Analyst upgrades:

• Keefe Bruyette upgraded shares of AllianceBernstein (NYSE: AB) to Outperform from Market Perform as they find AB's risk/reward attractive given its attractive long-term business model. Wachovia upgraded Watson Pharma (NYSE: WPI) and Teva Pharma (NASDAQ: TEVA) to Outperform from Market Perform citing valuations and positive drivers for generics that include patent expirations and market share expansion.
• UBS raised Lloyds TSB Group (NYSE: LYG) to Neutral from Sell on expected pricing power following the HBOS (OTC: HBOOY) acquisition.
• Otter Tail (NASDAQ: OTTR) was upgraded to Outperform from Neutral at Baird.
• GFI Group (NASDAQ: GFIG) was upgraded at Citigroup to Hold from Sell.
• Merrill upgraded Logitech (NASDAQ: LOGI) to Neutral from Underperform.

Analyst downgrades:

• JP Morgan downgraded shares of Lloyds TSB Group to Underweight from Neutral on capital concerns and believes the HBOS acquisition is not in the best interest of shareholders.
• Stephens downgraded Universal Truckload (NASDAQ: UACL) to Equal Weight from Overweight on valuation and concerns about a slowdown in the flatbed sector. The firm's target remains $28.

The timing of the Thomson-Reuters merger could not have been worse as many of their biggest customers on Wall Street are struggling. Now, Thomson Reuters Corporation (NYSE: TRI) is trying to make the best of a bad situation. Investors may like what they are seeing today but they won't over the long term.

Shares of Thomson Reuters are trading up even though the financial information company reported disappointing earnings. The stock is rallying following an earlier sell-off. Revenue was $3.13 billion, a 73% rise but short of the $3.32 billion analysts surveyed by Bloomberg News expected. The results benefited from the merger. Earnings were $172 million, or 22 cents per share, down from $375 million, or 58 cents per share a year earlier.

Chief Executive Tom Glocer told reporters that financial services markets "are likely to remain challenging through at least the end of the year." That means that big clients are going to be asking for big discounts. Bloomberg, my former employer and the company's biggest rival, has usually been able to resist this temptation.

Who is the boss of Bloomberg News?

During my career there, there was no question that Matthew Winkler was in charge. My colleagues laughed hysterically when I told them I asked Winkler about his bow ties during my interview with him before I was hired. Bloomberg's editor-in-chief is not known for his sense of humor. Good thing I didn't bring up bow ties -- which he wears every day -- again.

That's why I found the appointment of former Wall Street Journal top editor Norman Pearlstine as Bloomberg's chief content officer so curious. Does this mean that Pearlstine, who was Winkler's boss at the Journal, will supervise him again? What exactly does a chief content officer do that's different than an editor-in-chief? I am not sure of the answers to those questions and neither is the New York Times.

As the Times opines, "the move suggests that Bloomberg, whose fortunes have been buoyed by the selling of its hugely profitable data terminals to brokerage firms and investment banks, plans to expand the journalism side of its business."

MAJOR PAPERS:

• According to the Wall Street Journal (subscription required), citing people familiar with the matter, Community Health Systems Inc (NYSE: CYH) is near a deal to purchase Triad Hospitals (NYSE: TRI), which would break up an existing $4.5B private-equity buyout plan.
• The Wall Street Journal's "Heard on the Street" column reported that rumors are swirling that Infineon Technologies ADS (NYSE: IFX) will be chosen to supply the main chip to drive the upcoming iPhone from Apple Inc (NASDAQ: AAPL).

OTHER PAPERS:

• The Business Standard reported that Reliance Industries is reportedly in advanced discussions with Nova Chemicals Corporation (NYSE: NCX), the plastics and petrochemicals firm, to form a joint venture.
• According to the U.K. Times, Barclays plc ADS (NYSE: BCS) will announce today its formal interest in buying Netherlands bank ABN Amro Holdings (NYSE: ABN) for a price of up to a little less than EUR60B, or EUR31.3 per share, according to reports.
• Dow Jones & Company (NYSE: DJ) is trying to buy the Financial News for GBP25M, the U.K. Times reported.
• The Sunday Telegraph reported that Coca-Cola Company (NYSE: KO) is planning a 'beauty tea' in conjunction with L'Oreal ADR (OTC: LRLCY), called Lumae.
• According to Google Inc's (NASDAQ: GOOG) official blog, it has acquired Adscape media. Terms were not disclosed.

MOST NOTEWORTHY: Wendy's International Inc (WEN) and NOVA Chemicals Corp (NCX) were today's most notable downgrades:

• Matrix USA downgraded shares of fast-food restaurant Wendy's International Inc (NYSE: WEN) to Sell from Hold to reflect the company's slowing revenues, increasing expenses and valuation.

• CIBC downgraded NOVA Chemicals Corp (NYSE: NCX) to Sector Underperformer from Sector Performer, lowering their target to $27.50 from $31 as they believe margins will be squeezed in 2008 once Middle Eastern supply begins to impact export markets.

OTHER DOWNGRADES:

• Following the company's lower guidance, UBS downgraded National Semiconductor Corp (NYSE: NSM) to Neutral from Buy with a $25 target, while Citigroup downgraded National Semi to Hold from Buy with a $27 target.

• Recent strength in Royal Caribbean Cruises Ltd (NYSE: RCL) forced Bank of America to remove it from their Top Pick list.

• Jefferies downgraded shares of Triad Hospitals Inc (NYSE: TRI) to Hold from Buy pending the buyout.

• JP Morgan downgraded shares of Altiris Inc (NASDAQ: ATRS) to Neutral from Outperform based on the Symantec (SYMC) acquisition.

• Thomas Weisel downgraded Medimmune Inc (NASDAQ: MEDI) to Market Perform from Outperform on valuation.

• Matrix USA downgraded Secure Computing Corp (NASDAQ: SCUR) to Sell from Buy on valuation.

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

MOST NOTEWORTHY: Lear Corp (LEA) and Tellabs Inc (TLAB) were today's most notable upgrades:

• Lear Corp (NYSE: LEA) was upgraded to Neutral from Underperform at Credit Suisse following the $2.31B cash bid from Carl Icahn.

• Merrill Lynch upgraded Tellabs Inc (NASDAQ: TLAB) to Buy from Neutral, citing expectations for an improvement in cross-connect demand and margins; the firm expects Tellabs to benefit from AT&T's (NYSE: T) new broadband initiatives, a demand recovery at Cingular, T-Mobile 3G deployment plans and an increase in Sprint/Nextel (NYSE: S) base stations.

OTHER UPGRADES:

• JP Morgan upgraded Nvidia Corp (NASDAQ: NVDA) to Overweight from Neutral based on expectations for gross margin upside to be driven by improved unit costs and market share gains in the notebook segment.

• Raymond James upgraded shares of AirTran Holdings Inc (NYSE: AAI) to Outperform from Market Perform with a $14 target.

• CIBC upgraded Kronos Inc (NASDAQ: KRON) to Sector Outperformer from Sector Perform, with a $46 target, as they find valuation attractive at current levels given their increasing confidence operations are improving.

• State Street Corp (NYSE: STT) was upgraded to Equal Weight from Underweight at Morgan Stanley following the news of the Investors Financial Services Corp (NASDAQ: IFIN) acquisition.

• Triad Hospitals Inc (NYSE: TRI) was upgraded to Neutral from Sell at Bank of America.

• Overstock.com Inc (NASDAQ: OSTK) was upgraded to Neural from Sell at First Albany, as the worst is already reflected in the stock's valuation.

• Matrix USA upgraded Estee Lauder Co Inc (NYSE: EL) to Hold from Sell based on fundamental trends.

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

Lately, private equity has been buying-up hospitals, with the biggest deal being the purchase of HCA for $33 billion.

The latest foray? It's the buyout of Triad Hospitals (NYSE: TRI).

True, it's not as big as the HCA -- but it is still sizeable. The valuation is about $6.4 billion, which includes $1.7 billion in assumed debt. The buyers include CCMP Capital Advisors, which was once a part of JPMorgan Chase (NYSE: JPM), and GS Capital Partners, which is the private equity fund for Goldman Sachs (NYSE: GS).

As for Triad, the company owns and manages 54 hospitals and 13 surgery centers. It also has a hospital management division. Interestingly enough, Triad was a spin-off from HCA in 1999.

More recently, Triad has been in a proxy battle with TPG-Axon, which is a hedge fund. In other words, CCMP and GS Capital may really be white knights. Nevertheless, the transaction includes a "go shop" provision, which allows Triad to seek-out other offers. And the break-up fee is fairly small (only $20 million).

Currently, Triad's stock price is up 15% to $49.80. The buyout bid is $50.25.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Volatility Index S&P 500 Options-VIX was down .44 to 10.41.

Triad Hospitals (NYSE:TRI) option implied volatility and volume was elevated on an expected event. Triad has been frequently mentioned as a leveraged buyout target over the last nine months. Bank of America Corporation (NYSE:BAC) said they were "converging toward a binary event." Bank of America added "our ear on the ground' suggests the company is indeed entertaining potential buyers." Alex Brown said "reiterate Buy on potential near-term catalyst." Triad reported 2005 annual revenue of $4.7 billion. Triad has a market cap of $3.68 billion with long term debt $1.6 billion. Triad's call option volume of 21,413 contracts compares to put volume of 12,344 contracts. Triad's February option implied volatility of 41 is above its 26-week average of 27 according to Track Data, suggesting increasing fluctuations.

Option volume leaders today were: Microsoft (NASDAQ: MSFT), Apple Computer (NASDAQ: AAPL), IBM (NYSE: IBM) and Google (NASDAQ: GOOG).

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