Updated from 8:48 a.m. EST.

Merrill Lynch

gored the brokerage community on Wednesday morning, telling investors that the bottom could fall out on first-quarter earnings as investors shy away from trading.

"Upcoming broker dealer earnings results look set to disappoint vs. current Street estimates," wrote analyst Judah Kraushaar in the opening of his note to investors, fittingly called

Crunch Time

. "Consensus first-quarter and 2001 forecasts may fall near term."

He reduced his earnings per share estimates on a handful of companies and named three near-term challenges as major factors in the revision. The first problem is that retail investors have stopped trading, leading to a downturn in revenue created from trading-related fees. Also, private equity results might face more losses while mergers and acquisitions and underwriting fees have dried up as the market grows cold and hostile.

Goldman Sachs'

(GS) - Get Report

first-quarter earnings estimate was cut to $1.18 per share from $1.24 per share, while the full year 2001 was dropped to $6 from $6.15. Wall Street currently expects Goldman to make $1.39 a share in the first quarter and $6.29 a share in 2001.

Morgan Stanley Dean Witter's

(MWD)

first-quarter estimate was cut to 88 cents a share, like the Goldman call, 15% below Wall Street's forecasted $1.02 a share. Kraushaar said that private equity losses and weak commissions would hurt Morgan Stanley but hoped that fixed income markets could help alleviate the pain. He trimmed his 2001 estimate to $4.40 from $4.45 a share.

Lehman Brothers

(LEH)

received the lightest slap, with only its first-quarter earnings estimate getting scaled back. Kraushaar dropped the estimate to $1.39 a share from $1.46 a share, lower than the consensus $1.50 a share currently on the books at

First Call/Thomson Financial

. "Nonetheless, we think that Lehman may be unusually well-positioned for leveraging the revival in fixed income markets as 2001 unfolds," wrote the analyst, who actually upped his 2001 estimates to $6.20 a share from $6.05 a share.

Once those nasty earnings problems begin to alleviate, Kraushaar advised investors to take the opportunity to pick up shares of

Citigroup

(C) - Get Report

and

J.P. Morgan

(JPM) - Get Report

, two companies that have expanded their securities business by making purchases in recent weeks.

"We are optimistic that first-quarter earnings results may mark a cyclical bottom and we see positive year-to-year comparisons reemerging in the third quarter," Kraushaar wrote, expressing some long-term optimism despite the near-term weakness. "We see a reasonably speedy stabilization/revival in earnings given rebounded liquidity in fixed income markets."

After another

song of softness came from

Altera

(ALTR) - Get Report

, a programmable chipmaker, the analyst community has stepped in and restated earnings forecasts and provided more guidance for their investing customers.

Lehman Brothers analyst

Dan Niles slashed his 2001 earnings per share estimate to 59 cents from 89 cents, coming in well below the current consensus Wall Street estimate of 94 cents a share. For 2002, Niles cut his estimate to 74 cents a share from $1.10 a share, which is also lower than the average forecast of $1.15 a share. This is the second time in the past week that Niles has adjusted his estimates on Altera.

"We continue to believe we have not seen the bottom," wrote Niles in his note to investors before the start of trading on Wednesday. He also said that Altera has eight months of inventory on hand, something that'll make it harder for Altera to push things down the pipeline going forward.

Credit Suisse First Boston

analyst Tim Mahon cited slowing North American demand for networking, telecommunications and DSL equipment as a major trouble spot for Altera. And the analyst said those high inventory levels will only be exacerbated by high inventory levels at subcontractors and distributors, meaning that demand is not set to improve for a while.

Mahon said that the upcoming year would be challenging for Altera and reduced his 2001 earnings estimate to 56 cents a share from 95 cents a share. He also cut his first-quarter revenue estimate to $294.4 million from $349.6 million.

"Investors would remain best served staying on the sidelines," he wrote.

Although the blood has been on the tracks for a while now, with technology facing an industrywide slowdown in spending that ripples through many market sectors, today's analyst vitriol was due to Altera's warning on Tuesday night. The company said first-quarter revenue would drop 20% from fourth-quarter levels, coming in at $368 million, a far cry from the $412.6 million expected by analysts.

Xilinx

(XLNX) - Get Report

was caught in some Altera-related crossfire on Wednesday morning, getting struck by analyst estimate revisions after its competitor announced that revenue would fall by 20% from the fourth quarter to the first quarter.

Lehman analyst Dan Niles cut his earnings per share view on Xilinx before the company makes comments on Monday, saying that Altera's revenue reduction was a pretty good indication that Xilinx would warn as well.

"We are also reducing earnings per share on Xilinx ahead of their update Monday, as we believe

the first quarter could be down 12% quarter-to-quarter with the

second quarter."

Niles cut his 2001 estimate to $1.14 a share from $1.19 a share. His old estimate was in line with Wall Street's consensus estimate. His 2002 estimate was dropped to $1.08 a share from $1.33 a share. The First Call/Thomson Financial estimate for 2002 was $1.39.

If

WorldCom

(WCOM)

accounts for 92% of all your sales, and

Nortel

(NT)

,

Lucent

(LU)

and

Cisco Systems

(CSCO) - Get Report

are your other three major customers, then it's a pretty safe bet that earnings will be lower.

That's the situation over at

Avanex

(AVNX)

, a networking-equipment maker, which was taken out by analysts after warning about its third quarter and fiscal 2001 on Tuesday night.

Lehman Brothers analyst Steve Levy acted accordingly and dropped both his rating and estimates on the company, cutting it to market perform from strong buy -- a drop of two rating positions. His 2001 estimate on Avanex fell to 15 cents a share from 26 cents a share, while his 2002 estimate was trimmed by more than half, cut to 31 cents a share from 76 cents a share.

"Investors are not going to reinstate a premium valuation on a company like Avanex until the overall uncertainty in the space improves," Levy wrote to investors in a note on Wednesday morning. "The March quarter shortfall is entirely due to lower-than-expected sales to MCI Worldcom for the PowerFilter product due to the carrier's weak seasonal demand that was even slower-than-already lowered expectations."

The company announced that third-quarter sales would come in around $41 million, resulting in earnings between 2 cents and 3 cents a share. Analysts, on average, expected the company to make 6 cents a share. And going forward, 2001 will also be tough. The company said that full-year earnings could come in between 15 cents and 16 cents a share, missing the 25-cent estimate. Revenues will come in around $169 million, a huge upswing over the year-ago $40.7 million, but well shy of the forecasted $195.5 million.

Amgen

(AMGN) - Get Report

, one of the biggest names in the battered biotech sector, got a boost from

Prudential Securities

analyst John Sonnier, who upgraded the company to strong buy from accumulate, a jump of two ratings places. Sonnier also adjusted his 52-week-price target to $95 from $75 on the company, citing improved fundamentals.

The analyst wrote a virtual love letter to Amgen, telling investors that the company has a ton of upside, since, unlike its competitors, it faces no patent expiration risks between 2001 and 2005. He also said that current market valuations were rather low on the company, considering the high premium at which other large drug stocks trade and the growth potential of many of Amgen's products.

"Fundamentally, we anticipate the company to break out of its traditional two-product focus with three major drug launches this year and a fourth in the first half of 2002," Sonnier wrote. "We believe these launches will literally change the face of the company."

Upgrades

Amgen

(AMGN) - Get Report

: UP to strong buy from accumulate at Prudential Securities.

Interpublic Group

(IPG) - Get Report

: UP to buy from hold at Credit Suisse First Boston.

Nextel

(NXTL)

: UP to strong buy from accumulate at Prudential Securities.

Sybase

(SYBS)

: UP to buy from accumulate at Merrill Lynch.

Downgrades

Allscripts

(MDRX) - Get Report

: DOWN to neutral from buy at

W.R. Hambrecht

.

Astec Industries

(ASTE) - Get Report

: DOWN to buy from hold at Credit Suisse First Boston.

Cintas

(CTAS) - Get Report

: DOWN to long-term accumulate from long-term buy at Merrill Lynch.

J.B. Hunt

(JBHT) - Get Report

: DOWN to sell from hold at Credit Suisse First Boston.

Trintech

(TTPA)

: DOWN to hold from accumulate at Prudential Securities.

Initiations

Accredo Health

(ACDO)

: NEW buy at Credit Suisse First Boston.

Angiotech Pharmaceuticals

(ANPI)

: NEW buy at Credit Suisse First Boston.

Dial

(DL) - Get Report

: NEW hold at Prudential Securities; price target: $17.

Investment Technology Group

(ITG)

: NEW neutral at W.R. Hambrecht; price target: $55.

Jack Henry & Associates

(JKHY) - Get Report

: NEW buy at Credit Suisse First Boston; price target: $55.

Radio Shack

(RSH)

: NEW strong buy at Prudential Securities; price target: $54.

Group Moves

Lehman Brothers analyst Paul Cheng downgraded his ratings on five independent oil refineries, changing his position from an overweight stance to an underweight one. Why the sudden flip from bull to bear?

Although it would appear as if the oil refiners would be set for short-term bullishness because of record margins, the Lehman analyst said that a closer look at the sector reveals intermediate-term weakness -- especially if the U.S. economy continues to cool. Cheng specifically cited rising production rates, strong gasoline imports and the possibility that a slowing economy could keep U.S. vacationers indoors and off the roads this summer.

Concerned, Cheng reduced his rating on the following five companies, dropping them from the best rating, strong buy, to the third-best rating, market perform.: