Analyst upgrades:

• Janney Montgomery upgraded Adobe (ADBE) to buy from neutral on expectations for a strong CS5 product cycle in 2010. The firm raised its target on shares to $43 from $33.
• Kaufman Bros. upgraded Rackspace (RAX) to buy from hold to reflect the company's "strong" Q3 results and expectations growth will accelerate in 2010. The firm raised its target on shares to $22.50 from $16. Oppenheimer upgraded Rackspace to outperform from perform and established a $24 price target on the stock.
• Stephens upgraded Ann Taylor (ANN) to overweight from equal weight as it believes the company's core brand will recover faster than originally thought. The firm raised its target on shares to $17 from $12.
• Rockwell (ROK) was upgraded to neutral from underperform at Baird.
• Taiwan Semi (TSM) was raised to outperform from market perform at FBR Capital.
• Royal Bank of Scotland (RBS) was upgraded to buy from hold at Deutsche Bank.

"The term cloud computing is nothing particularly new or complicated; it simply means that instead of having software on your home, office or notebook computer, you run applications over the Internet," explains Gregg Early.

In Personal Finance says, "It's the way of the future as computing becomes increasingly mobile." Here, he looks at a trio of plays on this trend: Amazon.com (NASDAQ: AMZN), Salesforce.com (NYSE: CRM), and Rackspace Hosting (NYSE: RAX).

"I would point out that I'm writing this article on Google Docs. This document is stored on a Google server farm, not on my office computer.

Analyst upgrades:

• JPMorgan upgraded Franklin Resources (NYSE: BEN) to Overweight from Underweight to reflect performance and sales improvements, as well as benefits from the weakening U.S. dollar. The firm has a $94 target on the stock.
• Oppenheimer upgraded FormFactor (NASDAQ: FORM) to Outperform from Perform after channel checks indicated orders are recovering. The firm raised its target on shares to $30 from $22.
• KeyBanc upgraded Oshkosh (NYSE: OSK) to Buy from Hold citing the company's MRAP-ATV contract win, which they view as a "game changer." The firm has a $30 target on the stock.
• Novellus (NASDAQ: NVLS) was upgraded to Neutral from Underperform at Credit Suisse.
• Ternium (NYSE: TX) was upgraded to Buy from Neutral at Goldman.
• Cathay General (NASDAQ: CATY) was upgraded to Buy from Neutral at B. Riley.

Cloud computing is a type of on-demand hosting services on the internet. Not only a necessity for mainstream e-commerce sites, it also increases efficiency, is scalable, and lowers expenses. The monetary savings may be misleading to consumers and businesses who do not fully understand the potential risks involved.

With a pay-as-you-go type structure, users are only charged for the amount of traffic, bandwidth, and memory used. Online businesses become more efficient by only utilizing the storage and space needed, while also being assured capacity for any usage increases. The buzz has been building for years, so cloud computing has attracted a diverse customer base, ranging from popular social networks such as Twitter and Facebook, to educational websites of Arizona State and Northwestern University.

Analyst upgrades:

• KeyBanc upgraded Epicor (NASDAQ: EPIC) to Buy from Hold based on several near-term catalysts that include possible convertible debt repurchases, reasonable Q4 results, a proxy fight, and a boost from the Epicor 9 product cycle in 2H09.
  
• KeyBanc also upgraded AK Steel (NYSE: AKS) to Buy from Hold based on relative valuation and said the company could benefit from lower iron ore, scrap natural gas, and labor inputs.
  
• JP Morgan upgraded Lennar (NYSE: LEN) to Overweight from Neutral based on relative valuation.
• Marriott (NYSE: MAR) was upgraded to Buy from Neutral at Goldman.
  
• Raymond James (NYSE: RJF) was raised to Market Perform from Underperform at Wachovia.
  
• Deere (NYSE: DE) was upgraded to Outperform from Market Perform at Bernstein.

Analyst downgrades:

Carnage. Mayhem. BS. Rumors. It was and remains ugly and the fears are only growing. You should see the credit spreads of the credit default swaps. Some of them have never traded at these levels -- even on the good solid companies. Trying to get new, fresh angles to cover the markets right now is becoming a challenge. It's just ugly. I didn't even feel like writing a Closing Bell post today. Gold, oil and metals rallied sharply as investors fled to save havens.

Here are today's unofficial closing bell levels:
Dow 10,610.80 -448.22 -4.05%
S&P 500 1,156.21 -57.38 -4.73%
NASDAQ 2,098.85 -109.05 -4.94%
10YR T-Bond 3.41% -0.081%
52-week lows
Top Analyst Upgrades
Top Analyst Downgrades

Nortel Networks Corp. (NYSE: NT) needs to change its name to "NO TELL" in a hurry. This stock was down 50% at $2.64 right before the close. You know why: slowing telecom and communication equipment orders. Yep, another warning.

Morgan Stanley (NYSE: MS) was the worst financial cohort today. The stock was crushed on rumors, widening credit spreads specific to it, and just overall fears that it is next on the Bataan Death March. Right before the close the stock was down 30% to $20.00, but shares hit lows of $16.08 at the worst level today.

Analyst upgrades:

• Wachovia upgraded shares of The Goldman Sachs Group Inc (NYSE: GS) to Outperform from Market Perform on expectations for greater pricing power given Goldman's position as the largest remaining independent securities firm.
• Keefe Bruyette upgraded Investment Technology Group Inc (NYSE: ITG) to Outperform from Market Perform as they believe the company will take market share with the reshaping of the large wire-house brokerage community. The company's target was raised to $37 from $33.
• Broadpoint raised Hoku Scientific Inc (NASDAQ: HOKU) to Buy from Neutral as they believe the contract with Tianwei New Energy reduces financing risk.
• ACE Ltd (NYSE: ACE) and The Travelers Companies Inc (NYSE: TRV) were upgraded to Buy from Neutral at Goldman.
• Axcelis Technologies Inc (NASDAQ: ACLS) was upgraded to Buy from Hold and Evergreen Solar Inc (NASDAQ: ESLR) was lifted to Hold from Sell at Citigroup.

Analyst downgrades:

For the most part, the IPO market has been horrible this year. In fact, according to a report from Reuters, only three IT (information technology) companies have gone public this year.

Despite this, web-hosting company Rackspace (NYSE: RAX) still went ahead with its IPO this week. And, it was pretty bad for investors. On its opening day, the stock price plunged 20% to $10. Ironically enough, Wall Street was hoping that the Rackspace deal would help spark the IPO market.

After all, Rackspace is a great company. Keep in mind that its investor roster includes biggies like Norwest Venture Partners and Sequoia Capital.

Moreover, unlike other upstart tech IPOs, Rackspace has a strong history of profitability. In Q1, net income was $5.4 million. Rackspace is also growing at a torrid pace, with Q1 revenues at $119.6 million, up from $75.2 million in the same period a year ago. There are 33,000 customers.

However, Rackspace must deal with tough competitors, such as IBM (NYSE: IBM), AT&T (NYSE: T) and even Amazon.com (NASDAQ: AMZN), which offers a variety of cloud-computing services. Furthermore, the slowing economy may put pressure on IT budgets, which could be a problem for Rackspace going forward.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.