Analyst Upgrades

• Research In Motion (RIMM) to buy from sell and Gap (GPS) to hold from sell at Citigroup.
• Archer Daniels (ADM) and Airgas (ARG) to buy from hold at Jefferies.
• NCR Corp. (NCR) to conviction buy from neutral at Goldman.
• Valero Energy (VLO) to top pick from sector perform and Western Refining (WNR) to outperform from underperform at RBC Capital.
• Fred's (FRED) to overweight from neutral at JP Morgan.
• Marsh & McLennan (MMC), Willis Group (WSH) and Brown & Brown (BRO) to equal weight from underweight at Barclays.
• Host Hotels (HST) to outperform from neutral at RW Baird.
• La-Z-Boy (LZB) to strong buy from market perform at Raymond James.

Time was, independent refiners like Valero Energy Corporation (VLO), first discussed here on April 20, 2009, at a price of $20.08, were in a bind, operationally, due to high oil prices and low gasoline demand that squeezed crack spreads.

But that was a long time ago. Refinery margins, which were squeezed during 2008-2009, due to the loss of more than 8 million jobs from the U.S. economy -- many of those being vehicle owners -- continue to recover. Gasoline demand, in particular, has rebounded: the U.S. will likely see decreased gasoline usage on a per capita basis, as vehicle efficiency improves, but rising vehicle sales stemming from job growth will offset this.

Analyst Upgrades

• Valero Energy (VLO) to outperform from perform at Oppenheimer.
• Changyou.com (CYOU) to overweight from equal weight at Morgan Stanley.
• Albermarle (ALB) to overweight from neutral at JPMorgan.
• ICU Medical (ICUI) to buy from neutral at Roth Capital.
• Check Point (CHKP) to outperform from market perform at Bernstein.
• FMC Corporation (FMC) to buy from neutral at BofA/Merrill.
• Rangold Resources (GOLD) to neutral from sell at Goldman.
• Global Cash Access (GCA) to buy from hold at Duncan-Williams.

Analyst Upgrades

• General Electric (GE) and Barclays (BCS) to buy from neutral at UBS.
• Warnaco (WRC) to outperform from market perform and Melco Crown (MPEL) to market perform from underperform at Wells Fargo.
• Parker-Hannifin (PH) and Emerson Electric (EMR) to buy from neutral at Goldman.
• AMD (AMD) to buy from neutral at Nomura.
• Novellus (NVLS) and Sherwin-Williams (SHW) to equal weight from underweight at Morgan Stanley.
• OpenTable (OPEN) to outperform from market perform at Morgan Keegan.
• Skilled Healthcare (SKH) to buy from hold at Jefferies.
• Lear (LEA) to overweight from equal weight at Barclays.
• Adobe (ADBE) to buy from neutral at BofA/Merrill.

Bright and early this morning, Valero Energy (VLO) was singled out for a bullish volatility play. Shortly before 10 a.m., a block of 7,500 contracts traded at the ask price at VLO's September 19 call, indicating they were purchased. Simultaneously, a matching block of 7,500 contracts changed hands on the oil refiner's September 17 put, with this transaction also taking place closer to the ask price. With VLO trading at $18.08 at the time of the trade, both strikes are out of the money.

This was another day where the real closing verdict of red or black was unknown right up until the closing bell. The day looked very mixed from index to index and sector to sector. Consumer confidence came in weak again, and there is still mixed data on housing prices.

Here were today's closing bell levels:

Dow Jones 10,537.69 +12.26 (0.12%)
S&P 500 1,113.84 -1.17 (-0.10%)
Nasdaq 2,288.25 -8.18 (-0.36%)

Is any sustained rally or bounce too much to ask for? That is what today felt like. We had a positive durable goods report this morning and the overseas markets held on to most of their gains. Some positive data on demand and supply gave oil the bounce that got it back above $70 per barrel.

Here were today's closing bell levels:

Dow 9,974.45 -69.30 (-0.69%)
S&P 500 1,067.92 -6.11 (-0.57%)
Nasdaq 2,195.88 -15.07 (-0.68%)

Top Analyst Calls

I first discussed independent refiner Valero Energy (VLO) on April 20, 2009, at a price of $20.08, saying at the time that investors over-punished the stock due shrinking refinery margins. If felt the consternation of investors was too great, but really, it's more of a sector issue than a company issue.

Refinery margins shrunk as U.S. gasoline decreased during the 2007-2009 recession. Removing 8.4 million jobs from the workforce will tend to affect sales, even of gasoline. As we move into recovery mode, refinery margins should improve, and with it Valero's stock price.

"Valero Energy Corp. (VLO) is an $11 billion oil refining and marketing company based in San Antonio, Texas," notes technical expert Melvin Pasternak.

The editor of Double-Digit Trading adds, "If you've ever filled-up at an Ultramar, Beacon, or Diamond Shamrock station, you've helped pump up this company. The stock may return the favor if you go long on it.

"This Fortune 500 company operates 15 oil refineries throughout the United States, Canada and the Caribbean. Its refineries have a combined capacity of 2.8 million barrels per day, an amount equal to about 1% of the 400 million gallons of gas used daily in the United States.

I've upgraded independent refiner Valero Energy (VLO) to buy from the hold rating issued on November 3, 2009, at a price of $1812. Here's why:

Valero's stock chart has reversed, after holding support at the $15-$16 level. VLO was first recommended with a Buy Rating on April 20, 2009, at a price of $20.08.

For now, I'm placing a Hold on Valero Energy Corp. (NYSE: VLO) shares, first recommended on April 20, 2009 at a price of $20.08.

Valero, the largest, independent refiner in North America, continues to underperform, as a result of the decline in demand for refined products triggered by the recession.

Analyst upgrades:

• JPMorgan upgraded Barrick Gold (NYSE: ABX) and Goldcorp (NYSE: GG) to Overweight from Neutral following its gold valuation analysis. The firm set a $54 price target on Barrick shares and a $47 price target on Goldcorp shares.
• Thomas Weisel upgraded EMC Corp. (NYSE: EMC) to Overweight from Market Weight and raised its target to $24 from $15, citing the company's improving end market demand, competitive position, and valuation.
• Barclays upgraded AMR Corp. (NYSE: AMR) to Overweight from Equal Weight, citing the company's improved liquidity position and what they believe to be the beginning of a multi-year profit cycle for the sector. Despite the upgrade, the firm lowered its target to $14 from $20.
• Harley-Davidson (NYSE: HOG) was upgraded to Outperform from Market Perform at Wells Fargo.
• Toshiba (OTC: TOSBF) was upgraded to Overweight from Neutral at JPMorgan.
• Sanofi-Aventis (NYSE: SNY) was upgraded to Neutral from Sell at UBS.

Analyst upgrades:

• Deutsche Bank upgraded ConocoPhillips (NYSE: COP) to Buy from Hold on expectations that oil supply will begin to tighten and demand rise. The firm has a $55 price target on the stock.
• Citigroup upgraded Pinnacle West (NYSE: PNW) to Buy from Hold and added the stock to its Top Picks Live list. The firm expects the company's settlement in Arizona to be approved and raised its target on shares to $35 from $32.
• RBC Capital upgraded NetApp (NASDAQ: NTAP) to Outperform from Sector Perform as it believes that the company is performing better than expected during its October quarter. The firm expects the company to continue to execute well during subsequent quarters and it raised its target to $33.
• Wells Fargo (NYSE: WFC) was upgraded to Buy from Neutral at Goldman.
• PetSmart (NASDAQ: PETM) was upgraded to Buy from Neutral at Janney Montgomery.
• General Dynamics (NYSE: GD) was upgraded to Overweight from Equal Weight at Morgan Stanley.

Valero Energy (NYSE: VLO) has underperformed, but I'm nevertheless Reiterating my Buy rating for the company, first recommended on April 20, 2009 at a price of $20.08. Here's why:

True, gasoline demand has lagged due to the recession, but that trend is expected to end, as lay-offs decline with the U.S. economic recovery.

Here are some highlights from last week's earnings coverage from BloggingStocks:

• Alcatel-Lucent (NYSE: ALU) reported a surprise profit but is expected to return to losses next quarter.
• Coach Inc. (NYSE: COH) profit and revenue were in line with expectations, sending shares lower.
• Corning Inc. (NYSE: GLW) posted better-than-expected earnings but other concerns drove down shares.
• eHealth Inc. (NASDAQ: EHTH) reported solid Q2 numbers but Wall Street was not impressed.
• Goodyear Tire & Rubber Co. (NYSE: GT) posted a smaller-than-expected Q2 loss, sending shares higher.
• JAKKS Pacific Inc. (NASDAQ: JAKK) reported swinging to a Q2 net loss and revenues were flat.