Analyst upgrades:

• Jefferies upgraded Aruba Networks (NASDAQ: ARUN) to Buy from Hold following the company's Q3 results to reflect improved visibility. The firm raised its target price to $6.50 from $3.
• Citigroup upgraded Mosaic (NYSE: MOS) and Potash (NYSE: POT) to Buy from Hold and Agrium (NYSE: AGU) to Hold from Sell as it believes stronger grain fundamentals more than offset China contract risk. The firm raised its target on Mosaic to $72 from $48, on Potash to $145 from $83 and on Agrium to $55 from $36.
• Fulton Financial (NASDAQ: FULT) Was upgraded to Market Perform from Underperform at Keefe Bruyette.
• Rio Tinto (NYSE: RTP) was raised to Neutral from Sell at Goldman.
• Noble Corp. (NYSE: NE) was upgraded at Deutsche Bank to Buy from Hold.

I think it's fair to say that there's much trepidation about the earnings season that picks up steam this week. And for better or worse, numbers from the big financials have begun to roll in. Last week we saw profit sink for JPMorgan Chase (NYSE: JPM) and significant losses from Bank of American Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C), and Deutsche Bank (NYSE: DB).

Analysts surveyed by Thomson Reuters expect Bank of New York Mellon Corp. (NYSE: BK) to be among those financials reporting fourth-quarter earnings growth this week. They anticipate that Bank of New York will post a profit of $0.70 per share, compared to $0.67 per share a year ago and $0.72 in the previous quarter. Revenue is expected come to $3.8 billion, about the same as it was a year ago. Bank of New York has fallen short of earnings estimates in two of the past five quarters, by as much as 11.1%. For the full year, analysts are looking for $2.78 per share (+5.8%) on $14.8 billion (+4.2%). The consensus recommendation of analysts is to buy BK, and the long-term EPS growth rate forecast is 10.7%. Shares are 48.7% lower than a year ago. Other financials expected to report quarterly earnings growth this week include SunTrust Banks Inc. (NYSE: STI) and M&T Bank Corp. (NYSE: MTB).

Wall Street's optimism in last week's preview about the earnings of tech stocks wasn't misplaced, as there were many more positive surprises than negative ones among the stocks we looked at. This week will bring plenty more data for investors in and watchers of the sector to mull over. Apple Inc. (NASDAQ: AAPL), AT&T Inc. (NYSE: T), and Microsoft Corp. (NASDAQ: MSFT), for example, are expected by analysts surveyed by Thomson Financial to post modest earnings gains from a year ago, to $1.11 per share (on $8.1 billion in sales), $0.72 per share (on $31.3 billion in sales), and $0.47 per share (on $14.8 billion in sales) respectively. All three of these companies ended the week closer to their 52-week lows than highs, and analysts on average consider them each a buy.

Here's a look at some of the week's biggest expected earnings gainers and decliners in the sector:

• Baidu.com Inc. (NASDAQ: BIDU): $1.25 per share (+44.0%) on revenues of $134.7 million (+103.2%)
• Broadcom Corp. (NASDAQ: BRCM): $0.44 per share (+38.6%) on revenues of $1.3 billion (+33.8%)
• QLogic Corp. (NASDAQ: QLGC): $0.31 per share (+29.0%) on revenues of $170.0 million (+21.2%)
• FLIR Systems Inc. (NASDAQ: FLIR): $0.32 per share (+28.1%) on revenues of $275.2 million (+44.0%)
• Juniper Networks Inc. (NASDAQ: JNPR): $0.30 per share (+26.7%) on revenues of $927.4 million (+26.2%)
• Waters Corp. (NYSE: WAT): $0.75 per share (+17.3%) on revenues of $391.6 million (+11.1%)
• Flextronics International Ltd. (NASDAQ: FLEX): $0.29 per share (+17.2%) on revenues of $8.7 billion (+57.3%)
• EMC Corp. (NYSE: EMC): $0.19 per share (+10.5%) on revenues of $3.7 billion (+12.9%)

Financials have staged an impressive rally from extremely oversold levels," says Kelley Wright, editor of the top-rated IQ Trends, which focuses on high quality, blue chip, dividend-paying stocks. Here's his top long-term buys among banks.

"It is increasingly evident that the banking sector is dividing into two distinct camps; the have's and the have not's. The 'have's' are:

Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC) among the big cap area;
SunTrust (NYSE: STI) and BB&T Corp. (NYSE: BBT) in the larger regional banking sector;
Bank of Hawaii (NYSE: BOH) and Southwest Bancorp (NASDAQ: OKSB) in the smaller cap area.

"The impressive rally to date notwithstanding, it still remains to be seen whether another retracement will develop should crude oil, gold and other commodities reverse course.

"A strong rally in these sectors could send the market down again. While Mr. Market can do whatever he pleases, it is highly unusual for stocks to bottom in the summer.

"It would not be imprudent to see what September and October have to offer before anyone begins to talk seriously about the bottom. For investors with an appetite for the financials, however, we would suggest dusting off that old tried and true tactic of dollar cost averaging as a prudent means to establish positions."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.

It's officially a trend because it's happened more than three times -- a bad financial report leads to a spike in stock prices. (I posted here and here about this phenomenon with Citigroup (NYSE: C) and Bank of America (NYSE: BAC) respectively). Now, the New York Times reports that five banks lost billions, or saw their profits plunge, but their stock prices rose an average of 12.9% in the wake of those reports.

Why? The conventional wisdom suggests that investors expected them to do much worse and were pleasantly surprised. And this phenomenon is not confined to banks -- this morning, Yahoo (NASDAQ: YHOO), which reported a penny less profit per share than the 10 cents analysts had expected, is up 3% in premarket, reportedly because it did not lower its guidance.

I am not convinced by conventional wisdom about why these stocks are up. My hunch is that there were many traders who sold short the stocks of these companies because they expected them to do worse than they actually did. When reported results beat expectations, investors bought the stocks, perhaps due to bottom fishing. These buyers caused the stocks to rise enough to trigger margin calls for those who were short. The shorts bought to satisfy those margin requirements, causing a buying panic. I wish I had data to test this hypothesis.

SunTrust Banks (NYSE: STI) shares are trading higher today after data from the Conference Board showed that the US economy may be starting to right itself. This morning's Leading Indicators report indicated a 0.1% rise for April, after March showed a positive figure last month. This data is giving investors the courage to jump back into the stock market and particularly stocks that were hurt in the mortgage mess like STI. 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 STI.

After hitting a one-year high of $94.18 in May of last year, the stock has steadily declined to make its one-year low of $50.14 in April. STI opened this morning at $56.64. So far today the stock has hit a low of $56.38 and a high of $5.987. As of 12:25, STI is trading at $57.27, up 1.25 (2.2%). The chart for STI looks neutral and improving while S&P gives STI a negative 2 STARS (out of 5) sell rating.

For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just five weeks as long as STI is above $50 at June expiration. SunTrust would have to fall by more than 12% before we would start to lose money. Learn more about this type of trade here.

STI hasn't been below $50 at all in the past year and has shown support around $55 recently. This trade could be risky if other housing-specific indicators are still weak in the coming months, but even if that happens, this position could be protected by support the stock might find just above $50, where it bottomed out in the past month.

Brent Archer is an options analyst and writer at Investors Observer.

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. At publication time, Brent neither owns nor controls positions in STI.

MOST NOTEWORTHY: Smith International, Cerner and Coach were today's noteworthy upgrades:

• JP Morgan upgraded Smith International (NYSE: SII) to Overweight from Neutral citing better risk/reward vs. group, and upside to estimates from Latin America drilling and its deepwater rig fleet. Note that Oppenheimer downgraded shares of SII based on valuation.
  
• Jefferies believes Cerner Corp. (NASDAQ: CERN) in-line results and solid domestic bookings could alleviate the pressure on shares. Shares were raised to Buy from Hold.
  
• Shares of Coach Inc. (NYSE: COH) were raised to Buy from Hold at Citigroup, citing sales stabilization and compelling valuation.

OTHER UPGRADES:

• Medco Health (NYSE: MHS) was upgraded at Oppenheimer to Outperform from Perform.
  
• ThinkPanmure raised VMware Inc. (NYSE: VMW) to Buy from Accumulate.
  
• SunTrust Banks (NYSE: STI) was upgraded to Market Perform from Underperform at Keefe Bruyette.

MOST NOTEWORTHY: Google, Ross Stores and Novartis were today's noteworthy upgrades:

• Jefferies upgraded Google (NASDAQ: GOOG) to Buy from Hold to reflect the company's "impressive" improvements in monetization in Q1, no signs of weakness from the economic downturn and upside potential from display, video and mobile.
  
• Lehman upgraded Ross Stores (NASDAQ: ROST) to Overweight from Equal Weight and believes the company's 2008 guidance of 8-9% sales growth and up to 20% bps in margin expansion will prove conservative.
  
• Morgan Stanley upped Novartis (NYSE: NVS) to Overweight from Underweight on valuation and expectations for positive news flow from the company's vaccine division.

OTHER UPGRADES:

• JP Morgan upgraded Bladex to Neutral from Underweight.
• William Blair raised Watsco (NYSE: WSO) to Outperform from Market Perform.
  
• SunTrust (NYSE: STI) was upgraded at Baird to Neutral from Underperform.

"Changes in psyche driven by news and events, along with a fair amount of fear and greed, is the perfect backdrop for a market reversal," says Charles Payne, FOX Business news regular and editor of Wall Street Strategies.

"The inspiration for the latest volatility in equities came from Ambac (NYSE: ABK) which looked like it would be off as much as 10% instead had a monster gain, up more than 30%, on calming statements from management. Citigroup (NYSE: C) also made a strong statement concerning its financial position.

"Outside of these developments the most exciting niches of the market are those that have been hammered the most in late 2007 and thus far in 2008.

"Scuttlebutt says the President is willing to up the ante in his rescue package (in excess of $150.0 billion) and that has sent retail stocks surging. The emergency interest rate cut stoked demand for homebuilder stocks as well.

"The retailers and homebuilders have miles of room on the upside, but must first reverse horrid downtrends and get above the top of their respective channels. For the S&P Retail Index ($RLX) that means a close above 441.0

"Homebuilders have seen so many false alarms it's difficult to notice or care about periodic up sessions. However, considering the fantastic swings and pressure on the broad market today's strength stands out as more than an anomaly or fluke.

"I don't think the global economy is going to slow down as much as one could extrapolate from yesterday's overseas meltdown, but there are country-specific issues that could make individual international markets more volatile.

"There are a ton of stocks I think are screaming buys. For example, I like SunTrust Bank (NYSE: STI) among financial stocks as well as Lehman Brothers (NYSE: LEH)."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.

Three weeks ago I warned that you should review the holdings of your money market funds because they could be exposed to the mortgage mess. Well, today the Wall Street Journal reports that several money market funds are taking action to shore up their holdings because of exposure to one of the troubled SIVs -- Cheyne Finance LLC, which was downgraded to default status last month by S&P after the SIV went into receivership.

Bank of America (NYSE: BAC)'s money management arm, Columbia Management, is managing two of the money market funds discussed in today's Journal story - SEI Investments Daily Income Trust Prime Obligation Fund and SEI Daily Income Trust Money Market Fund. In my story three weeks ago, I warned about the SIV holdings in Columbia Cash Reserves Fund. I also warned about holdings in other Bank of America mutual funds managed by Columbia. Other mutual funds holding SIVs mentioned in the Journal's story this morning include STI Classic Funds from SunTrust Banks (NYSE: STI) and Credit Suisse Group money market funds.

All this is finally becoming public because S&P took the position that exposure to troubled SIVs like Cheyne Finance LLC was not "consistent with its criteria for receiving its highest ratings for money-market funds." Money market funds are not supposed to invest in low-grade securities. The big fear for investors and government regulators is that losses in these riskier holdings could drive the asset value of a money market fund below $1 a share or "break the buck." The only time that happened was in 1994 after a money market fund faced losses because of the 1994 derivative crisis.

On today's STOP TRADING segment on CNBC, Jim Cramer didn't spend too much time talking about the big drops we have seen in the markets in the last 3 days. He does have 3 picks:

He said that PepsiCo (NYSE: PEP) bought a Ukrainian juice maker for $542 million, and that is a good move. Cramer thinks Coca-Cola (NYSE: KO) is more attractive now that it came in.

Dick's Sporting Goods (NYSE:DKS) was one that Cramer went back for as a major grower over its 20% growth targets and plans for 800 stores.

SunTrust (NYSE:STI) is one that Cramer said may be acquired because its size makes it vulnerable. We noted this one in mid-May as a potential takeover candidate.

These picks are all pretty interesting. Dicks and others have shown that despite a weak retail environment in general, some companies can still prosper. This morning there were several retail winners that blew the doors off their same-store targets. As far as Pepsi and Coke, the better one for the current environment and for the time being is most likely going to revolve around which one has underperformed or pulled back more than the other.

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Note: The Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Volatility Index S&P 500 Options-VIX up .02 to 10.25.

Compass Bancshares-(NASDAQ:CBSS) option volume heavy & implied volatility up to 24 from 15. CBSS is recently up $3.91 to $65.67. Compass Bancshares, a financial services firm based in Birmingham, Alabama, is up on unconfirmed chatter SunTrust-(NYSE:STI) is interested in a M&A transaction with CBSS. CBSS call option volume of 3,887 contracts compares to put volume of 999 contracts. CBSS daily average volume over the last ten business days is 424 contracts. CBSS March option implied volatility of 24 is above its 26-week average of 16 according to Track Data, suggesting larger price risks.

Option volume leaders today were: Bank of America (NYSE:BAC), Microsoft Corp. (NASDAQ:MSFT), Boston Scientific (NYSE:BSX), Alcoa (NYSE:AA), Qualcomm (NASDAQ:QCOM) and Bidu (NASDAQ: BIDU).