: CSL) Q4 numbers resulted in an analyst's upgrade.
• Costco Wholesale Corp. (NASDAQ: COST) warned that its earnings would fall well below expectations.
• Electronic Arts Inc. (NASDAQ: ERTS) posted a bigger-than-expected loss and outlined cost cutting plans.
• Hasbro Inc. (NYSE: HAS) shares took a hit ahead of its earnings report due to rival Mattel's Q4 results.

This post was written by Minyanville contributor Bill Feingold.

With SanDisk (NASDAQ: SNDK) -- which turned down a $26 per share bid from Samsung last fall -- now talking about raising equity at well below half that price, I think shareholders are going to be beyond irate. In what appears to be one of the great breaches of fiduciary duty of all time, management belittled Samsung for being opportunistic, trying to take advantage of a depressed stock price.

Funny, I thought that once you go public, you have made a deal that you are willing to accept the market's opinion of your value. I guess Sandisk's management somehow acquired immunity and forgot to tell everyone else.

The economic upheaval around the globe just torpedoed another deal. South Korean electronics giant Samsung said it will abandon its effort to acquire computer memory and consumer electronics manufacturer SanDisk, noting a particularly shaky environment for SanDisk's various markets it sells into.

Samsung CEO Lee Yoon-woo told CNBC that "Your surprise announcements of a quarter billion dollar operating loss, a hurried renegotiation of your relationship with Toshiba and major job losses across your organization all point to a considerable increase in your risk profile and a material deterioration in value, both on a stand-alone basis as well as to Samsung." Yowza. Nothing like going from one extreme to the other. But he's right - SanDisk's outlook has gone down the toilet. Along with it went Samsung's $5.9 billion takeover offer.

Yoon-woo went on to say that his company is no longer interested in buying SanDisk for $26 per share. Don't think Samsung won't be back at some point if SanDisk's share price trails downward, though. SanDisk already told Samsung to get lost when the bid was announced, but Samsung - to me - is still very interested in getting its hands on SanDisk. When the initial bid was announced, SanDisk said that Samsung's bid failed to recognise the intrinsic value of SanDisk's intellectual property. What intrinsic value? Commodity memory and consumer electronics products?

SanDisk (NASDAQ: SNDK - option chain) shares are dropping today after the company agreed to sell part of its capacity in a joint venture with Toshiba. For $1 billion, Toshiba will buy 30% of the manufacturing capacity in the joint venture. SNDK is getting trashed today as investors presumably don't like the idea of selling part of the company in the middle of an economic storm, when values might not be at their highest. SanDisk also reports its Q3 earnings after the close today, with analysts expecting a 27 cents per share loss. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on SNDK.

This morning, SNDK opened at $15.81. So far today the stock has hit a low of $13.83 and a high of $15.85. As of 12:15, SNDK is trading at $14.33, down $1.18 (-7.6%). The chart for SNDK looks neutral and S&P gives SNDK a 3 STARS (out of 5) hold ranking.

For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $25 range.

SanDisk (NASDAQ: SNDK) is recently trading at $22.65 in pre-open trading, above its close of $15.04. Samsung Electronics made public a $5.8 billion offer to purchase SNDK. SNDK, a supplier of flash storage cards, rejected Samsung's buyout proposal. SNDK overall option implied volatility of 79 is above its 26-week average of 63 according to Track Data, suggesting larger price movements.

Sempra Energy (NYSE: SRE), an energy company serving 29 million consumers worldwide, closed at $53.04. SRE October option implied volatility of 51 is above its 26-week average of 25 according to Track Data, suggesting larger price movement.

Volatility Index S&P 500 Options-VIX at 30.29; 10-day moving average is 25.31.

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

The bulls got to lead the first day of the quarter, although we would note that if today was the norm that trading volatility isn't slowing down regardless of the direction. Oil rose again toward session highs on tensions and the usual myriad of reasons we cite for oil rising (yes, it's that routine). Here are today's unofficial closing levels:

• DJIA 11,381.77 (+31.51)
• S&P500 1284.89 (+4.89)
• NASDAQ 2304.97 (+11.99)
• 10YR T-Note 3.992% (+0.013%)
• 52-WEEK LOWS

We actually saw many financial sector upgrades from research firms today, which sent many of the corresponding shares higher in what feels like a "for once" statement. We would caution that later in the day an analyst report did note other banks would need more capital (again).

MOST NOTEWORTHY: Edison International, Animal Health International and SanDisk were today's noteworthy initiations:

• RBC Capital initiated Edison International (NYSE: EIX) with an Outperform rating and $64 target citing strong rate base growth and the favorable environment at Southern California Edison.
  
• Piper assumed coverage of Animal Health International (NASDAQ: AHII) with a Buy rating and $10 target, as they believe the current valuation is attractive from long-term investors.
  
• Pacific Crest started SanDisk (NASDAQ: SNDK) with a Sector Perform rating and believes the valuation is too high following the recent strength as product margins are trending down.

OTHER INITIATIONS:

• Sandler initiated Heritage Commerce (NASDAQ: HTBK) with a Hold rating and $16 target.
  
• Burger King (NYSE: BKC) was initiated with a Buy rating and $34 target at Piper.
  
• RBC Capital assumed U.S. Geothermal (AMEX: HTM) with an Outperform rating and $4 target.

MOST NOTEWORTHY: U.S. semiconductors, Teekay Offshore and Oplink Communications were today's noteworthy upgrades:

• Goldman upgraded the U.S. Semiconductor Sector, including Intel (NASDAQ: INTC) and SanDisk (NASDAQ: SNDK) to Attractive from Neutral. The firm believes semi fundamentals are poised to improve in 2H08 and that valuations are reasonable.
  
• Wachovia upgraded Teekay Offshore (NYSE: TOO) to Outperform from Market Perform based on valuation and increased distribution growth outlook following the acquisition of an additional 25% ownership interest in Teekay Offshore Operating, L.P.
  
• Merriman upgraded shares of Oplink Communications (NASDAQ: OPLK) to Buy from Neutral as it believes the company is an attractive takeover target following the Finisar (NASDAQ: FNSR) and Optium (NASDAQ: OPTM) merger, given its low-cost Chinese manufacturing capacity and attractive $140M cash balance.

OTHER UPGRADES:

• Goldman upgraded Amazon.com (NASDAQ: AMZN) to Buy from Neutral and added shares to its Conviction Buy List.
  
• William Blair raised Interpublic Group (NYSE: IPG) to Outperform from Market Perform.
  
• Citigroup upgraded Texas Instruments (NYSE: TXN) to Buy from Hold.

MOST NOTEWORTHY: The Department store sector, SanDisk and CNET Networks were today's noteworthy downgrades:

• Goldman downgraded the department store sector to Neutral from Attractive after raising its 2008 oil forecast to $149 from $115, as it believes higher gas prices will impact consumer discretionary spend and sentiment. Goldman downgraded JC Penney (NYSE: JCP) and Nordstrom (NYSE: JWN) to Neutral and also removed Kohl's (NYSE: KSS) from its Conviction Buy List.
  
• JMP Securities downgraded SanDisk (NASDAQ: SNDK) to Underperform from Market Perform based on increased competition in NAND, a potential decline in royalty income, valuation, and lack of catalysts from flash-based solid state drives.
  
• CNET Networks (NASDAQ: CNET) was cut to Neutral from Buy at Banc of America following the tender offer from CBS (NYSE: CBS).

OTHER DOWNGRADES:

• Merrill downgraded Regions Financial (NYSE: RF) to Sell from Neutral.
  
• B. Riley downgraded Exar (NASDAQ: EXAR) to Neutral from Buy.
  
• Albermarle (NYSE: ALB) was lowered to Neutral from Overweight at JP Morgan.