Early this morning, Societe Generale cut GlaxoSmithKline (GSK) to "sell" from "hold." The brokerage blamed the downgrade on the "looming threat" of generics to GSK's respiratory drug Advair. SocGen believes the market is "underestimating" the chances for a generic competitor to Advair in the U.S. by 2011.

Technically, the stock is facing resistance at the $40 level -- a level that has provided a hurdle in the past. Along with this potential resistance is the possibility that the equity may slip back below its 20-month moving average. This trendline has acted as resistance in the past, and now that the shares are positioned north of this trendline, it could act as support. The problem is that this trendline is in a sharp descending pattern.

It isn't all bad news for GSK, the good news is that the equity should find some support from its 10-week moving average. With this trendline providing support, any potential drop from this morning's news could be limited.

After the closing bell rang yesterday, Amgen (NASDAQ: AMGN) announced a second-quarter profit that increased 40% compared to a year ago. The company earned $1.29 per share compared to 84 cents per share a year ago. Not only did the pharmaceutical firm top its previous-year results, but it also outpaced the Street's estimated earnings of $1.16 per share.

Quarterly revenue dropped to $3.71 billion from $3.76 billion a year ago, but AMGN still topped the consensus revenue estimate of $3.58 billion. Total product sales for AMGN increased 1% when taking the impact of foreign exchange out of the equation. Looking ahead, AMGN forecast full-year adjusted earnings between $4.80 and $4.95 per share, far better than its earlier forecast of $4.55 to $4.75 per share and the Street's expected $4.57 per share.

Human Genome (NASDAQ: HGSI) is recently trading at $11.07 in pre-open trading, above its close of $3.32. Human Genome Sciences and GlaxoSmithKline (NYSE: GSK) announced that BENLYSTA met the primary endpoint in BLISS-52, the first of two pivotal Phase 3 trials in patients with serologically active systemic lupus erythematosus. HGSI August 2.5 straddle is priced at $2.45, October 2.5 straddle is priced at $2.75, January 2.5 straddle is priced at $3.25 according to Track Data, suggesting large price movement.

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

"Stocks are likely in a new downtrend," says Michael Ashbaugh. In Marketwatch's The Technical Indicator, he looks at the S&P's prospects and some drug stocks set to buck the trend.

"The S&P 500 has violated its major moving averages in the closely tracked 900 area. The recent downturn was convincingly bearish, placing the burden on market bulls to reassert the uptrend.

"After finding resistance in the 923 area, the S&P sold off sharply, edging back under its 200-day moving average, which currently holds at 900 and now marks resistance. This is bearish price action.

Today was just a weird day as we sold off, but marginally compared to elsewhere. Parts of Asia and Europe, as well as Latin America, saw their equity markets hit hard over fears of a pandemic swine flu outbreak. Many traders feel this is a notion that will pass as a footnote rather than as a catastrophe, and this was a very light day for data. Sheila Bair at FDIC did manage to call the bank liquidity crisis over.

Here are today's unofficial closing bell levels:

Dow 8,025.00 -51.29 (-0.64%)
S&P 500 857.51 -8.72 (-1.01%)
Nasdaq 1,679.41 -14.88 (-0.88%)

Top Analyst Upgrades
Top Analyst Downgrades

I remember Toronto during SARS. As one of the harder hit areas, it was not a happy place. It was the end of winter, but that miserable, cold winter just didn't want to end. People walked the streets in a gloomy haze, afraid to take the subway and giving dirty looks to anyone brazen enough to cough in public. Worse, I couldn't even visit a friend in the hospital. All things considered though, in global pandemic terms, it was over relatively quickly. Let's hope swine flu will be the same.

In the meantime, let's put on our investors hats and see what's in store for some stocks:

Travel and tourist stocks
This is one of the worst hit areas, especially airlines, as people may cancel their travel plans. For example, AMR Corp. (NYSE: AMR) traded over 9 percent lower an hour after the open. Royal Caribbean Cruises (NYSE: RCL) was down over 15 percent. In fact UBS downgraded these airlines and hotels this morning: AMR, Continental Airlines (NYSE: CAL), Host Hotels and Resorts (NYSE: HST), Lasalle Hotel Properties (NYSE: LHO), Marriott (NYSE: MAR), United Airlines (NASDAQ: UAUA), US Airways (NYSE: LCC). Carnival Cruise Lines (NYSE: CCL) also declined considerably. Best to stay away from the sector.

As Jon Ogg reported, Allergan, Inc. (NYSE: AGN - option chain) rallied sharply on Tuesday amid rumors that GlaxoSmithKline (NYSE: GSK) was mulling a takeover bid. Speculative investors jumped all over the news, as option volume on AGN skyrocketed well beyond normal levels yesterday. Interestingly enough, it seems that some traders took advantage of the stock's surge to initiate new bearish positions.

Specifically, AGN on Tuesday saw 15,850 puts cross the tape, which represents about 14.5 times its average daily put trading volume. Meanwhile, 59,943 call contracts changed hands, marking 11.5 times the norm.

Analyst upgrades:

• Jefferies upgraded Home Depot (NYSE: HD) to Buy from Hold as they expect significant multiple expansion as earnings revisions start to bottom out and the market starts to factor in a recovery. The firm raised its price target to $24 from $18-$20.
  
• Goldman upgraded HSBC (NYSE: HBC) to Neutral from Sell and removed the stock from their Asia Pacific Sell List given the company's plans to stop making new loans at its U.S. unit.
  
• Deutsche Bank upgraded Ensco International (NYSE: ESV) to Hold from Sell on valuation as it believes weakening shallow water demand is priced into shares at current levels. The firm raised its target price to $32 from $30.
• Liberty Global (NASDAQ: LBTYA) was raised to Equal Weight from Underweight at Morgan Stanley.
  
• UnitedHealth (NYSE: UNH) was lifted to Outperform from Market Perform at Bernstein.

Mattel (NYSE: MAT) reported that its fourth-quarter profit fell 46% to $176.4 million, or 49 cents a share, on sales of $1.94 billion from $2.19 billion as it was hurt by the stronger dollar and the weakest holiday season in decades. This was much lower than analyst estimates for the toymaker of 72 cents of profit on $2.2 billion of sales, according to Thomson Reuters. MAT shares declined over 18% in premarket trading.

Humana (NYSE: HUM) reported that its fourth-quarter net income fell 28% to $174.1 million, or $1.03 a share, on higher claim expenses, lower investment income, and a 12% income decline in its government segment business. Analysts polled by FactSet had expected fourth-quarter earnings of $1.07 a share. HUM shares declined nearly 4% in premarket trade.

I am the Global Editor at MoneyShow.com and each week I interview an investing expert. This week, I spoke with Chris Gilchrist, editorial director of EveryInvestor, who tells investors how they should protect themselves, diversify, and position their portfolios for a rebound.

Q. Chris, in an interview at the recent World Money Show in London, you discussed the failure of the most widely used diversification strategies during the current global market declines. Why did it happen?

A. There are two major reasons. First, current portfolio planning techniques are based on portfolio theory, which systematically underestimates the frequency of extreme events as well as the size of potential losses. 'Standard deviation' is a false measure of risk because investment returns are not 'normally distributed'. Inadequate recognition of risk meant advisers recommended too high a proportion of capital be invested in equities.

Second, finance theorists hold that the excess annual return on equities above risk-free bonds should be no more than 2% to 3% as against a historical 5% to 7%, but this, too, is contrary to what we know about investors. It assumes investors are indifferent between loss and gain, when we know investors are about twice as risk-averse as they are gain-seeking and that this systematically skews their behavior.

Nevertheless, if you follow the theory, you end up putting more capital into risky assets in order to achieve your target rate of return. So, the failure arose not from diversification itself-though that, too, has been problematic-but from putting too high a proportion of assets into riskier assets.

ImClone Systems Inc. (NASDAQ: IMCL) had good results today, with shares closing up 6.7% at $67.94. The biotechnology company rejected Bristol-Myers Squibb (NYSE: BMY)'s offer to buy the remaining 83% of the company at $60 a share, saying it is considering a buyout offer worth $70 per share from an unidentified large pharmaceutical company. It seems that chairman Icahn has been busy.

To be sure, I was one of the skeptics when the billionaire investor last rejected BMY's offer, as was my colleague Doug McIntyre. But if this new offer is for real, then I must admit I underestimated him. Apparently, he "has been in talks with the chief executive of the pharmaceutical company that made the new offer, which would be worth about $6.1 billion." ImClone said it has not decided if the offer is adequate -- talk about playing hard ball all the way.

Bristol-Myers is ImClone's partner in selling its only product, the colon and head-and-neck cancer drug Erbitux. Analysts believe this would force BMY to offer $70 as well. A partnership between BMY and ImClone makes sense strategically. But I guess it all depends on who is the other pharmaceutical company BMY is competing with. Many pharma companies are losing sales to generic companies as their drugs go off patent, and without having much in the pipeline, but enough cash on their hands, any of them could be an interested buyer.

Some specific names mentioned by analysts include Sanofi-Aventis (NYSE: SNY), GlaxoSmithKline PLC (NYSE: GSK) and possibly AstraZeneca PLC (NYSE: AZN). Germany's Merck KGaA, which already sells Erbitux in some countries outside North America, is another likely candidate, as is Pfizer Inc. (NYSE: PFE), which has been trying to expand its portfolio of oncology drugs.

It's interesting that negotiations with the other company have been kept so tight, except for the price of course. BMY wins either way -- even if it can't get ImClone -- as it still holds 17% of BMY shares. Icahn, of course, would be a big winner too. Other options ImClone has been entertaining was spinning off the Erbitux division into a separate firm. The parent company would focus on developing drugs in its pipeline.

Sanofi-Aventis (NYSE: SNY - option chain) shares are soaring higher today after the company announced that its CEO Gerard Le Fur will be replaced by Chris Viehbacher, head of GlaxoSmithKline's (NYSE: GSK) North American pharmaceutical operations. If you think that the stock won't fall by too much in the coming months as the CEO gets a honeymoon period, then now could be a good time to look at a bullish hedged trade on SNY.

SNY opened this morning at $35.59. So far today the stock has hit a low of $35.28 and a high of $35.84. As of 11:55, SNY is trading at $35.52, up $1.99 (5.9%). The chart for SNY looks bullish and S&P gives SNY a positive 4 STARS (out of 5) buy ranking.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $32.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 19.0% return in just three and a half months as long as SNY is above $32.50 at December expiration. Sanofi would have to fall by more than 8% before we would start to lose money. Learn more about this type of trade here.

Analyst upgrades:

• Goldman upgraded shares of BP Plc (NYSE: BP) to Buy from Neutral on valuation as they believe the recent pullback provides an attractive entry point.
  
• VF Corp. (NYSE: VFC) was raised to Outperform from Neutral at Credit Suisse citing its acquisition platform and international growth. The company's target was increased to $100 from $88.
  
• Deutsche Bank upgraded shares of Tenet Healthcare (NYSE: THC) to Buy from Hold and increased its target to $8.50 from $7 to reflect increased confidence in the company's ability to beat expectations over the next 12 months and reduce its net debt.
• US Steel (NYSE: X) was raised to Sector Outperformer from Sector Performer at CIBC.
  
• United Technologies (NYSE: UTX) was upgraded at UBS to Buy from Neutral.

Analyst downgrades:

Monday, June 16

• Lehman Brothers Holdings Inc. (NYSE: LEH) reporting Q2 earnings; conference call at 10:00 am.
• Nvidia Corporation (NASDAQ: NVDA) to discuss new GPU products at 1:00 pm.
• Lime Energy Co. (NASDAQ: LIME) to discuss acquisition of Applied Energy Management at 4:00 pm.
• Adobe Systems Inc. (NASDAQ: ADBE) reporting Q2 earnings; conference call at 5:00 pm.

Tuesday, June 17

• La-Z-Boy Inc. (NYSE: LZB) to report Q4 earnings; conference call at 8:30 am.
• The Hershey Company (NYSE: HSY) to hold business update conference call at 8:30 am.
• Best Buy Inc. (NYSE: BBY) to report Q1 earnings; conference call at 10:00 am.