The merger of Wachovia Corporation (NYSE: WB) and Citigroup Inc. (NYSE: C) left investors to wonder who would be next to crumble. And that question was answered quickly: Sovereign Bancorp (NYSE: SOV) and National City Corporation (NYSE: NCC) are on deck -- down 68% and 57%, respectively in today's trading. Meanwhile, thanks to the Republican vote to sink the bailout bill, the Dow is down 677.

The good news is that today's decline is not going to be the biggest in history on a percentage basis. The record that still stands was set in October 1987, when the Dow fell 22.6% -- 508 points really meant something back then -- that's because the Dow was trading at 2,248 before the crash. It would take at least a 2,519 point decline in the Dow to beat that crash. But 21 years ago, the economy was in nowhere near as bad shape as it is today.

I hope I'm wrong but I would not be shocked if Sovereign and National City were no longer independent banks by the end of the week.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citi shares and has no financial interest in the other securities mentioned.

National home prices tumbled by 7.7% in the first quarter in a recent survey. While retail sales did fall -0.2% overall in the month of April, the ex-autos numbers were actually positive by +0.5%. Below are the unofficial closing levels for major averages:

• DJIA 12,833.97 (-42.34; -0.33%)
• S&P500 1,403.42 (-0.16; -0.01%)
• NASDAQ 2,495.34 (+6.85; +0.28%)
• 10YR-TBond 3.909% (+0.134%)
• TOP 10 ANALYST CALLS

Clear Channel Communications Inc. (NYSE: CCU) was up again on news of a settlement between the buyers and the banks for the $20 billion delayed buyout by Bain Capital and THL Partners. The court was adjourned until 2 pm today to allow settlement talks to continue. Shares were up 4% to $34.24 at the end of the day.

MOST NOTEWORTHY: Apple Inc (AAPL) and Lam Research (LRCX) were today's most notable downgrades:

• Apple Inc (NASDAQ: AAPL) was downgraded by two firms today:
  
• JP Morgan downgraded Apple Inc to Neutral from Overweight as they believe outperformance will be difficult given the Mac shipment miss in the first quarter; the broker also noted they have had an Overweight rating since October 2004 and the stock has appreciated strongly in that time.
• JMP Securities also downgraded shares of Apple to Outperform from Strong Buy, citing valuation.

• Lam Research (NASDAQ: LRCX) was downgraded by both Bear Stearns and CIBC:
• Bear Stearns downgraded Lam Research to Peer Perform from Outperform to reflect shipment delays in the quarter, as they believe delays typically serve as a good leading indicator for deteriorating environments.
  
• CIBC downgraded Lam Research to Sector Performer from Outperformer, with a $46 target. CIBC said management's 2007 outlook confirmed their 2007 thesis for a 10%-20% stock correction based on a retrenchment in DRAM orders.

OTHER DOWNGRADES:

• Merrill Lynch downgraded shares of Sovereign Bancorp (NYSE: SOV) to Sell from Neutral, with a$21 target, after the company named Joe Campanelli its permanent CEO. Merrill believes Sovereign now has a reduced chance of a takeover to go along with deteriorating fundamentals.

• Goldman Sachs downgraded Progressive Corp (NYSE: PGR) to Sell from Neutral.

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

MOST NOTEWORTHY: Eli Lilly (LLY) and L-3 Communications (LLL) were the only notable downgrades today:

• HSBC downgraded Eli Lilly & Co. (NYSE:LLY) to Neutral from Overweight.
• Following the loss of the Army Linguist contract, Credit Suisse downgraded L-3 Communications Hldgs Inc. (NYSE:LLL) to Neutral from Outperform with an $83 target.

OTHER DOWNGRADES:

• Cooper Companies Inc. (NYSE:COO) was downgraded to Underweight from Neutral, with a $42 target at Prudential; they believe another reduction in 2007 guidance is likely and, additionally, the company is likely to lose additional market share in the Toric market.
• Credit Suisse, seeing potential risk to production targets at Murphy Oil Corp. (NYSE:MUR), downgraded the company to Underperform from Neutral.
• RBC Capital Markets downgraded Sovereign Bancorp Inc. (NYSE:SOV) to Underperform from Sector Perform based on valuation.

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