The Pep Boys -- Manny, Moe & Jack (NYSE: PBY) issued Q2 earnings on Tuesday after the bell. The aftermarket service business for automobiles, whose related companies include AutoZone (NYSE: AZO) and AutoNation (NYSE: AN), said net sales fell about 2%, and earnings per share increased 50% to 15 cents. The earnings growth was actually better than that since there were a couple of items in the previous year's quarter that benefited the bottom line.

According to Reuters, the expectation was for 14 cents per share in net income. Yep, we got the beat-by-a-penny cliche in full effect here. Management credited cost containment and service sales as drivers for the quarter.

The U.S. Government's 'Cash for Clunkers' program ends today. It won't be clear for some time whether the program was successful or not in stimulating the auto industry but it was certainly popular with buyers. As the program ends, will the rally in auto retailing stocks also come to a close?

Interestingly, although the program runs through the end of business on today, some dealers stopped using the rebate program on Friday the 21st. For example, AutoNation, Inc. (NYSE: AN) is a publicly owned auto retailer that stopped offering the program to buyers on Friday. Perhaps management has concerns about the government being willing to pay the rebates on time.

CarMax (NYSE: KMX), an expert in used automobiles and a colleague of AutoNation (NYSE: AN), is up today nearly 14% in early-afternoon trading on spectacular volume. What's driving (pun intended!) the buying action? You guessed it...earnings. Revenues for the first quarter decreased 17%. Adjusting for items, CarMax earned $0.22 per share, and, according to my colleague Melly Alazraki, that figure simply annihilated earnings projections developed by the analysts.

Well, well, well...what to do now, right? CarMax is an interesting company in an interesting time. It sells used cars during a period when new cars aren't selling too well. We all know about the problems at Ford (NYSE: F) and General Motors (OTC: GMGMQ). But that isn't reason enough to put money down on this stock. Especially not after a rally like we're seeing today.

Analyst upgrades:

• Citigroup upgraded Lennar (NYSE: LEN) to Buy from Hold as it believes the company's near-term liquidity profile is improved following the $400M debt issuance. The firm raised its target price to $12 from $11.
• Jefferies upgraded Rowan Companies (NYSE: RDC) to Buy from Hold as it believes jack-up drillers will continue to outperform deepwater names. The firm raised its target price to $27 from $20.
• Keefe Bruyette upgraded First Financial (NASDAQ: FFIN) to Market Perform from Underperform to reflect more positive loan data for the Texas banks. The firm raised its target price on shares to $44 from $38.
• MGM Mirage (NYSE: MGM) was upgraded to Overweight from Neutral at JP Morgan.
• Morgan Stanley (NYSE: MS) was upgraded to Outperform from Market Perform at JMP Securities.
• Brinker (NYSE: EAT) was upgraded to Overweight from Equal Weight at Barclays.

Okay, maybe I'm too bearish, but I'm not sure I could possibly buy stock in CarMax (NYSE: KMX). The used-car dealer, a colleague of AutoNation (NYSE: AN), reported some good profit growth on Thursday, but I just don't like the guidance (or lack thereof) and the sales figures.

Most of all, though, I think buying CarMax now might be violating the buy-low-sell-high principle. Who knows, maybe I should just join the momentum party. The stock is up over 60% over the year-to-date period as of Thursday. See the dilemma a potential buyer would be in?

This is the fourth in a four part series which I hope gives buyers, sellers, shareholders and dare I say management a platform for discussion.

This week I envisioned an eBay (NASADQ: EBAY) without Skype, eBay Motors and Paypal. Everything goes to the highest bidder, excluding handling and delivery of course.

While EBay might benefit from selling Skype and Motors, considering they might be worth more to others like Cisco Systems (NASDAQ: CSCO) and AutoNation Inc. (NYSE:AN), it should not sell PayPal unless it is contemplating a merger, since the acquiring company most likely would want PayPal to be an integral part of any deal.

Ebay is going through some growing pains right now but it is still a primary center of activity on the web. Although there are many disgruntled sellers that have left the site or been forced off because of the constant changes in the rules, it really has only one main rival and that is Amazon.com (NASDAQ: AMZN).

This is the second in a four part series which I hope gives buyers, sellers, shareholders and dare I say, management, a platform for discussion.

Now that I have unloaded Skype from eBay (NASDAQ: EBAY) in Tuesday's post (Serious Money: eBay should auction off Skype), it's time to move on to an asset that is not losing money, eBay Motors, but may be of more value to one of its competitors like Carmax (NYSE: KMX) or AutoNation (NYSE: AN).

It might also find a home with Amazon.com (NASDAQ: AMZN), its closest competitor in non-automotive categories. There is also the possibility that any number of auto-parts companies like AutoZone Inc (NYSE: AZO) or even the online car referral site Autobytel Inc. (NASDAQ: ABTL) would find eBay Motors a very compelling addition.

The Big Three American automakers might want to compete for this great asset. Since General Motors (NYSE: GM), Ford Motors (NYSE: F) and Chrysler are having difficulty selling new cars, expanding used car sales would be enticing. The problem is they are basically broke and holding on to a thread for dear life. That is not the case for Honda (NYSE: HMC) and Toyota Motor Corp. (NYSE: TM). Perhaps eBay Motors might find a place in their long term plans.

Four well known CEOs weighed in on CNBC's Squawk Box, giving their particular insight on economic conditions one day after the Federal Reserve made yet another basis rate cut. Each of the four Chief Executives acknowledged the tough going in the economy, yet each also sought to inject a thread of optimistic patience into their commentary.

Mike Jackson, CEO, Auto Nation Inc. (NYSE: AN), came to the defense of Reserve Board Chair Ben Bernanke. While admitting that the chairman may have crawled blindly into what is now mostly economic turmoil, Jackson stated: "...I think he absolutely has it right now. He's got to be on full flight recession mode, and we'll worry about the dollar, and commodities and inflation later." Personally, I think Benanke should be making moves to protect the consumers and their dollars first, and let inflation take care of itself until the consumer sector is back up to speed.

Wilbur Ross, CEO, W L Ross & Co. Played the most obtuse card stating: "My own opinion is that it's just more of the same volatility." More of the same volatility? Yeah the economy is volatile ... DUH!

MAJOR PAPERS:

• The Wall Street Journal's "Deal Journal" reported that Sam Zell's planned buyout of Tribune Company (NYSE: TRB) is contingent on the receipt of a solvency opinion, and that this is the first time they have ever seen a deal dependant on this.
• The WSJ's "Heard on the Street" reported that Countrywide Financial Corporation (NYSE: CFC) may not be out of the woods yet. Despite executives promising a return to profitability, there is still a risk the company may eventually seek bankruptcy protection or "resort to huge sales" of new stock.
• U.S. private equity group JC Flowers "is understood" to have walked away from the auction for troubled bank Northern Rock, the Financial Times reported.
• Rupert Murdoch is shaking up the management of News Corp (NYSE: NWS.A), the Financial Times reported, giving his son, James Murdoch, control over the company's European and Asian operations, and appointing two trusted executives to lead Dow Jones & Company Inc (NYSE: DJ) and the Wall Street Journal.

WEB SITES:

• Barron's Online's "Weekly Trader" said AutoNation Inc (NYSE: AN) looks attractive now, despite hovering near a multi-year low. The company has also been on a slow but steady quest to diversify away from unpopular domestic brands by snapping up luxury and import dealerships.

MOST NOTEWORTHY: Toll Brothers (TOL), COTT Corp (COT), Tim Hortons (THI) and Linktone (LTON) were today's noteworthy downgrades:

• Banc of America downgraded shares of Toll Brothers (NYSE: TOL) to Sell from Neutral, citing expected deterioration in luxury sales due to mortgage distress in the marketplace.

• COTT Corp (NYSE: COT) was cut to Hold from Buy at Stifel, citing the difficult macro environment and continued profit declines.

• Tim Hortons (NYSE: THI) was downgraded to Neutral from Buy at Goldman, citing valuation, and notes that fundamentals remain favorable.

• Montgomery cut Linktone (NASDAQ: LTON) to Hold from Buy, citing the sudden decline in its wireless VAS revenues following Q2 results...

OTHER DOWNGRADES:

• Banc of America downgraded Hovnanian (NYSE: HOV) and Standard Pacific (NYSE: SPF) to Neutral from Buy.
  

• Merrill Lynch cut AutoNation (NYSE: AN) and American Axle (NYSE: AXL) to Sell from Neutral.

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

MOST NOTEWORTHY: AutoNation (AN), Darden Restaurants (DRI), Rare Hospitality (RARE) and ChoicePoint (CPS) were today's noteworthy downgrades:

• Goldman cut AutoNation (NYSE: AN) to Sell from Neutral based on potential for additional earnings shortfalls. The firm does not expect a sharp rebound in shares.

• Bear Stearns downgraded Darden Restaurants (NYSE: DRI) to Peer Perform from Outperform following its acquisition of Rare Hospitality.

• Rare Hospitality (NASDAQ: RARE) was cut to Hold from Buy at Keybanc following the acquisition offer from Darden.

• ChoicePoint (NYSE: CPS) was cut to Reduce from Neutral at Suntrust, citing the difficult macro environment, which will impact revenue growth in its low-barrier commoditized non-insurance operations...

OTHER DOWNGRADES:

• Alliance Holdings (NASDAQ: AHGP) was cut to Hold from Buy at AG Edwards.

• UBS downgraded SL Green Realty (NYSE: SLG) and Boston Properties (NYSE: BXP) to Neutral from Buy.

• Morgan Stanley downgraded Countrywide Financial (NYSE: CFC) to Equal Weight from Overweight.

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

MOST NOTEWORTHY: QLogic (QLGC), Cnet Networks (CNET), Taiwan Semiconductor (TSM), Darden Restaurants (DRI) and Anadys Pharma (ANDS) were today's noteworthy downgrades:

• QLogic (NASDAQ: QLGC) was cut by several firms:
  
• QLogic was cut to Neutral from Outperform and removed from JP Morgan's Focus List due to the lack of catalysts to drive shares higher.
  
• Caris cut shares to Average from Above Average and Pacific
  
• Crest downgraded QLogic to Sector Perform from Outperform as the company's profits decline.

• Citigtroup downgraded CNet Networks (NASDAQ: CNET) to Hold from Buy as they no longer expect material revenue growth acceleration and operating leverage in 2H07; First Albany cut shares to Neutral from Buy.

• HSBC downgraded shares of Taiwan Semiconductor (NYSE: TSM) to Neutral from Overweight to reflect worse than expected pricing pressures.

• Matrix downgraded shares of Darden Restaurants (NYSE: DRI) to Hold from Buy on increasing competition and rising costs.

• Piper cut Anadys Pharma (NASDAQ: ANDS) to Underperform from Outperform following the company's announcement that it has discontinued development of ANA975...

OTHER DOWNGRADES:

• First Albany cut Zimmer Holdings (NYSE: ZMH) to Buy from Strong Buy.

• Bear Stearns downgraded AutoNation (NYSE: AN) to Peer Perform from Outperform.

• Piper Jaffray downgraded Volcom (NASDAQ: VLCM) and Sierra Wireless (NASDAQ: SWIR) to Market Perform from Outperform.

• Bernstein downgraded Coca-Cola Enterprises (NYSE: CCE) to Underperform from Market Perform.

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

MOST NOTEWORTHY: The automotive sector was today's most noteworthy initiation:

• Prudential initiated the automotive manufacturers industry and automotive retail industry with Favorable ratings and the automotive parts and equipment industry with an Unfavorable rating. The firm initiated coverage on following stocks:
  
• Overweight-rated names included Autoliv Inc (NYSE: ALV), Group 1 Automotive, Inc (NYSE: GPI), Honda Motor Co, Ltd (NYSE: HMC), Johnson Controls, Inc (NYSE: JCI), Sonic Automotive, Inc (NYSE: SAH), & Toyota Motor Corp (NYSE: TM).
  
• Neutral Weight-rated names included AutoNation, Inc (NYSE: AN), DaimlerChrysler (NYSE: DCX), Magna International Inc (NYSE: MGA) and United Auto Group, Inc (NYSE: UAG).
  
• Underweight-rated names included Ford Motor Co (NYSE: F), General Motors Corp (NYSE: GM) and Gentex Corp (NASDAQ: GNTX).

OTHER INITIATIONS:

• Bernstein initiated JPMorgan Chase & Co (NYSE: JPM) with a Market Perform rating and $54 target.

• Lehman started Time Warner Cable Inc (NYSE: TWC) with a Neutral rating.

• Merriman initiated shares of Progressive Gaming International Corp (NASDAQ: PGIC) with a Buy rating, as the firm believes it is on the cusp of gaining meaningful market share of casino floors through its technologies and now is the time to get involved in shares.

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

One of the stocks that I like to keep an eye on is AutoNation (NYSE: AN). It interests me due to their number one position in online auto sales and because of their robust size. I'm getting a bit curious about how quiet it is over there in terms of news items. I'm not the least bit worried about what they're up to. As I've said before, generally a lack of news means that things are going in a business-as-usual fashion.

As of this writing, the most current news item you'll find on the AutoNation website is their Oct. 26, 2006 news release of their third quarter earnings report. . The most current news piece I can find on the web is a reference to the AutoNation Inc. presentation at the China Auto Services Market Summit, December 5, 2006 at JW Marriott Hotel Shanghai . What this signals to me is that AutoNation is yet another active participant in the massive movement to exploit China's blooming economic opportunities. The summit seemed to be geared more towards automobile service operations than towards outright retailing of automobiles. The logistics of moving cars to market, the financing of new vehicle purchases, underpinning the retail segment, leasing, renting and mechanical service were among the topics of focus. The entire summit signals to me that the groundwork is being carefully laid for a major influx of automobiles into mainland China.

I like the feel of the whole thing. "Detroit's" big three are surely in full preparation for this impending boom. Aren't they? I want to see some advertising fliers showing Chevrolet (NYSE: GM) Silverados parked along the Great Wall. I want to see pictures of the streets of Peking jammed with Nitros (NYSE: DCX) and Explorers (NYSE: F). I want to see some of the money we've spent on cheap Chinese die cast tools and toys coming back as wages for American workers. I want my piece of their economy now. C'mon gang, it's time to bring it on home!

Stock futures are lower in early morning, indicating stock markets would also open lower. This is a day after Microsoft Corp. (NASDAQ:MSFT) reported financial results and before the quarterly GDP data is released.

As I indicated yesterday in Microsoft's earnings preview, the Street would hardly pay attention to the quarterly results and instead focus on outlook for the upcoming year. Indeed, Microsoft beat street estimates and yet left investors unimpressed as it also gave a lowered guidance.

Today, ahead of the bell at 8:30 a.m. ET, GDP figures will be reported. Economists expect Gross Domestic Product data to show a third quarter economic growth of 2.1% annual rate, compared to 2.6% in the previous quarter. This figure is especially important as economists try to see if the Fed's monetary policy hadn't choke up the economy too much with its consecutive rate hikes. The slowdown that is evident in the housing market is already an indication of the overall economic growth slowdown.

Also today, just before 10:00 a.m., October's University of Michigan's consumer confidence index will be released.

Earnings: The biggest company to report before the bell is Chevron Corp. (NASDAQ:CVX). Analysts expect a 24% jump in earnings.

Also in the news:

Sun Microsystems Inc. (NYSE:SUNW) reported quarterly earnings yesterday as well and posted a narrower net loss with a revenue rise of 17%.

In Hong-Kong, shares for Industrial & Commercial Bank of China rose nearly 15% to HK$3.52 ($0.45) in the world's largest IPO. The strong debut disappointed investors in Shanghai nonetheless. Analysts predicted the stock would rise between 10% to 15%.

In the auto industry a few stories are developing:

• According to The Wall Street Journal, car dealer AutoNation Inc. (NYSE:AN) will slash its orders from the Big Three -- General Motors Corp. (NYSE:GM), Ford Motor Co. (NYSE:F) and DaimlerChrysler (NYSE:DCX) -- automakers by 30% due to already high inventories.
• GM also said that due to losing sales to Toyota Motor Corp. (NYSE:TM), it will use some of the money saved in cost cuts to make more fuel efficient cars and match Toyota's technology. And while talks of bankruptcy have receded, analyst still sound cautious about GM.
• Finally, Volkswagen, the world's fourth-largest carmaker, beat expectations by nearly doubling third-quarter operating profit, reaffirming its full-year increased forecast.

Wal-Mart Stores Inc. (NYSE:WMT), struggling to communicate its new image of being both trendy and low-cost will sever its ties with another longtime ad agency. Personally, I wonder if Wal-Mart has ever internalized the term "target-market." You can't dance at too many weddings, Wal-Mart.

Staying on Wal-Mart, a union group and the Rev. Jesse Jackson demanded yesterday that Wal-Mart fire a Republican consultant. Find out why here.

Sony Corp. (NYSE:SNE) battery woes seem unending.

Finally, car rental company Hertz Global Holdings Inc. will issue 88.2 million shares of common stock in a planned initial public offering for an estimated price of between $16 and $18 per share.

Bonds rallied again yesterday with the yield on the benchmark 10-year Treasury note falling to 4.72% from 4.76% late Wednesday.

Overseas, Asian markets closed mixed to lower. European markets are mixed at the moment with a negative trend.

Futures are negative in early morning trade (8:00 a.m.), pointing to a lower start for stocks.