Sara Lee (SLE) has rejected an offer from a group of private-equity firms that includes Bain Capital, Apollo Management and TPG Capital, the New York Post reports. Overall option implied volatility of 20 is below its 26-week average of 24, according to Track Data, suggesting decreasing price movement.

PepsiCo (PEP) is expected to report Q4 EPS on February 10. Overall option implied volatility of 17 is near its 26-week average, according to Track Data, suggesting nondirectional near-term price movement.

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

After a weak August, stocks got off to a great start in September. The international markets were already trying to offer a bounce for support this morning, and stocks rose as Treasury prices fell after the ISM manufacturing data showed a surprise gain overall. Several smaller regional reports on manufacturing over the last ten days were offering very cautious data, so it was a welcome and somewhat unexpected surprise.

Here were today's unofficial numbers:

Dow Jones 10,269.70 +254.98 (2.55%)
S&P 500 1,080.27 +30.94 (2.95%)
Nasdaq 2,176.84 +62.81 (2.97%)

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This was another day mostly in and out of the red. The true closing bell levels were up in the air until the close. Japanese data and Chinese data led the headlines now that China has a larger economy than Japan. Education stocks were weak on steady pressure and many other sectors were seeing a mixed bag as the markets tried to balance between bears and bulls.

Here were the unofficial closing bell levels:

Dow Jones 10,301.86 -1.29 (-0.01%)
S&P 500 1,079.37 +0.12 (0.01%)
Nasdaq 2,181.87 +8.39 (0.39%)

Apollo Group, Inc. (APOL) closed down $1.51 to $38.96. Education Secretary Arne Duncan said his department will increase oversight of federal student financial-aid programs in a letter to Senator Harkin, according to Bloomberg. September put option implied volatility is at 53, November is at 54; above its 26-week average of 48 according to Track Data, suggesting larger price movement.

US Bancorp (USB) closed down 20c to $22.24. USB overall option implied volatility of 35 is above its 26-week average of 32, according to Track Data, suggesting larger price movement.

CBOE Mini-NDX-MNX down $1.18 to 182.03; overall volatility at 20.

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

In the middle of 2007, the private equity industry started to crumble as the credit crunch shocked the U.S. financial system. Since then, it's been particularly tough for dealmakers.

Yet, according to a cover story in BusinessWeek, the good days may be here again. In fact, private equity may even help the economy get out of its funk.

And, there is historical precedent. Back in the early 1990s, private equity funds were a key source of restructuring and capital infusions. Interestingly enough, some of the players included the Blackstone Group (NYSE: BX), Carlyle and Apollo (yes, these are now some of the largest funds in the world).

But there's a big difference: Private equity funds now have about $1 trillion in capital to put to work.

Back in the mid 1970s, Paul Allen cofounded Microsoft (NASDAQ: MSFT). Since then, he has bought many nice toys (such as luxury yachts and sports teams), as well as made investments in a variety of companies. Unfortunately, his investment record has been spotty (perhaps he should have focused on the toys instead?)

Now, it looks like Allen will take the biggest loss of his investment career; that is, in Charter Communications (NASDAQ: CHTR). In all, he has committed $7 billion to the firm.

It would be hard to find a large American company doing as well at Apollo (NASDAQ: APOL), the online education company best known for its University of Phoenix division, the biggest business of its kind in the U.S. The firm's ads are everywhere.

In the last quarter, Apollo made $307 million in operating income on revenue of $971 million -- an amazing margin. Both numbers were up sharply from the same period in the previous year.

This post was written by Minyanville contributor Smita Sadana.

Apollo Group (Nasdaq: APOL) was enjoying a bump in price after reporting earnings that were well above estimates, based in increased enrollments. Of course, one can argue that people would go back to school for skill enhancement in these tough recessionary times.

However, two days after that stunning gain, APOL is off 4.9% to $82.55, on a cautious research note from Citron Research, who argue that "this growth is a one time bump."

While I do not endorse any such research or base my trading primarily on it, I am taking note of the negative reaction on double the average volume.

The stock can certainly come in a little and reduce the distance from its 200-day moving average, which is 38% at the current levels. While not at an extreme, it is unusual in this market to find stocks which are trading so far out.

I'm seeing various levels of support on the APOL chart and they range from $75 to $79.

I don't like to toot my horn much, as there are plenty of loud mouths in this industry ready to tell you how great they are. I prefer to let my work do the talking, and lately that work has been screaming.

I'll make an exception to the rule today. Here goes: Following my suggestions can significantly improve your performance in the market.

Case in point is my list of Top 10 Stocks for 2009. With a week of trading under our belt, the S&P 500 is down approximately 1%. The aggregate return of an equally weighted portfolio consisting of the 10 stocks on the list is nearly 9%.

Included on the list are big gainers Chicago Bridge & Iron (NYSE: CBI), up 25% year to date, and Transocean (NYSE: RIG), up 15% year to date.

Now, a week does not make a year, but keep in mind that as goes January, so goes the rest of the year. I expect these stocks to continue outperforming by a wide margin for the remainder of the year.

Were you wondering which sector of the U.S. economy would be next to take a dive from the year-old credit crunch? Well look no further, because Barron's [subscription required] reports that private equity firms like Apollo Global Management, Kohlberg Kravis Roberts, and Blackstone Group (NYSE: BX) are hurting gators thanks to too much borrowed money and the weak financial performance of the companies they bought. And business is way down, Barron's reports that through mid-August, the 2008 total deal volume "stood at $67 billion, versus more than $400 billion in the corresponding 2007 period."

This does not come as a surprise to me. In February 2007, I appeared on CNBC arguing that private equity had peaked. And I began to question its long-term viability back in August 2006 when Barron's Alan Abelson quoted my thoughts on the matter. The basic problem is that when debt is cheap, private equity booms and when it starts selling itself to the public, investors should hold onto their wallets for dear life. People who own private equity firms tap their superior knowledge of the coming downturn to convince the public to bail them out by buying their stock.

Barron's cites -- as evidence of trouble in private equity land -- examples of the declining value of the publicly traded debt in companies that private equity took private at too-high prices with too much borrowed money. It writes that bonds of "many companies taken private in the past two years have plunged to 50 cents on the dollar or less, signaling that investors fear they won't be fully repaid. Many companies that were the subjects of buyouts a year or two ago are so grossly over-leveraged that they're struggling simply to pay interest. If they were to default, debt investors would be stung, but equity investors would be even worse off; the value of their holdings would be deeply impaired or wiped out."

Huntsman (NYSE: HUN), a chemical company, controlled by private equity investor David Matlin and Jon Huntsman, rejected Apollo Managements attempt to back out of merger a $28 cash merger agreement.

HUN is recently trading at $13.10 in pre-open trading, below its close of $20.86.

HUN overall option implied volatility of 82 was above its 26-week average of 48 according to Track Data, suggesting larger price risk.

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

Citigroup (NYSE: C) has a set of loans to music firm EMI. It had hoped to sell them as part of a $12 billion package of debt that it is unloading to several private equity firms including using Apollo and TPG. But, things at EMI have gotten so bad that buyers want the debt held out of the mix.

According to The Wall Street Journal (subscription required), "The fact that EMI's debt was pulled from the proposed sale suggests it would have attracted prices well below the upper-80s range the other loans command." The total value of the loan to EMI, made by Citi and several other banks, was $4.9 billion.

For Citi, the news has no silver lining. It will probably have to write-down a large portion of its piece of the debt in its first quarter. One of the lessons form the General Electric (NYSE: GE) earnings catastrophe is that March was a terrible month in the credit markets and many financial companies did not see it coming. Earnings for Citi and other banks and brokerages could be worse that expected, as they were at GE's financial groups.

No one should be surprised of Cit has to raise more money.

Douglas A. McIntyre is an editor at 247wallst.com.

MAJOR PAPERS:

• According to people familiar with the matter, the Wall Street Journal reported that home-furnishings retailer Linens 'n Things, acquired by Apollo Management in 2006 and caught by a shrinking housing market and increasing debt load, is expected to file for Chapter 11 bankruptcy-court protection by Tuesday.

OTHER PAPERS:

• The Detroit News reported that Delta Air Lines Inc (NYSE: DAL) pilots have agreed to a contract revision that clears the way for Delta and Northwest Airlines Corporation (NYSE: NWA) to announce a merger next week, according to sources close the matter.
• The United Auto Workers union notified General Motors Corporation (NYSE: GM) of its deadline to strike three factories in Michigan if the two are unable to agree on local labor pacts, the Detroit News reported.
• The Business Standard reported that Toyota Motor Corporation (NYSE: TM) is planning to invest Rs 1,400 crore in Toyota Kirloskar Motor, its India subsidiary to set up its second plant in the country.

MAJOR PAPERS:

• In an effort to increase sales in the Middle East, the Wall Street Journal reported that Dell Inc (NASDAQ: DELL) is in talks with a government-owned vehicle in Dubai called Tecom about establishing a joint venture.
• The Wall Street Journal also reported that Washington Mutual Incorporated (NYSE: WM), which obtained a $7B capital infusion from TPG and other investors, had reportedly been working on the TPG deal while negotiating with JP Morgan Chase & Co (NYSE: JPM), which made a preliminary takeover bid of about $7B, people familiar with the deal said.
• Citigroup Incorporated (NYSE: C) is close to reaching a deal to sell $12B in leveraged loans at a discount to a group of leading private equity firms, the Financial Times reported. Although details of the deal were still being worked out, inside sources said Apollo Management, The Blackstone Group LP (NYSE: BX) and TPG would buy the loan portfolio at a discount that could come in at about 90 cents on the dollar.

OTHER PAPERS:

• The UK Times reported that The Boeing Company (NYSE: BA) is today expected to announce that its 787 Dreamliner has been delayed by 18 months, a setback which will affect all airlines that have ordered the 787, including British Airways Plc (OTC: BAIRY) and Virgin Atlantic.

With the severe credit crunch, the private equity world has come to a screeching halt. Sure, there is some dealmaking – but nothing like it was just a year ago.

So, what are the private equity folks doing? Well, they are raising billions of dollars. This is according to a piece in the FT.com (subscription required).

Although, the typical investors in private equity funds – such as pension funds – are actually losing their appetites. There are concerns about lower returns as well as larger concentrations of portfolio risk. Just look at the recent write-downs at KKR.

Yet, the top-tier private equity firms are still having little trouble raising money. TPG plans to snag $15 billion and Apollo should also get the same amount. And, as for Bain and Blackstone(NYSE: BX), it looks like they'll get $20 billion apiece.

OK, so where is the big money coming from? Yep, it's the sovereign wealth funds. With bulging coffers – especially from oil – the money needs to go somewhere. And, with lower valuations and distressed companies, it could be spot-on timing for those with a long-term perspective.

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