Analyst upgrades:

• Thomas Weisel upgraded SanDisk (NASDAQ:SNDK) to Market Weight from Underweight. Thomas Weisel said they are less negative on the outlook for memory industry dynamics but they do expect SanDisk shares to be range bound.
  
• Citigroup upgraded shares of Hershey (NYSE:HSY) to Buy from Hold as they believe Hershey is benefiting from increased advertising spending and the consumer trade-down to less expensive chocolate. The firm maintains a $39 target on the stock.
  
• Deutsche Bank upgraded Best Buy (NYSE:BBY) to Buy from Holdas they believe the company will be a beneficiary from the Circuit City liquidation.
• Ericsson (NASDAQ:ERIC) was upgraded to Neutral from Sell at Goldman.
  
• Advance Auto Parts (NYSE:AAP) and Virgin Media (NASDAQ:VMED) were raised to Overweight from Neutral at JP Morgan.
  
• NewMarket (NYSE:NEU) was upgraded at KeyBanc to Buy from Hold.

Analyst downgrades:

• Citigroup downgraded Kellogg (NYSE:K) to Hold from Buy as they believe the company's U.S. trends are decelerating and that FX trends will have a negative impact. The firm lowered their target price to $47 from $58.
  
• Jefferies downgraded Cerner (NASDAQ:CERN) to Hold from Buy following Eclipsys' (NASDAQ:ECLP) negative pre-announcement as they believe both companies are suffering from a downturn in hospital spending. Jefferies lowered their target on Cerner to $38 from $51.
  
• Oppenheimer cut Amdocs (DOX) to Perform from Outperform following the weak Q1 results citing lack of near-term catalysts and the macroeconomic slowdown.
• Eclipsys (NASDAQ:ECLP)was downgraded to Underperform from Buy at Jefferies and to Neutral from Buy at Piper Jaffray.
  
• PetSmart (NASDAQ:PETM) was downgraded to Hold from Buy at Deutsche Bank.
  
• Fulton Financial (NASDAQ:FULT) was lowered to Underperform from Market Perform at Keefe Bruyette.

Analyst initiations:

• Wunderlich initiated Republic Services (NYSE:RSG) with a Buy rating and $30 target and believes the company should enjoy sustainable pricing leverage following the merger with Waste Management.
  
• RBC Capital initiated Elan Corp (NYSE:ELN) with an Underperform rating and $4 target based on Tysabri uncertainty, bapineuzumab clinical risk, MS competition, and debt overhang.
  
• Oppenheimer expects Ligand Pharmaceuticals (NASDAQ:LGND) to become an aggressive acquirer of financially distressed biotech companies with the completion of the acquisition of Pharmacopeia. Shares were assumed with an Outperform rating and $5 target.
• Zebra Tech (NASDAQ:ZBRA) was initiated with a Neutral rating and $25 target at JP Morgan.
  
• Activision (NASDAQ:ATVI) was reinitiated at Friedman Billings with an Outperform rating and $14 target.
  
• Ameren (NYSE:AEE) was assumed with a Hold rating at Jesup & Lamont.

Analyst upgrades:

• Jefferies upgraded shares of Devon Energy (NYSE: DVN) to Buy from Hold on expectations that Haynesville results could be a catalyst in 2009. The firm raised their target to $100 from $94.
  
• Friedman Billings upgraded shares of Republic Services (NYSE: RSG) to Outperform from market Perform following the completed merger with Allied Waste (NYSE: AW).
  
• KeyBanc upgraded NorthWestern (NYSE: NWE) to Buy from HOld as they expect the Montana commission to grant the company's pending request for an accounting order to smooth pension expenses over five years.
• EnCana (NYSE: ECA) was upgraded to Neutral from Sell at Goldman.
  
• Goldman also upgraded Questar (NYSE: STR) to Buy from Neutral.
  
• Kinross Gold (NYSE: KGC) was raised to Outperform from Neutral at Credit Suisse.

Analyst downgrades:

U.S. stock futures were higher Friday morning, indicating stock markets could possibly extend Thursday's rally as the dollar rose and oil prices fell further. The dollar continues to make gains on the back of growing evidence of global economic softness. Still, several economic readings are due out today, including the New York Empire State manufacturing index , capacity utilization and industrial production -- all before the opening bell.

Retail will be in focus today after two Kohl's Corp (NYSE: KSS) and Nordstrom (NYSE: JWN) reported late Thursday, and J.C. Penney (NYSE: JCP) and Abercrombie & Fitch (NYSE: ANF) are due to report before the opening bell.

Kohl's Corp shares could start higher as premarket indication has them trading 2.3% higher, while Nordstrom's are trading 4% lower in premarket action. Kohl's quarterly profit fell 12% from a year ago, but the retailer lifted its fiscal year profit forecast. Meanwhile, upper scale Nordstrom, reported a 21% drop in second-quarter profits and cut full year outlook.

ANF said second-quarter profit fell on lower sales of jeans and T-shirts and forecast full-year earnings per share that trailed some analysts' estimates. JCP also saw profit decline but beat estimates and issued lower guidance.

Autodesk (NASDAQ: ADSK) shares are trading 10% higher in premarket action after the design software maker reported stronger-than-forecast second-quarter earnings Thursday after the close.

U.S. stock futures were a little higher this morning following Friday's rally. Oil futures have been rising again due to the Russian-Georgian conflict and the dollar retracted from the five-month high set Friday. Global markets were mostly higher although China's hit a 19-month low.

Waste Management (NYSE: WMI) is expected to raise its unsolicited cash offer for rival Republic Services (NYSE: RSG) by nearly 10% to $6.73 billion, the Wall Street Journal reported.

Verizon Communications (NYSE: VZ) and two unions agreed on a new three-year contract Sunday, averting a possible strike of 65,000 workers. The new contract provides 10.5% wage increases and changes in retirement benefits.

Berkshire Hathaway (NYSE: BRK.A) reported an 8% decline in second-quarter profit after the market close Friday. The investment group attributed the decline to fewer insurance premiums and $1 billion in unrealized derivative losses.

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

U.S. stock futures were higher early Monday as a recovery from Friday's selloff seemed in the cards. Oil, which will continue to be in focus alleviated some pressure as it came off highs, and several deals also gave boost to stocks. The Federal Reserve is due to have a two-day policy meeting starting Tuesday. Most investors expect the Fed to keep its key federal funds rate unchanged but change the focus, or give more weight to inflation.

U.S. stocks fell sharply Friday as oil prices climbed once again and financials continued to be in the headlines. The Dow industrials tumbled 220 points, or 1.83%, for a weekly loss of 3.7%. The Dow closed below 12,000 at 11,482.69, a three-moth low. The S&P 500 dropped nearly 25 points, or 1.85%, Friday and 3.1% last week. The Nasdaq Composite, with the same weekly decline, fell nearly 56 points, or 2.27%, Friday.

Without any economic readings out today, the market will undoubtedly focus on oil. Despite Saudi Arabia saying Sunday it will produce more crude this year if the market needs it, oil prices rose overnight as the promise was kept vague enough for any concrete relief.

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.

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.