MOST NOTEWORTHY: Bed Bath & Beyond, DSW Inc and Oplink Comm were today's noteworthy downgrades:

• JP Morgan downgraded Bed Bath & Beyond (NASDAQ: BBBY) to Underweight from Neutral citing recent sales commentary from competitors and the difficult macro environment.
  
• Oppenheimer cut DSW Inc (NYSE: DSW) to Perform from Outperform following the company's Q1 miss and lower than expected guidance, as they see little visibility in the coming quarters.
  
• Piper downgraded shares of Oplink Communications (NASDAQ: OPLK) to Sell from Neutral following the company's negative earnings preannouncement and lowered their target to $9.00 from $14.

OTHER DOWNGRADES:

• Tiffany (NYSE: TIF) was downgraded to Sell from Neutral at Merrill.
  
• Goldman cut National Semiconductor Corp (NYSE: NSM) to Sell from Neutral.
  
• Wellpoint (NYSE: WLP) was downgraded to Equal Weight from Overweight at Lehman.

Investors didn't have a whole lot of confidence in Bed Bath & Beyond Inc. (NASDAQ: BBBY) ahead of tonight's earnings report - the stock hit a new 52-week low during the trading day. Under the unforgiving glare of the earnings spotlight tonight, the domestics retailer said third-quarter profit fell to $138.2 million from $142.4 million in the year-ago period. Earnings on a per-share basis edged up to 52 cents from 50 cents, matching analysts' expectations.

Net sales for the quarter were 10.8% higher at $1.795 billion, and comparable store sales in the reporting period edged up 0.8%. In the year-ago third-quarter period, same-store sales grew by 4.6%. According to Thomson, analysts were expecting revenue of $1.765 billion.

For the fourth-quarter, BBBY officials expect same-store sales to be virtually flat, leading to per-share earnings between 64 and 67 cents per share. This is well south of analysts' mean estimate of 77 cents per share, according to Reuters.

The poor fourth-quarter guidance is not sitting well with investors, who have sent BBBY reeling nearly 9% lower in after-hours trading. This move will bring the stock deeper into new-annual-low territory. In fact, a move of this magnitude come tomorrow morning, should the selling persist, would put the shares in the neighborhood of a six-year low. Bed Bath & Beyond shareholders may not be enjoying a good night's sleep tonight.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

Bed Bath & Beyond (NASDAQ: BBBY), a nationwide chain of retail stores, is expected to report EPS on January 3. BBBY January option implied volatility of 40 is above its 26-week average of 32 according to Track Data, suggesting larger risks.

Monsanto (NYSE: MON) will issue first quarter financial results on Jan. 3. MON closed at $114.47. MON January option implied volatility of 48 is above its 26-week average of 37 according to Track Data, suggesting larger risk.

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

Bed Bath & Beyond Inc. (Nasdaq: BBBY) opened at $37.93. So far today the stock has hit a low of $37.78 and a high of $38.50. As of 11:15, BBBY is trading at $38.42, down $2.05 (-5.1%).

After hitting a one-year high of $43.32 in February, the stock has been flat in the $40-42 range over the past few months until today's drop below support. Yesterday after the close, BBBY warned it would miss EPS estimates this quarter, due to a "challenging retail environment," and weak home merchandise sales. Goldman Sachs also cut BBBY from buy to neutral in response. Recent technical indicators for BBBY have been neutral and improving, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bearish hedged play on this stock, I would consider a July bear-call credit spread above the $42.50 range. BBBY has not been above $42.50 since February and has shown resistance around $41 recently. This trade could be risky if the stock bounces upward due to some better economical news, but even if this happens, BBBY would have pass through heavy resistance around $42 before we would be in trouble.

Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls a position in BBBY.

Back in November 2005, Apollo spent $1.3 billion to buyout Linens 'N Things. Actually, this was really the only serious buyer. After all, Linens 'N Things was having lots of troubles.

So, the magic of private equity would solve things?

Not necessarily. This is according to an AP story. It looks like the stores are a bit underwhelming -- and not stocked with the kinds of things shoppers want to buy.

No doubt, turnarounds are always tough. Besides, the competition continues to be rough, such as from Bed Bath & Beyond Inc. (NASDAQ:BBBY) and Target Corp. (NYSE:TGT). Of course, the real estate market is no help.

And, for 2006, Linens 'N Things posted a net loss of $154 million. In other words, it looks like this deal has become a long-term deal.

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

Bed Bath & Beyond (NASDAQ:BBBY) might be a nice quick money play for Monday, March 11, 2007. BBBY took an unwarranted downward slip late in February and it leaves what may be an enticing opening for grabbing the quick rebound. Analysts give BBBY a green light almost across the board with a buy rating and a positive company assessment. The numbers I see are positive, solid and tight with nearly 25 analysts in agreement that BBBY is producing good positive results.

A fly in the ointment, analyst Brian Nagel, downgraded the company on February 27, giving BBBY an undeserved albeit mild flogging, sending a note of caution to clients warning that company reinvestment would limit upside on company EPS. But he salted his warning with mention that BBBY is "aggressively reinvesting" and that those reinvestments might preclude any upside "surprises." Then, without adjustment to target price, BBBY was downgraded from buy to hold and the shares dipped 4.5% which signals to me the presentation of a nice sweet opening.

If you're reading this with a critical eye, give BBBY a quick look and read what analysts have said over the last couple of quarters. At the point where Bed Bath & Beyond shares rest as I'm writing this, I see nothing less than opportunity.

Stock futures were positive in early morning trade, indicating to a similar start for stocks.

Today several economic indicators will be released:
- At 8:30 a.m. Eastern, weekly initial jobless claims and final GDP number for the third quarter are due. Economists are expecting a 2.2% economic growth, same as the previous quarter.
- At 10:00 a.m., November leading indicators will be reported. Consensus calls for a 0.1% increase, compared to 0.2% the month before.
- At noon, Philadelphia Fed index will be released.
- At 1:00 p.m., Richmond Fed President Jeffrey Lacker, the only Federal Open Market Committee member who voted for a rate hike, is due to speak.

In earnings news:
Nike Inc. (NYSE:NKE) reported quarterly earnings late yesterday. A tax break from the Dutch, surging demand in China and the success of converse, helped the world's largest athletic shoe and clothing company boost profit in its second quarter to $325.6 million, or $1.28 per share, from $301.1 million, or $1.14 per share, during the same period last year. Sales increased 10% to $3.82 billion. NKE shares were down 1.5% in after hours trading.

Also yesterday, Bed Bath & Beyond Inc. (NASDAQ:BBBY) posted a third-quarter profit rise of 3.8% as sales increased to $142.4 million, or 50 cents per share. Analysts expected profit of 52 cents per share. The company expects a fourth-quarter charge related to stock option grants. BBBY shares were down nearly 3% in after hours trading.

Reporting today:

In corporate news:
The unsecured creditors committee for Delta Air Lines said it supports Delta's decision to file its stand-alone reorganization plan, but that it also will weigh alternatives. So far the committee hadn't reacted much to US Airways Group's (NYSE:LCC) unsolicited $8.4 billion bid for Delta.

Back in mid-November, specialty retailer Bed, Bath & Beyond (NASDAQ: BBBY) was cut by J.P. Morgan from neutral to underweight based on the home-improvement retailer's current quarterly results -- which will most likely be "fine". What's all the fuss about, then?

J.P. Morgan says that BBBY's current fiscal quarterly outlook is great but that fact is already factored into the current share price. The analytical methods that the ratings houses use to determine this have always been a little shaky to e, but this time the method must have been "one potato, two potato" or something similar.

J.P. Morgan told its clients that BBBY's operating margins have contracted in the last three quarters and that operating cash flows have growth at a slower pace than earnings. This is true -- but I'm still confused over more specifics that allow one to conclude that BBBY's share price has these factors already thrown in. Sometimes, plugging in a formula is not the best way to arrive at a conclusion, but it's worth noting regardless.