According to Standard & Poor's (S&P) Case-Shiller home price index, home prices are falling faster in the nation's largest cities.

The index dropped 0.6% in September compared to August (some are reporting 0.7%), with 18 of the cities recording monthly price declines. The largest drop was reported in Cleveland, Ohio, which saw prices drop 3% compared to a month earlier. The only two cities where prices increased were Washington DC (thanks mainly to government spending) and Las Vegas (which has been battered in recent reports).

Wednesday morning, Standard & Poor's announced that it may cut AT&T's (T) credit rating because the company could have trouble reducing its debt load within a "reasonable timeframe."

The ratings house placed the communications firm on CreditWatch negative with implications, which includes the company's "A" rating and its "A-1" short-term and commercial paper ratings. S&P stated, that it expects "a potential downgrade of the corporate credit rating, if any, would be limited to one notch." This news has had very little impact on the stock, as shares of the titan of telecom were trading near break-even by late morning.

Helmerich & Payne (HP - option chain) shares are rising today after Standard & Poor's announced this morning that HP will be added to its S&P 500 index after the close of trading on February 26. HP will replace IMS Health Inc. (RX), which is being acquired by private interests. Companies added to the major indices often see a bump higher as tracking funds are forced to add shares to their holdings. 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 HP.

HP opened this morning at $42.73. So far today the stock has hit a low of $41.52 and a high of $42.78. As of 12:00, HP is trading at $41.98 up 24 cents (0.6%). The chart for HP looks bearish.

Home prices fell yet again in November, losing 0.2% month-over-month (on a not seasonally adjusted basis), following a 0.1% drop in October. The Standard & Poor's/Case-Shiller's home price index reported only five out of 20 metro areas with gains, and from November 2008 to November 2009, home prices are off 5.3%. Need a benchmark? It's late 2003: Six years of appreciation have been obliterated by the financial crisis.

The slide worries analysts who wonder if the housing recovery is strong enough to keep moving forward. A stall on the housing side, of course, could push through the rest of the economy, ultimately putting the squeeze on consumer spending (further) and impeding overall growth.

A rally that began last year has already run up the prices of some stocks, creating small bubbles across the market. Some investors might be pushing prices higher ahead of their time for 62 of the stocks in the S&P 500 index. These companies now have P/E ratios of above 70, up from 23 a year ago. Says Robert Maltbie of Singular Research, "We have to temper some of this crazy bullishness." He tells USA Today that when P/E ratios approach 70, a stock can begin to have problems.

So, why are some prices being run up? As usual, any hope of rational price drivers is the domain of dreamers. Investors have found their favorites and sometimes haven't allowed reality to become a constraint on their excitement. Take a look at five reasons below:

The private equity market was hit hard by the financial crisis last year, but it's already on the road to recovery, according to a new report by Preqin (pdf).

From the first quarter to the second, this year, increasing returns and valuations have given investors a reason to hope, even though the industry's average return is down 24.1% for the 12-month period ending June 30, 2009. The negative return still outpaced the S&P 500, MSCI Europe and MSCI Emerging Markets indexes, the alternative investment research firm says, which returned -26.2%, -34.1% and -27.8%, respectively -- and the 12-month average improved from -30% for the year-long period ending March 31, 2009.

What happens when a bank has to accept the collateral posted for loans? Well, in Russia, it's like the punchline to a bad Yakov Smirnoff joke. "In Russia, when a bank takes collateral, it has to set up a pigpen!"

Well, this is exactly what happened to Alexander Lebedev's OAO National Reserve Bank. It wound up with 40,450 of them. As Russian banks are coping with the financial crisis, they are finding themselves with a variety of hard goods that they never expected to receive.

The McGraw-Hill Companies (NYSE: MHP), a distributor of business information and educational materials which counts Scholastic (NASDAQ: SCHL) as a related stock, issued third-quarter results earlier today. Sales contracted over 8%. Net income on a dollar basis dropped almost 14%. Earnings per diluted share decreased a very unlucky 13% to $1.07. At least expectations were taken out. Earnings.com indicates a beat of two pennies for per-share profit.

The declines are pretty understandable. When you think about McGraw-Hill, you understand fairly quickly that the company's business model is tied closely to the economy. Education markets must be tough given all the budget cuts happening in school systems across the country. Plus, spending by administrators is probably done these days very slowly and carefully.

Economist and president of a research firm that bears his name, Andrew Smithers (not related to the Smithers of Mr. Burns fame) is saying our on-fire stock market is set to burn itself out. The S&P 500 Index is overvalued by 40%, he believes, and we can expect a plunge thanks to central bankers restraining themselves on the securities purchases that have pushed the markets up so far so fast. Also, banks are going to need to sell more shares to raise capital and pump up their balance sheets.

If the S&P 500 were to take a 40% dive today, it would fall to 647.76 (based on the Friday close), below the low it recorded in March.

Late Thursday, Standard & Poor's announced a few changes to its U.S. indices. The reason for the changes are that Wyeth (NYSE: WYE) is being acquired by Pfizer (NYSE: PFE), leaving an opening in both the S&P 100 and S&P 500 (SPX). I want to focus on the stock that will replace WYE in the SPX, First Solar (NASDAQ: FSLR). In after-hours trading, FSLR jumped more than 6% in response to the announcement.

FSLR manufactures solar modules and is a major benefactor of what I like to call the "green rush" that took place during the past two years. FSLR capitalized nicely on the global environmental consciousness revolution last year, ascending as high as the $310 region. Yes, the stock has backed off quite a bit due to the economic crisis, but it could enjoy a bit of a recovery provided it can parlay this latest news into a breach of some overhead resistance.

Eight is enough ... of DJIA gains in days in a row, that is. There are many things that the market had going for it today, but sometimes good news can only propel a market for so many days ...

Here are today's unofficial closing bell levels:

Dow 9,532.11 -48.52 (-0.51%)
S&P 500 1,028.36 -2.62 (-0.25%)
Nasdaq 2,028.04 +0.31 (0.02%)

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Since Obama's inauguration, the market seems to have responded negatively to the president's rhetoric, and yesterday was no exception. Within seconds of a White House alert that the president and his chief economic advisers would make an important announcement, stocks headed south.

And by the time that President Obama -- flanked by his team -- began the address at 3:50 p.m. Eastern, the Dow had given up more than 100 points, with investors fearful that the team had decided on a major policy shift.

Despite the poor timing of the White House's news conference, which contained little new information and spooked traders into a flurry of profit-taking, Wednesday's small correction did little to change Tuesday's upside reversal and the probability of further buying.

Standard & Poor's has slashed Motorola Inc.'s (NYSE: MOT) credit rating to junk status, saying that continued operational challenges will lead to weak cash flows.

"Revenues and profits in the first part of the year will be challenged by a narrower, somewhat-dated product portfolio," S&P's Bruce Hyman said in a statement. "Standard & Poor's also expects about 10 percent fewer handsets to be sold worldwide in 2009 at lower average prices than in 2008."

On December 1, BloggingStocks' Doug McIntyre wrote that "As hard as it would have been to imagine a year ago, Motorola may still have to dump its cell operation and perhaps put it into Chapter 11. Its fate is that grim. It needs to escape its employee and creditor obligations to make it."

The company's November 2012 notes are trading at a yield of 8.02% -- hardly a sign of a company in severe distress.

But everything the company needs to do to turn itself around will be made more difficult by a weak credit rating in an environment where it's tough for company's with good credit ratings to secure access to capital.

But the one thing we can see from this is that Carl Icahn's complaint that the company was under-leveraged may not have been the case.

McGraw-Hill (NYSE: MHP) shares opened lower today, but have rebounded as the day moved on after the European Union Internal Market Commissioner announced that bond and credit rating agencies, including MHP's Standard & Poor's, will face mandatory new European Union regulation as a result of these agencies' roles in the U.S. sub-prime mortgage crisis. 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 MHP.

After hitting a one-year high of $71.97 last June, the stock hit a one-year low of $33.91 in March. This morning, MHP opened at $42.87. So far today the stock has hit a low of $42.10 and a high of $43.65. As of 12:00, MHP is trading at $43.60, down $0.13 (-0.3%). The chart for MHPlooks bullish and steady.

For a bearish hedged play on this stock, I would consider an August bear-call credit spread above the $50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade will make an 11.1% return in two months as long as MHP is below $50 at August expiration. McGraw-Hill would have to rise by more than 14% before we would start to lose money.

MHP hasn't been above $50 since October and has shown resistance around $45 recently. This trade could be risky if the company's earnings (due out in late-July) are a positive surprise, but even if that happens, this position could be protected by resistance MHP might find at its 200 day moving average, which is currently around $44 and falling.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in MHP.

Most investors probably think that when an investment ratings service like Moody's, Standard & Poors or Fitch gives a company, financial institution or security the highest rating of "AAA," it carries the least possible level of risk. Most investors would think that this rating would be reserved for United States Treasuries and only the most secure of companies like Berkshire Hathaway (NYSE: BRK.A), Johnson & Johnson (NYSE: JNJ), or United Parcel Service (NYSE: UPS). Actually, this happens to be the case, and these companies are among the very few to receive AAA ratings outside of financial institutions.

So what happened in the case of the Collateralized Debt Obligation (CDOs), where the ratings agencies determined that high-risk securities batched together had a smaller chance of default than the individual securities? Perhaps that is the case, but triple-A? Well, it seems to me that large investment banks knew they needed the AAA ratings to have a marketable security. They went to the ratings agencies that understood this and the agencies created the rational or plausible deniability to support the rating. This may be a bit harsh, but it does seem that the ratings agencies were working in reverse: first establish the rating and then the support for the rating. The ratings services are all heading for cover and many of the previously AAA-rated securities are being re-evaluated.