MAJOR PAPERS:

• The Wall Street Journal reported that a spokesperson for New Corporation (NYSE: NWS) said the company has dropped out of the bidding for Tribune Co's (NYSE: TXA) Newsday. This leaves Cablevision Systems Corporation (NYSE: CVC) as the apparent winner of the auction.
• According to people familiar with the matter, the Wall Street Journal reported that American International Group Inc's (NYSE: AIG) airplane-leasing unit is considering a split from the company. The people said International Lease Finance Corp have grown "increasingly concerned" the company will be hurt by AIG's financial troubles.
• Royal Dutch Shell Plc (NYSE: RDS.A) and Spain's Repsol YPF SA (NYSE: REP) are pulling out of one of Iran's biggest gas projects, the $10B-plus development of phase 13 of South Pars, the world's largest gas field, the Financial Times reported.

WEB SITES:

• Bloomberg reported that HSBC Holdings Plc (NYSE: HBC) set aside a smaller-than-forecast $3.2B for bad loans in the U.S. The bank also said its Q1 profit was higher than Q107.

MOST NOTEWORTHY: Novartis AG (NVS), Barnes & Noble, Inc (BKS), Altria Group (MO) and Advanced Micro Devices (AMD) were some of today's more notable upgrades:

• Credit Suisse upgraded Novartis AG (NYSE: NVS) to Neutral from Underperform on valuation and the approval of its drug Tekturna.

• Merrill Lynch upgraded shares of Barnes & Noble, Inc (NYSE: BKS) to Neutral from Sell on valuation.

• Deutsche Bank believes the recent weakness in Altria Group (NYSE: MO) presents a buying opportunity given the potential to unlock value, upgrading shares to Buy from Hold.

• JMP Securities upgraded shares of Advanced Micro Devices Inc (NYSE: AMD) to Market Outperform from Market Perform following checks that indicate the company's next-generation "Barcelona" quad-core server chip and next-generation low-power mobile PC processor chip is exhibiting excellent power, performance, scalability, and price/performance characteristics at key OEM customers.

OTHER UPGRADES:

• ThinkEquity upgraded Microchip Technology Inc (NASDAQ: MCHP) to Accumulate from Source of Funds following the company's improved guidance.

• Morgan Stanley upgraded Eni SpA (NYSE: E) to Equal-Weight from Underweight as they believe management made it clear that the dividend is sustainable and a large-scale acquisition is not forthcoming.

• JP Morgan upgraded Deutsche Telekom AG (NYSE: DT) to Neutral from Underweight citing management's new focus on customer service and expectation's for modest growth for the upgrade.

• AG Edwards upgraded Anheuser-Busch Companies Inc (NYSE: BUD) to Buy from Hold.

• Morgan Joseph upgraded Boyd Gaming Corp (NYSE: BYD) to Buy from Hold based on key markets the company operating in and its diversification.

• Bernstein upgraded Cablevision Systems Corp (NYSE: CVC) upgraded to Outperform from Market Perform.

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

When my colleagues and I said yesterday that gridlock would be good for Wall St., we didn't mean the kind that would require a legal battle and most likely a recount.

Americans, it seems, by and large have spoken, saying they want change. Democrats have gained a comfortable majority in the House of Representatives for the first time since 1994. As for the Senate, results are now locked at 49 seats each with Montana and Virginia still undecided.

Futures are negative in early morning trade, pointing to a lower start for stocks, probably due to this indecision in the Senate and the possibility the Dems will take both houses. Wall St. likes to know where it stands and doesn't like uncertainties. International stock markets were down with the Nikkei 225 finishing 1.1% lower.

Commenting on the possibility that the Democrats could take both houses, many analysts don't expect a pullback in the stock market, and if there were one, it would be short-term, many say. Despite the market having issues with some suggested Democratic policies such as capital gains tax or minimum wage increase, the issue of the economy was the third most important issue with 50% believing the U.S. economy isn't doing well. Democrats have captured many votes from those.

The question now is how the relationship between the president and the House would be. How would the election outcome affect the war in Iraq, for example, or what measures can the Democrats take before the president uses his veto pen. In case of a tie in the Senate, it is up to vice president Cheney to cast the deciding vote, which in this case would swing the vote the Republican way.

Economic data reported today is limited. At 10:30 a.m. crude inventories will be reported. Usually this does not have a great impact unless inventories surprise one way or the other. Oil prices could then be affected. Oil prices have etched up this morning but are still below $60 a barrel.

Reporting today are: Federated Department Stores (NYSE:FD), Cablevision Systems (NYSE:CVC), Cisco Systems (NASDAQ:CSCO), PG&E Corp. (NYSE:PCG), Sirius Satellite Radio, Inc. (NASDAQ:SIRI) and News Corp. (NYSE:NWS, NWS.A).

Two companies are expected to fall: True Religion Apparel (NASDAQ:TRLG) plunged 20% in after-hours trading yesterday after reporting disappointing results and lowering outlook for the year, UTStarcom (NASDAQ:UTSI) fell more than 5% in after-hour trading after announcing it would delay the release of its third-quarter earnings.