Waste Management (NYSE: WMI) really rocketed on Monday. Its shares closed up nearly 18% to a final price of $30.39. Volume was heavy. No doubt the company's preliminary earnings report helped get things going for the company that makes its money off ridding the world of trash.

For the third quarter, Waste Management is forecasting an increase in its top line of 3.6%. It should book revenues of $3.5 billion. For the bottom line, the company should do at least $0.62 per share, which is two pennies above Wall Street estimates. Even better, this represents a 15% improvement over last year's earning's performance. Not bad, I suppose, but was the 18% gain in the stock price truly reflective of an organic breakout? Keep in mind that the Dow rallied almost 1000 points on Monday. That obviously had a lot to do with the fantastic price appreciation. In addition, Tom Taulli covered how Waste Management dropped its bid for competitor Republic Services (NYSE: RSG). As Tom pointed out, Waste Management probably didn't want to rock the boat as far as its credit rating was concerned. So the traders probably also took this into consideration when placing their bids.

But why would I want to buy the stock now after its stellar one-day performance? I'd much rather take a look at the company after it pulls back. I'm just not convinced that all of the action in the stock was due to strong conviction on the part of investors. I'd have to watch how the price behaves over the next few days before making a decision. All of these bounces that we're going to inevitably see after suffering many days of hellish declines in the major indexes are to be approached with caution if you're looking for quick trading gains. Long-term investors can obviously have a different attitude going into certain stocks. In the case of Waste Management, I will give credit for its attractive yield. But you'll need to perform more due diligence beyond the yield to see if this is one you should look at or not.

Disclosure: I don't own any company mentioned; positions can change at any time.

The credit crunch has made it nearly impossible for private equity firms to pull off multi-billion dollar deals. As a result, a variety of strategic buyers have capitalized on the situation.

But, even this trend may falter. Just look at Waste Management Inc.'s (NYSE: WMI) $6.73 billion buyout bid for rival Republic Services Inc. (NYSE: RGS) Well, today Waste Management said it is going to drop the deal.

Why? Of course, it's about the "market conditions."

But, even top companies are having difficulties getting financing. Besides, a big financial commitment could put pressure on Waste Management's credit rating.

Then again, the good news for Waste Management is that the core business continues to be strong. The company forecasts Q3 earning at $0.62 to $0.63 per share. In fact, the recent decline in fuel costs should be a nice boost.

So far in today's trading, the shares of Waste Management are up 6% to $27.29. Republic's shares are up 3.47% to $3.47%.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He is also the founder of BizEquity, a valuation website

Waste Management Inc. (NYSE: WMI) raised its hostile bid for smaller rival Republic Services Inc. (NYSE: RSG) by more than 8% to $6.73 billion, a premium that should be enough to scuttle Republic's $6.24 billion purchase of Allied Waste Industries Inc. (NYSE: AW).

Under the terms of the deal, Waste Management would buy Republic for $37 per share, a premium of almost 33% to Republic's closing price on July 11, the last trading day before the company's buyout proposal was disclosed. The proposal is above Republic's all-time high stock price. Moreover, Waste Management will pay Republic, which rejected Waste Management's earlier offer as inadequate, a fee of $250 million if the merger does not close because of opposition from the U.S. Department of Justice.

"Our $37.00 all-cash proposal clearly offers Republic stockholders a better and more certain value
alternative than is contemplated in the Republic-Allied transaction," said David P. Steiner, Waste
Management's CEO, in a press release. "We believe our proposal is clearly superior for Republic's stockholders and is designed so we can work cooperatively with Republic to structure a transaction that would benefit both
Republic and Waste Management stockholders."

A combined Waste and Republic would create annual synergies of $200 million, $50 million more than the savings created by the Republic-Allied deal, according to the Wall Street Journal. The reason for Waste Management's interest in Republic is simple according to the paper: "Though smaller than Waste or Allied, Republic is generally regarded as the best-run trash hauler in the country, and its stock has outperformed its rivals."

Today would be described as being choppy disappointment at best. The markets started out strong on a government bailout proposal for GSE's but traders went right back to shorting financials on big gap ups. After today, we'll get major earnings reports coming on a non-stop basis and tomorrow we'll also start to see some key data around producer prices tomorrow morning. Here are today's unofficial closing bell levels:
DJIA 11,052.10 (-48.44)
S&P500 1,228.02 (-11.46)
NASDAQ 2,212.87 (-26.21)
10YR T-Note 3.88% (-0.06%)
52-WEEK LOWS
TOP ANALYST UPGRADES
TOP ANALYST DOWNGRADES

Anheuser-Busch Companies, Inc. (NYSE: BUD) saw a gain as the company finally capitulated and agreed to be acquired now that InBev boosted its buyout offer price to $70.00 from $65.00.

The largest waste disposal company in the U.S., Waste Management Inc. (NYSE: WMI), wants to get even bigger. The company announced today that it proposes to pay $34 per share – or $6.3 billion -- for rival Republic Services, Inc. (NYSE: RSG).

On problem here is that Republic is already the subject of a merger with Allied Waste Industries, Inc. (NYSE: AW) announced in mid June. Although, if you take a look at the Republic-Allied merger agreement, there are clauses that allow Republic to entertain alternative offers. What's more, it looks like Waste Management may have access to internal data.

All in all, Waste Management is highly confident it will get the deal done: the firm has a plan for dealing with antitrust issues (likely involving divestitures); the investment grade status should be maintained; and the dividend will remain intact.

Without the benefit of any due diligence, Waste Management believes the deal will be accretive in the first year and provide at least $150 million in synergies. Basically, there should be lots of room to rip out duplicative costs, as well as get efficiencies from scale.

Waste Management also announced today its preliminary figures for Q2. The company plans to generate revenues of $3.49 billion, up 3.9% from the same period a year ago. Earnings are expected to be $0.64 per share.

So far in today's trading, though, Waste Management's stock is off 5% to $34.75. Of course, Republic stock is 15.6% higher to $32.25, while Allied Waste shares are down 7% to $11.15.

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.

Republic Services (NYSE: RSG) is recently trading at $33.22, above its close of $27.90 Friday.

Waste Management (NYSE: WMI) announced it made a proposal to acquire all of RSG outstanding common stock for $34 per shares in cash. Allied Waste (NYSE: AW) offered to acquire RSG on June 23 for 0.45 shares of AW for each share of RSG.

RSG overall option implied volatility of 31 is near its 26-week average of 30 according to Track Data, suggesting non-directional price movement.

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

Waste Management Inc. (NYSE: WMI) is the biggie in the trash business. But, things may get tougher.

According to a report in the Wall Street Journal [a paid publication], Allied Waste Industries Inc. (NYSE: AW) and Republic Services Inc. (NYSE: RSG) are contemplating a $6.5 billion merger (a stock-for-stock swap). The companies are the second and third largest trash haulers in the U.S., respectively.

Yes, it's not a sexy industry, but it's fairly recession-resistant. There are some pressures, though, such as higher energy prices. But, the industry has been increasing prices to accommodate for this.

And, of course, if Allied and Republic combine operations, that should mean even more pricing power. Actually, the total revenues would be about $9.3 billion or so.

Besides, Allied could use some help. The company's revenues have languished and the debt load is a hefty $6.7 billion.

In Friday's trading, Allied shares were up 7.7% go $15, as investors speculated on a possible deal.

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.

Republic Services, Inc. (NYSE: RSG) is recently up 41c to $34.12:

The WSJ reported RSG and AW are in merger discussions. RSG call option volume of 648 contracts compares to put volume of 10 contracts. RSG June 35 straddle is priced at $1.95. RSG July option implied volatility of 23 is below its 26-week average of 30 according to Track Data.

Allied Waste Industries, Inc. (NYSE: AW) is recently up 93 to $14.89:

The WSJ reported RSG and AW are in merger discussions. AW call option volume of 2,419 contracts compares to put volume of 114 contracts. AW July option implied volatility of 62 is above its 26-week average of 33.

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

MOST NOTEWORTHY: The environmental services sector, the machinery and capital goods sector and several bank holding companies were today's noteworthy initiations:

• Credit Suisse initiated shares of Allied Waste Industries Inc (NYSE: AW), Republic Services Inc (NYSE: RSG) and Waste Management Inc (NYSE: WMI) with Outperform ratings and a $16 target, $35 target and $45 target, respectively.
• Bernstein initiated the machinery and capital goods sector, initiating shares of Caterpillar Inc (NYSE: CAT) and Illinois Tool Works Inc (NYSE: ITW) with Outperform ratings and a $100 target and $68 target, respectively and Deere & Company (NYSE: DE), Eaton Corporation (NYSE: ETN), Ingersoll-Rand Company Ltd (NYSE: IR) and Parker-Hannifin Corporation (NYSE: PH) with Market Perform ratings.
• Sandler initiated shares of Preferred Bank Los Angeles CA (NASDAQ: PFBC) and UCBH Holdings, Inc (NASDAQ: UCBH) with Buy ratings and shares of Cathay General Bancorp (NASDAQ: CATY) and East West Bancorp, Inc (NASDAQ: EWBC) with Hold ratings.

OTHER INITIATIONS:

• Golfsmith International Holdings Inc (NASDAQ: GOLF) was initiated at Wedbush with a Buy rating and $8.75 target, as the firm believes the company is an attractive growth story and buyout candidate.
• Pharmasset Inc (NASDAQ: VRUS) was initiated with a Buy rating and $12 target at Banc of America, as the firm believes Clevudine has the potential to be best in class for the treatment of the hepatitis B virus.
• Ciena Corporation (NASDAQ: CIEN) was initiated with an Outperform rating and $40 target at Piper Jaffray.