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Analyst Upgrades/Downgrades

Upgrades and Downgrades This Morning


CARB – Carbonite initiated with a Buy at Canaccord Genuity

TW  – Towers Watson ests raised at Stifel Nicolaus

SAP – SAP AG upgraded to Outperform from Market Perform at Wells Fargo

MGM – MGM Resorts upgraded to Overweight from Equal Weight at Morgan Stanley

SBSI  – Southside Banc assumed with Market Perform at Keefe Bruyette

PER – SandRidge Permanian Trust initiated with a Mkt Perform at Morgan Keegan

JPM – JPMorgan Chase initiated with an Overweight at Evercore

RL – Polo Ralph Lauren upgraded to Outperform from Neutral at Cowen

TRV – Travelers upgraded to Buy from Sell at Goldman

VMW – VMware initiated with a Buy at Merriman

PHM – PulteGroup upgraded to Buy from Neutral at UBS

CHKM – Chesapeake Midstream Partners initiated with Outperform at Credit Suisse

VC – Visteon initiated with a Buy at BofA/Merrill

AWH – Allied World Assurance resumed with a Neutral at Goldman


CVH – Coventry Health Care downgraded to Underperform at Wedbush

MCP – Molycorp downgraded to Neutral from Overweight at JP Morgan

PRU – Prudential target lowered to $66 at FBR Capital

AIXG – Aixtron downgraded to Neutral from Buy at UBS

LINE – Linn Energy initiated with a Neutral at Credit Suisse

TPX – Tempur-Pedic initiated with a Neutral at Goldman

FDX – FedEx ests and target lowered to $120 at Dahlman Rose

FIO – Fusion-io initiated with an Underperform at Sterne Agee

MRVL – Marvell downgraded to Market Perform from Outperform at JMP Securities

SLRC – Solar Capital initiated with a Hold at Stifel Nicolaus

AIXG – Aixtron downgraded to Underperform at Chevreux

HLS – Healthsouth downgraded to Fair Value from Buy at CRT Capital

QSFT – Quest Software initiated with a Hold at Capstone

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Gapping Up and Down This Morning

Gapping up 

CISG +5.3%, KONA +15%, RIO +1.9%,  SNY +2%, ABX +1.5%, GOLD +1.5%, BBL +1.4%, KEX +3.7%,  AEM +2.6%, HL +1.9%,

NOK +2.2%, RCL +3.4%, APD +0.5%, MGM +4%,

Gapping down

LYG -2.3%, GILD -2%, RAH -1.5%, NCT -9.7%, MLNX -3.5%, NFLX -2.6%, JAZZ -4.6%,  UBS -1.1%, SLV -1%,HME -4.6%, WES -4.2%, ARAY -4.1%,

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S&P 500 Estimates Lowered by Wells Fargo and Barclays

From Bloomberg

Wells Fargo & Co.’s Gina Martin Adams and Barclays Plc’s Barry Knapp cut their forecasts for the Standard & Poor’s 500 Index this year, citing economic uncertainty and a potential decline in earnings estimates.

Adams, the New York-based equity strategist at Wells Fargo, reduced her year-end price forecast for the S&P 500 by 10 percent to 1,250. Knapp, the head of U.S. equity strategy, lowered his to 1,325 from 1,450. Adams also cut her projection for combined profit by companies in the benchmark equity measure in 2011 and 2012.

The combination of Europe’s sovereign debt crisis and weakening U.S. economic data has pushed the S&P 500 down as much as 18 percent from its high this year in April. Strategists at Wall Street firms from UBS AG to Goldman Sachs Group Inc. have slashed their forecasts for the benchmark U.S. equity measure since the beginning of August. In the same period, analysts that cover stocks in the S&P 500 have lifted their profit estimates 0.4 percent to $99.88 a share.

“Micro profit forecasts are likely to play catch-up to soured macro data in coming weeks,” Adams and Peter Chung, an analyst at the firm, said in the note. “While bottom-up forecasters are holding relatively strong to their convictions for strong profits growth to continue, our models suggest earnings growth is likely to reflect the recent economic slowdown over the next few quarters.”

Weekly Losses

The S&P 500 rose 0.7 percent to 1,162.27 at 4 p.m. in New York. The index lost 1.7 percent last week, its sixth drop in the past seven weeks.

Combined earnings by companies in the equity measure will be $93.50 a share in 2011, down from an earlier estimate of $94.40, Adams said in a note dated today. She also lowered her estimate for profit in 2012 to $98.70 a share from $103.50. Knapp kept his predictions for profit by S&P 500 companies at $96 a share in 2011 and $105 in 2012.

“With roughly three quarters behind us, the risks to 2011 earnings are somewhat limited and we’re comfortable with our forecast,” Knapp wrote in a note dated Sept. 9. “However, 2012 is a different story.”

While Knapp still says S&P 500 profit will increase 9.4 percent in 2012 from the prior year, analysts’ expectations for growth have slowed. Financial companies are among the biggest risks to the Barclays earnings estimate for 2012, he said.

Public Policy

“We remain bullish,” he wrote. “Continued public policy uncertainty and the impact of slowing earnings momentum were significant factors in our decision to cut our 2011 year-end price target to a still optimistic 1,325.”

Technology, industrials, materials and consumer- discretionary stocks will lead the 15 percent rally from the S&P 500’s close on Sept. 9 to Barclays’s year-end forecast, Knapp said. Consumer staples and utility companies will lag behind, he said.

Adams said her profit forecasts for financials and energy companies diverged the most from the average estimate of company analysts. She raised her recommendation for consumer staples and consumer-discretionary stocks to “overweight” and utility stocks to “market weight.” She lowered her ratings for technology companies to “market weight,” while also downgrading industrial, energy and material companies to “underweight.”

Recommended Shift

“We are recommending a shift to a more defensive asset allocation,” Adams wrote. Declining commodity prices have allayed concerns that consumer companies will face margin pressures due to higher input costs, she said.

While the move to “overweight” on discretionary stocks may seem contrary to Wells Fargo’s shift to recommending defensive groups, the group won’t suffer as much as other industries in an economic slowdown, Adams said. Industrial and commodity companies would be vulnerable to a slowdown, according to San Francisco-based Wells Fargo.

“Energy, materials, and industrials nonetheless have among the most difficult earnings comparisons but highest expectations for growth over the next several quarters,” Adams wrote. “As the consensus works to catch up to the economic reality, we expect earnings downgrades are likely to weigh on these segments.”

To contact the reporter on this story: Inyoung Hwang in New York at [email protected]

To contact the editor responsible for this story: Nick Baker at [email protected]

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