MOST NOTEWORTHY: Salesforce.com, First Marblehead and The E.W. Scripps Co were today's noteworthy upgrades:

• Jefferies upgraded shares of Salesforce.com (NYSE:CRM) to Buy from Hold following the company's Q1 results and recommends accumulating shares on any weakness from concerns around a slowdown in bookings. They believe that while bookings growth slowed in Q1, CRM's growth remains stellar and its market opportunity remains large.
  
• Friedman Billings upgraded First Marblehead (NYSE:FMD) to Market Perform from Underperform. The firm believes most of the bad news is reflected in shares and that there are early indications of "thawing" within the private student loan ABS market.
  
• Lehman upgraded the E.W. Scripps Co (NYSE:SSP) to Overweight from Underweight and expects the upcoming July 1st split of Scripps Networks Interactive from Scripps will give the company strategic opportunity by separating high growth cable from traditional newspapers and broadcasting.

OTHER UPGRADES:

• ING upgraded Royal Dutch Shell (NYSE:RDS.A) to Buy from Hold and StatoilHydro (NYSE:STO) to Hold from Sell.
  
• Cost Plus (NASDAQ:CPWM) was raised to Market Perform from Underperform at JMP Securities.
  
• Wachovia upgraded Level 3 (NASDAQ:LVLT) to Market Perform from Underperform.

Today was mostly a solid day until profit taking at the day's end took off some of the gains. Retail sales data was mixed to mostly poor, although the shares reacted as though the news was good as many retailers maintained or were at least close to earnings guidance. Today's equity volume was actually very light. As far as trying to figure out the huge internet merger, well that's just an obvious mess and one that all the parties will ultimately decide on.

Below was the unofficial close of major US index levels:

• DJIA 12,582.39 (+55.13; +0.44%)
• S&P 500 1,360.58 (+6.09;+0.45%)
• NASDAQ 2,351.70 (+29.58; +1.27%)
• 10YR-TBond 3.532% (+0.066%)
• 52-Week Lows.

E.I. du Pont de Nemours & Company (NYSE: DD) saw a 1.2% gain to $49.64 after the company raised guidance for Q1 and issued cautious Q2 views.

If you wanted to look for the blame-game on why stocks listed lower most of the day, you could blame pending home sales at lows, higher oil prices, and even the FOMC minutes hinting at recession without saying "recession." We also saw the White House say it couldn't endorse the current structure of the proposed housing bill.

The truth is, Wall Street and Main Street are also coming to grips with the fact that we are about to get earnings (and guidance) from companies that we can only hope is mixed. Otherwise we just have to hope for "less-bad" news. Get ready for the legacy airline sector's low P/E and low Price to Book values to disappear completely. Below are the unofficial closing bell index prices:

• Dow 12,576.44 (-35.99; -0.29%)
• S&P 500 1,365.54 (-7.00; -0.51%)
• NASDAQ 2,348.76 (-16.07; -0.68%)
• 10YR-TBond 3.558% (+0.002%)
• Full 52-week lows.
• See Top 10 Pre-Market Analyst Calls.

Advanced Micro Devices (NYSE: AMD) saw shares fall almost 5% to $6.03 after it issued an earnings and revenue warning on Monday after the close. Had it not announced a major layoff plan, this would have been far worse. So much for this "growth story."

Reuters reports that First Marblehead Corporation (NYSE: FMD) -- a student loan securitizer -- is in deep yogurt and the stock market is not happy, knocking 42% out of its stock. The reason? The Education Resources Institute Inc (TERI), which claims to be the largest not-for-profit guarantor of U.S. private education loans, filed Monday for Chapter 11 bankruptcy protection. Thanks to borrower defaults and credit market problems, its liquidity was "damaged."

People have asked me what would be the next shoe to drop after subprime. The $85 billion student loan market is one where the supposed alchemy of securitization is turning lead into toxic waste rather than gold. Securitization was supposed to eliminate the risk of loss by bundling enough good loans with bad ones so the security would offer attractive returns. While the securitizers got big fees, the losses are turning out to be larger than expected.

TheStreet.com's Jim Cramer says the fresh troubles for IndyMac make it more imperative for the Fed to act.

We keep coming close to losing these companies that are fighting for their lives.

Yesterday we had First Marblehead (NYSE: FMD) (Cramer's Take) on student loans.

Is CIT (NYSE: CIT) (Cramer's Take) next with its student loan portfolio (as opposed to its mobile home portfolio and its subprime portfolio...sheesh!)?

We obviously had a giant problem with MBIA (NYSE: MBI) (Cramer's Take) over the amount of capital it needs to raise. Will it have to raise capital and cut the dividend?

MOST NOTEWORTHY: Sierra Pacific (SRP), Intersil (ISIL), Fannie Mae (FNM) and Freddie Mac (FRE) were today's noteworthy downgrades:

• Deutsche Bank downgraded shares of Sierra Pacific (NYSE: SRP) to Hold from Buy on valuation and uncertainty over the company's Integrated Resource Plan investment program.
  
• Jefferies downgraded shares of Intersil (NASDAQ: ISIL) to Hold from Buy and lowered their target to $30 from $38 after their Asia channel checks indicated the first wave of cancellations for PWM ICs from the leading Taiwan Motherboard manufacturers.
  
• Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) were lowered to Neutral from Buy at UBS, citing credit pressures that will likely require increased reserves.

OTHER DOWNGRADES:

• First Marblehead (NYSE: FMD) was downgraded to Underperform from Market Perform at Friedman Billings.
  
• The firm also downgraded Casey's General Stores (NASDAQ: CASY) to Market Perform from Outperform.
  
• Public Storage (NYSE: PSA) was lowered to Market Perform from Outperform at Wachovia.

Yahoo (NASDAQ: YHOO) volatility elevated as YHOO trades near 36-month low. YHOO, however, is recently up $0.81 to $23.54 following positive analyst comments. Bear Stearns says "there are several catalysts that could drive YHOO's shares, including: 1) success from branding initiatives, 2) good results from Panama, 3) takeover / strategic partnership talks, 4) the Alibaba IPO, and 5) a material share repurchase." YHOO overall option implied volatility of 38 is above its 26-week average of 35 according to Track Data, suggesting larger movement.

First Marblehead (NYSE: FMD) volatility was low prior to announcing Subpoena from NY AG. FMD, a provider of outsourcing services for private and non-governmental education lending, closed at $40.70. FMD announced on 8/31/07 it received a subpoena on 8/22/07 from the New York Attorney General's investigation of lending, educational, and nonprofit institutions. FBRC say's "facing wider spreads, downsizing-reiterating underperform." FMD over all option implied volatility of 41 is below its 26-week average of 45 according to Track Data, suggesting decreasing price movements.

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

Netflix Inc (NASDAQ: NFLX)

Amazing. Amazon.com Inc (NASDAQ: AMZN), that big online retailer, sees the flix for the net. The shares keep rising for the online DVD rental company-up about 15%, highest since January-- even if their discs do come a little scratched. More than that though is while new subscribers are coming on; it's not exactly going gangbusters. Still, 6.8M is a whole lot of subscribers. Will Amazon, or someone else, overpay?

Rackable Systems Inc (NASDAQ: RACK)

Which came first: The ongoing takeover rumors or the higher stock price? Or was it that Dell Inc (NASDAQ: DELL) is said to be after Rackable, a provider of servers and storage products for high density data center deployments. Rack it up.

Feldman Mall Properties Inc (NYSE: FMP)

Word is that this real estate investment trust will look for a sale, combo or merger. They said the venerable firm of Friedman, Billings, Ramsey & Co. will help them "explore strategic alternatives." Then the stock went up.

STILL FLYING AROUND

Trump Entertainment Resorts Inc (NASDAQ: TRMP)

Dennis Gomes, whose name surfaced in March, is a one time gaming exec and regulator. He's signed a confidentiality agreement to have a look see at the firm's Atlantic City casinos. Separately, Las Vegas' Boyd Gaming Corporation (NYSE: BYD) has also been mentioned as a possible contender.

YRC Worldwide Inc (NASDAQ: YRCW)

The CEO of this Kansas-based transportation service provider has been quoted as saying that a takeover is possible. An LBO is likely. This week the shares have actively been trading up.

Dollar Tree Stores Inc (NASDAQ: DLTR)

Imagine a dollar tree where the stock keeps going up, up, up. Well, here it is, once again, a subject of takeover talk.

BUZZ

United States Steel Corporation (NYSE: X): Russia's Severstal may be prowling around...Plains Exploration & Production Company (NYSE: PXP): Takeover candidate's stock is sharply higher... Micron Technology Inc (NYSE: MU): Blackstone has interest...Ameristar Casinos Inc (NASDAQ: ASCA): A hot stock and takeover rumors abound...Nvidia Corporation (NASDAQ: NVDA): Remains an LBO candidate...The First Marblehead Corporation (NYSE: FMD): The student loan business is booming and earnings growth is strong, but who would buy it?...Marriott International Inc (NYSE: MAR): A target? But where's the movement?...Oakley Inc (NYSE: OO) as a target has been around and around, and now some say it will be bought by Luxottica Group (NYSE: LUX).

Amdocs Ltd. (NYSE: DOX) -- calls Active on higher implied volatility as DOX rallies on Chatter. DOX is a software & services holding company and has a market cap of $7.4 billion with long term debt of $450 million. DOX is recently up $1.23 to $36.78 on unconfirmed & renewed LBO chatter. FMD call option volume of 2,049 contracts compares to put volume of 177 contracts. DOX June option implied volatility of 31 is above its 26-week average of 27 according to Track Data, suggesting larger price risks.

First Marblehead (NYSE: FMD) -- calls active as traders hedge Wells Fargo (NYSE: WFC) chatter. FMD, a provider of outsourcing services for private and non-governmental education lending, is recently up $1.42 to $36.73. Unconfirmed speculation is circulating WFC is interested in purchasing FMD. FMD June option implied volatility of 46 is above its 26-week week average of 43 according to Track Data, suggesting slightly larger price risks.

Joy Global (NYSE: JOYG) -- call volume and volatility higher on renewed takeover chatter. JOYG is a manufacturer and service provider of surface and underground mining equipment. JOYG is recently up .99 to $53.22 on unconfirmed takeover chatter. Caterpillar Inc. (NYSE: CAT) is frequently mentioned as potential acquirer. JOYG call option volume of 2,213 contracts compares to put volume of 276 contracts. JOYG June option implied volatility of 50 is above its 26-week average of 42 according to Track Data, suggesting larger price fluctuations.

Option volume leaders today are: Yahoo Inc. (NASDAQ: YHOO), Elan Corp. (ADS) (NYSE: ELN), Apple Inc. (NASDAQ: AAPL) and Altria Group (NYSE: MO).

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

MOST NOTEWORTHY: Xilinx, Inc (XLNX), Red Robin Gourmet Burgers, Inc (RRGB), Ingram Micro Inc (IM), Silicon Laboratories (SLAB) and Comtech Group, Inc (COGO) were today's more noteworthy initiations:

• Deutsche Bank believes upside remains on Xilinx Inc's (NASDQ: XLNX) margins and tax rates, initiating shares with a Buy rating and $38 target.

• JP Morgan waits for improved new unit volumes and better earnings visibility before getting more constructive on Red Robin Gourmet Burgers Inc (NASDAQ: RRGB) and initiated shares with a Neutral rating.

• Given the lack of catalysts to improve margins above their peers, JP Morgan doesn't expect multiple expansions from Ingram Micro (NYSE: IM) in the near-term, assuming shares with a Neutral rating.

• Deutsche Bank expects Silicon Labratories (NASDAQ:: SLAB) multiples to expand with operating margins, starting shares with a Buy rating and $40 target.

• Needham believes Comtech Group Inc (NASDAQ: COGO) is uniquely leveraged to benefit from the growth of manufacturing in China and started shares with a Buy rating and $21 target...

OTHER INITIATIONS:

• Deutsche Bank initiated shares of Marvell Technology Group (NASDAQ: MRVL) with a Buy rating.

• Citigroup started GTx, Inc (NASDAQ: GTXI) with a Buy rating.

• Pacific Growth started Itron, Inc (NASDAQ: ITRI) with a Buy rating.

• First Marblehead Corp (NYSE: FMD) was initiated with a Hold rating and $38 target at Sandler.

• UBS started Kaiser Aluminum Corp (NASDAQ: KALU) with a Buy rating and $100 target.

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