Analyst upgrades:

• Wachovia upgraded shares of The Goldman Sachs Group Inc (NYSE: GS) to Outperform from Market Perform on expectations for greater pricing power given Goldman's position as the largest remaining independent securities firm.
• Keefe Bruyette upgraded Investment Technology Group Inc (NYSE: ITG) to Outperform from Market Perform as they believe the company will take market share with the reshaping of the large wire-house brokerage community. The company's target was raised to $37 from $33.
• Broadpoint raised Hoku Scientific Inc (NASDAQ: HOKU) to Buy from Neutral as they believe the contract with Tianwei New Energy reduces financing risk.
• ACE Ltd (NYSE: ACE) and The Travelers Companies Inc (NYSE: TRV) were upgraded to Buy from Neutral at Goldman.
• Axcelis Technologies Inc (NASDAQ: ACLS) was upgraded to Buy from Hold and Evergreen Solar Inc (NASDAQ: ESLR) was lifted to Hold from Sell at Citigroup.

Analyst downgrades:

MOST NOTEWORTHY: Sony, FiberTower and Cardiome Pharma were today's noteworthy downgrades:

• Goldman lowered its rating on Sony (NYSE: SNE) to Neutral from Buy, citing the yen strength and the economic slowdown.
• Merriman downgraded shares of FiberTower (NASDAQ: FTWR) to Neutral from Buy following the CEO resignation due to added uncertainty. They do not anticipate the valuation to improve from current levels until a permanent CEO is named.
• Cardiome Pharma (NASDAQ: CRME) was downgraded to Neutral from Buy at Merrill following the FDA's decision to delay the Kynapid drug.

OTHER DOWNGRADES:

• American Express (NYSE: AXP) was downgraded to Hold from Buy at Citigroup.
• JC Penney (NYSE: JCP) was downgraded to Neutral from Buy at Piper.
• Merrill added Deutsche Bank (NYSE: DB) to its Bank Least Preferred List.

Main market news here: Before the bell: All eyes on Fed

The Financial Times reported Tuesday that Citigroup (NYSE: C) has trimmed its structured investment vehicles by more than $15 billion since October.

STMicroelectronics (NYSE: STM), rival to Texas Instruments (NYSE: TXN), announced it is buying video-chip maker Genesis Microchip (NASDAQ: GNSS) for $336 million. The deal pays $8.55 a share, a 60% premium on Genesis' closing price Monday.

Home lender Freddie Mac (NYSE: FRE), has adopted stricter limits and broader guidelines for when it will buy out delinquent loans from mortgage pools.

Speaking in Tokyo on Tuesday, Sony Corp. (NYSE: SNE) Chief Executive Officer Howard Stringer said the electronics maker plans to network its PlayStation 3 video game console and its other electronics in 2008.

Sunday night, while the writers and producers in Los Angeles were doing their strike countdown, a good friend was catching a flight to Albuquerque to start production on a new feature film. It seems that New Mexico is offering tax credits that make it worthwhile for a feature film to be produced there, yet again "stealing" revenue from Los Angeles and California.

While no one on the production was interested in leaving town, the studio decided that the tax credits made it worthwhile. Sooooooo, he and his 80 crew members blew town to set up shop for months outside of Hollywood, and the state of California let them go. Vancouver and Toronto have established solid credentials as filming locations at a discount to Hollywood, and they have all the trappings for major productions. With about $350 million in film and television income last year, Louisiana has established itself as one of the nation's most popular film centers, and 40 other states are looking to follow suit.

California is losing hundreds of millions of dollars annually to these "runaway" productions. Runaway used to mean a film was over budget, or it was breaking box office records. Now it means they will film somewhere else.

Surprisingly, California, with its movie star Governor Arnold Schwarzenegger, is doing little to keep the productions here. You would think The Governator would be interested in the subject, but alas -- nothing. No matching tax credits, no partial tax credits, no competitive move whatsoever.

Microsoft (NASDAQ: MSFT) will be releasing a family-oriented version of its Xbox 360 gaming console in November to target the family crowd and draw more price-conscious consumers into its gaming ecosystem. The newer Xbox 360 Arcade will forgo the expensive hard drive for a measly 256 megabytes of storage, and will come with a single wireless controller and five family-themed games. Here's the kicker: the system will sell for $279.99, only $30 higher than the reigning family-gaming champ, the Nintendo Wii.

When the Wii debuted almost a year ago, nobody could have predicted that Nintendo's focus on lower price, lower performance but more fun game console would take the market by storm and outsell technically superior offerings from both Microsoft and Sony (NYSE: SNE). Now that the Wii is the gaming console to beat, Microsoft has leveled the playing field a bit on price and a pack of family games, although it's hard to see if those two things alone will challenge the unique, physically-active gameplay that the Wii provides -- and which has made it attractive to the mass consumer.

The Xbox 360 Arcade console will include games like PAC-MAN Championship Edition, Luxor 2 and Uno. At the same time, Microsoft announced that it is increasing the amount of family-related content in the Xbox 360 games that can be downloaded to consoles over the internet (no physical purchase needed). Is this an attack on Nintendo's Wii at the precise time when holiday shopping will start heating up? You bet it is, but I have a feeling the effort may not be a grand slam. The Xbox 360 does offer a much larger amount of graphics horsepower than the Nintendo Wii, but customers have already voted with their wallets, in that they don't care. But the price parity is now largely gone. Will those that were considering the Wii now set the Xbox 360 Arcade edition next to it in those purchase decisions? Microsoft hopes so.

[Disclosure: I own MSFT shares as of 10-25-07]

MAJOR PAPERS:

• The Wall Street Journal reported that Sprint Nextel Corporation (NYSE: S) is reviewing its options to finance the building of WiMax, a wireless broadband network; a hook-up with Clearwire Corporation (NASDAQ: CLWR) is a possibility.
• The word is out that Liberty Media Corporation (NASDAQ: LCAPA) and EchoStar Communications Corporation (NASDAQ: DISH) will make a joint bid for the satellite communications provider Intelsat, Ltd, possibly somewhere in the $4.5B-$5.5B range, the Wall Street Journal reported.
  
• The Financial Times reported that Congress removed blocks on arms transfer requests by U.K. weapons manufacturer BAE Systems plc (OTC: BAESY), acting after BAE assured them that the transfer requests were unrelated to a defunct British investigation into bribery allegations involving Saudi Arabia and BAE.
• According to Barron's Online's "Weekday Trader," Sony Corporation (NYSE: SNE) is climbing its way back to electronic prominence, but more work remains, and it may be time to take profits.

WEBSITES:

• LiveMint.com reported that Citigroup Inc's (NYSE: C) emerging markets private-equity investment arm, Citigroup Venture Capital International, will reportedly invest $1.5B in India over the next three years, the largest investment by a single private-equity investor in the Indian markets.

Sony Corp. (NYSE: SNE) opened at $49.03. So far today the stock has hit a low of $48.28 and a high of $50.41. As of 1:30 this afternoon, SNE is trading at $49.50, down 2.37 (-4.6%).

The stock jumped in the month of February to a new year high at $53.34 before hitting resistance and backing off over the past few trading days. News came early today that Sony will pay a nearly $120 million settlement to Immersion Corp in a patent-infringement case. Also, the EU has begun its investigation into the company's proposed merger with Germany's Bertelsmann AG. The technical indicators for SNE have been bullish but deteriorating slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a short-term bearish hedged play on this stock, I would consider an April bear-call credit spread below the $55 range. SNE hasn't been above $53.50 ever and has shown resistance around $53. This trade could be risky if the stock continues its bullish run, but this position could be protected by the double top that the chart formed around $53.

Brent Archer is an analyst on the move at Investors Observer (Free Subscription). DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about.