MOST NOTEWORTHY: Allegheny Tech, Carpenter Tech, Haynes, Motorola and Machinery stocks were today's noteworthy downgrades:

• JP Morgan downgraded Allegheny Tech (NYSE:ATI), Carpenter Tech (NYSE:CRS) and Haynes (NASDAQ:HAYN) to Neutral from Overweight based on the decline in nickel prices and its impact on nickel-based metals demand on valuation, as they find the risk/reward less attractive following the recent rally and increased raw material costs.
  
• Oppenheimer downgraded shares of Motorola (NYSE:MOT) to Underperform from Perform after channel checks indicated the company could miss Q2 handset guidance and continued market share losses.
• UBS said the risk/reward profile for owning Machinery stocks given macro challenges and valuations. The firm downgraded Caterpillar (NYSE:CAT) and Kennametal (NYSE:KMT) to Sell from Neutral and United Rentals (NYSE:URI) and RSC Holdings (NYSE:RRR) to Neutral from Buy. Additionally, shares of Paccar (NASDAQ:PCAR) were cut to Sell from Neutral and Navistar (OTC:NAVZ) was downgraded to Neutral from Buy due to weak U.S. truck demand.
  

OTHER DOWNGRADES:

• Jefferies cut Hercules Inc (NYSE:HPC) to Hold from Buy.
  
• Goldman downgraded Pfizer (NYSE:PFE) and DirecTV (NASDAQ:DTV) to Neutral from Buy.
  
• Regeneron (NASDAQ:REGN) was downgraded to Neutral from Outperform at Credit Suisse.

MOST NOTEWORTHY: Synthesis Energy, Lamar Advertising and Urban Outfitters were today's noteworthy initiations:

• Merriman believes Synthesis Energy Systems Inc (NASDAQ: SYMX) is well-positioned as it begins to leverage its exclusive global license for U-GAS technology and commences the deployment of its coal-to-methanol production facilities in China. The firm started shares with a Buy rating.
• Lamar Advertising Company (NASDAQ: LAMR) was initiated with a Buy rating and $51 target at Jefferies, as they believe shares are oversold at current levels.
• William Blair believes Urban Outfitters Inc (NASDAQ: URBN) will benefit from both strong sales and a steep margin recovery in the coming two years. The firm assumed coverage of Urban with an Outperform rating.

OTHER INITIATIONS:

• Lehman started United Rentals Inc (NYSE: URI) with an Equal Weight rating and $22 target.
• Credit Suisse assumed coverage of Mellanox Technologies (NASDAQ: MLNX) with a Neutral rating.
• EPIQ Systems Inc (NASDAQ: EPIQ) was initiated with a Market Perform rating at Wachovia.

For the private equity space, it's been a mixed bag this week. The good news is that the $17.1 billion acquisition of Harrah's Entertainment got done (the largest casino deal in history). The buyers included TPG and Apollo Global Management LP.

But there was some bad news too -- it looks like Blackstone (NYSE: BX)'s proposed buyout of Alliance Data Systems (NYSE: ADS) is on the rocks.

So, in this environment, it's understandable that Wall Street is jittery with buyout deals. Just look at the pending buyout of Clear Channel Communications (NYSE: CCU).

MOST NOTEWORTHY: Voyager Learning, Digital River and FMC Tech were today's noteworthy upgrades:

• Bear upgraded Voyager Learning (OTC: VLCY) to Peer Perform from Underperform following the company's announcement to explore strategic alternatives.
  
• Credit Suisse upgraded Digital River (NASDAQ: DRIV) to Outperform from Underperform citing attractive risk/reward.
  
• Wachovia raised its rating on FMC Tech (NYSE: FTI) to Market Perform from Underperform citing the larger than expected Pazflor Angolan development contract. The firm expects optimism of other large developments should bode well for growth beyond 2009.

OTHER UPGRADES:

• UBS upgraded Gold Fields (NYSE: GFI) and United Rentals (NYSE: URI) to Buy from Neutral.
  
• Goldman upgraded Ingram Micro (NYSE: IM) to Buy from Neutral.
  

United Rentals Inc. (NYSE: URI) confirmed that the trial in its lawsuit against Cerberus Capital Management for walking away from a $4 billion buyout of URI has been postponed for a day to allow the parties to continue with settlement talks. URI over all option implied volatility of 86 is above its 26-week average of 30 according to Track Data, indicating larger movement.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Yesterday, United Rentals Inc. (NYSE: URI) published an ominous press release saying that its private equity sponsor, Cerberus Capital Management, "is not prepared to proceed with" the $7 billion transaction. Of course, with the uncertainty in lending markets, this should not necessarily be a surprise. Nonetheless, the shares of United Rentals plunged 30%.

United Rentals is the largest equipment rental company in the US. Annual revenues are about $3.7 billion and EBITDA is about $1.1 billion (which is always something private equity folks like to see).

If you take a look at the merger agreement, the break-up fee is $100 million. That's a pittance for Cerberus. In other words, if the cost of financing has spiked -- making a deal much more expensive -- why not just pay the $100 million? But the question is: may United Rentals have a case for requiring the deal to get done? Well, that's where things get fuzzy. I'm really not sure.

That's a good question for attorneys. And, yes, United Rentals has retained Orans, Elsen & Lupert LLP. So we may see showdown in the Delaware courts. If you want to see a great analysis of the legal argument, you can check out the M & A Law Prof Blog.

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

MOST NOTEWORTHY: Netflix (NFLX), NiSource (NI), TiVo (TIVO), Williams-Sonoma (WSM) and KLA-Tencor (KLAC) were today's more noteworthy downgrades:

• Netflix (NASDAQ: NFLX) was cut to Hold from Buy at Needham to reflect the lowered subscriber guidance and their belief that things can get worse before getting better. Shares were also downgraded at Cowen, to Neutral from Outperform, and Lehman, to Equal Weight from Overweight.

• NiSource (NYSE: NI) was cut to Underweight from Equal Weight at Lehman based on the expected increases in interest expense and taxes.

• TiVo (NASDAQ: TIVO) was downgraded to Short from Sell at SMH Capital and believes the current valuation now reflects 20% penetration of the Comcast Corp (CMCSK)-owned digital sub base for the joint venture product bundle, which the firm considers aggressive. In addition, the firm believes TiVo's new pricing structure doesn't add much value.

• Matrix cut Williams-Sonoma (NYSE: WSM) to Sell from Hold on valuation and deteriorating operating results.

• Citigroup downgraded shares of KLA-Tencor (NASDAQ: KLAC) to Hold from Buy on valuation as they see risk to 2H07 estimates due to slower near-term cost savings and higher integration costs...

OTHER DOWNGRADES:

• Friedman Billings downgraded American Express (NYSE: AXP) to Market Perform from Outperform.

• Piper Jaffray cut Atheros Communications (NASDAQ: ATHR) to Market Perform from Outperform.

• Jefferies downgraded United Rentals (NYSE: URI) and GlobalSantaFe (NYSE: GSF) to Hold from Buy.

• Merrill downgraded Wyeth (NYSE: WYE) to Neutral from Buy.

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

Stock futures are indicating a higher start on Wall Street this morning, as U.S. markets aim to recover today from Friday's 1%+ selloff. Another busy week of earnings await investors, but this morning, another buyout deal helps sentiment.

On Friday, stocks sharply declined after Google and Caterpillar disappointed investors when reporting quarterly results (they were both pounded 5.2% and 4.4% respectively on Friday). The Dow shed 1.1% while the Nasdaq and the S&P 500 lost 1.2% each.

No economic news is scheduled for release today, but investors can expect more housing market data as well as economic growth release.

Overseas, Asian markets finished the day lower, while European markets are mixed.
The dollar recovered somewhat after hitting new lows against the euro.
While Treasuries weren't changed much with the 10-year note still under 5%, oil fell towards $77 a barrel after OPEC expressed concern over near record prices and said it was prepared to pump more crude if needed. U.S. crude traded around $75.35.

Corporate news:

In deal news, Cerberus Capital Management LP is acquiring United Rentals Inc. (NYSE: URI) for about $6.6 billion, including $2.6 billion in debt. Under the deal, United Rentals stockholders will receive $34.50 in cash per share, a premium of 6.6%.

Halliburton Co. (NYSE: HAL) reported a 19% increase in second-quarter profit from continuing operations, helped by new international contracts. Earnings climbed to $595 million, or 63 cents a diluted share, including a one-time after-tax gain of 3 cents. Excluding one-time items, analysts on average had expected the company to report a profit of 56 cents a share, according to Reuters Estimates.

Other earnings expected today include two Dow components American Express Co. (NYSE:AXP) and Merck & Co. (NYSE: MRK). Both companies are expected to report good results.

Arena Pharma (NYSE: ARNA) skewed option implied volatility suggests risk into Autumn review. ARNA, a clinical stage biopharmaceutical company focusing on G protein-coupled receptors (GPCRs), closed at $14.32. ARNA's Lorcaserin, a treatment for obesity, has a Date Safety Monitoring Board (DSMB) review in the autumn of 2007. Bank of America started coverage of ARNA with a Neutral rating and a $16 price target on 5/24. BAMO say's "we expect a positive DSMB review, which could provide significant short-term gains in the stock in late 2007." ARNA June option implied volatility is at 44, October at 90 and January is at 66 according to Track Data, suggesting larger risk this autumn.

United Rentals (NYSE: URI) volatility Flat as URI explores strategic alternatives. URI, the largest equipment rental company in the world, closed at $32.85. URI announced on 4/10/07 that it is exploring strategic alternatives. URI June option implied volatility of 33 is near its 26-week average according to Track Data, suggesting flat risk.

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

While you've been busy scouring over this week's earnings reports, back here at rumor central there's been a number of "head ups," but not all that much to write home about, or to send you phoning your broker. But take note of these just for the heck of it.

UNITED RENTALS INC (NYSE: URI)

It's not news that the world's largest rental company has been for sale for a couple of weeks, but once again, as it is for so many speculative situations as this, there's an ongoing undercurrent of chatter. The CEO is retiring in June, and the COO will then hold down the fort. UBS (NYSE: UBS) and Credit Suisse (NYSE: CS) are offering advice. The company's in pretty good shape, and should attract some interesting offers. The stock keeps ticking slowly upward. But the rental market has slowed some. Stay tuned.

EASTMAN KODAK COMPANY (NYSE: EK)

The stock's been moving on up. Take over? Cash infusion? Fabulous new product release? Not one of us outsiders knows for sure what's up. So, what is up? Well, they sold the health imaging business and should get paid its $2.35B soon. Is Hewlett-Packard (NYSE: HPQ) a potential merger partner? Maybe, maybe not. Last month it was reported that Kodak had eyes for OmniVision Technologies (NASDAQ: OVTI). Maybe after quarterly results are released May 4 there'll be a clearer Kodak moment. Just don't count on them to try and rejoin the Better Business Bureau anytime soon. Now there's a rumor.

CUMMINS INC (NYSE: CMI)

Shares hit a record high the other day, at least one brokerage firm upgraded the stock, and reports were that the engine maker was...you guessed it...the target of takeover "expectations." Is that like, expecting? Like expecting to be courted and bought? Fiat (NYSE: FIA) could be expecting cause they are among the "rumored" to want to expand their truck division in good old North America. Cummins, one of the few remaining independents worldwide, meanwhile has been humming along, with three straight years of record earnings. What a machine, eh? Hmmm.

F5 Networks (NASDAQ: FFIV) -- implied volatility collapses on EPS; FFIV rallies 20%. FFIV, a provider of content switching application traffic solutions, is recently up $13.06 to $79.22. WEDB says "Q2 exceeds expectations; continued growth to come." FFIV May option implied volatility of 34 is below its 26-week average of 42 according to Track Data, suggesting decreasing price fluctuations.

Jeffries Group (NYSE: JEF) -- option implied volatility Up to 42; on speculation Risk. JEF, an investment bank engaged in financial product execution services and asset management, is recently up 08 cents to $30.19. JEF has been frequently mentioned as a takeover target. JEF call option volume of 2,194 contracts compares to put volume of 231 contracts. JEF May option implied volatility of 42 is above its 26-week average of 31 according to Track Data, suggesting larger price risks.

United Rentals (NYSE: URI) -- implied volatility & volume increases into EPS & on speculation. URI, the largest equipment rental company in the world, is recently up 96 cents to $33.69. URI will report EPS on 5/3. URI call option volume of 2,347 contracts compares to put volume of 406 contracts. URI May 35 calls are bid 75 cents above its theoretical value of 35 cents. URI May & June option implied volatility of 38 is above its 26-week average of 35 according to Track Data, suggesting slightly more risk.

Option volume leaders today are: Apple Inc. (NASDAQ: AAPL), Amazon.com Inc. (NASDAQ: AMZN) and Qualcomm Inc. ( (NASDAQ: QCOM).

MOST NOTEWORTHY: United Rentals, Inc (URI), Nintendo Co (NTDOY), Shuffle Master, Inc (SHFL), CheckFree Corp (CKFR) and The Kroger Co (KR) were some of today's noteworthy downgrades:

• JP Morgan cut United Rentals Inc (NYSE: URI) to Underweight from Neutral believing the company's strategic alternatives and valuation upside are limited given slowing end markets and lack of sources to unlock value.

• Citigroup downgraded Nintendo Ltd (OTC: NTDOY) to Hold from Buy.

• Prudential downgraded Shuffle Master Inc (NASDAQ: SHFL) to Neutral from Outperform following a field trip to Macau, as they are incrementally more negative given competition in electronic table games and continued market share erosion in slots.

• JMP Securities cut CheckFree Corp (NASDAQ: CKFR) to Market Outperform from Strong buy and has a greater degree of certainty that Bank of America (BAC) is planning on moving its payment warehouse portion of online bill pay in-house over an unspecified period. The firm believes earnings can be impacted by 25c-30c annually.

• HSBC downgraded shares of The Kroger Co (NYSE: KR) to Neutral from Overweight.

OTHER DOWNGRADES:

• ThinkEquity downgraded KLA-Tencor Corp (NASDAQ: KLAC) to Accumulate from Buy.

• Cowen downgraded Salesforce.com, Inc (NYSE: CRM) to Neutral from Outperform and removed the company from its Focus List citing reduced visibility, lack of near-term catalysts and potential increased competition from Oracle Corp (ORCL) and Microsoft (MSFT).

• JP Morgan cut Dr. Reddy's Laboratories Ltd (NYSE: RDY) to Underweight from Overweight to reflect the increased risk of changing market conditions in Germany.

• Matrix USA downgraded Coinstar, Inc (NASDAQ: CSTR) to Sell from Hold on valuation.

• Piper Jaffray cut Cognizant Technology Solutions Corp (NASDAQ: CTSH) to Market Perform from Outperform.

• JMP Securities downgraded Dendreon Corp (NASDAQ: DNDN) to Market Outperform from Strong Buy.

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