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Upgrades

By Jim Cramer
7:13 a.m. EDT

Remarkable series of upgrades this morning: Bank of America raises Caterpillar ( CAT) ahead of what is thought to be a horrible quarter. Disney ( DIS) and CBS ( CBS) taken up at Morgan Stanley; the former has been hot as it is. And Johnson Controls ( JCI) with its big number just now and lots of market share take...

Positions: None


Bank Credit Rallies on CIT News

By Tom Graff
7:45 a.m. EDT

Bank and finance bonds are tighter today on news that CIT ( CIT) has reached a deal with existing bondholders, averting bankruptcy for now. Bank of America ( BAC), Citigroup ( C), JPMorgan Chase ( JPM) and Wells Fargo ( WFC) are all about 10 tighter, Goldman Sachs ( GS) and Morgan Stanley ( MS) both 5 tighter.

I think CIT remains a cautionary tale. Government money was not forthcoming for CIT. It does sound like some regulatory relief may happen, allowing assets to transfer to the bank part of the company. Regardless, if the company hadn't been able to work out a private funding deal, there wasn't going to be any federally funded white knight riding to the rescue.

I don't understand why investors remain so sanguine about similar-sized financials: Fifth Third ( FITB), KeyCorp ( KEY), Comerica ( CMA), Marshall & Ilsley ( MI), M&T Bank ( MTB), etc. CIT proves that none of these guys are "too big to fail."

I'm not here to opine about the specifics of any particular bank's loan portfolio, but long-term subordinate bonds in regional banks are now trading near $80 (vs. $100 par), and it seems to me that price reflects a greater level of government support than actually exists.

In an apparently unrelated story, the FDIC closed two more banks this weekend. Can someone please explain the disconnect here?

Positions: None


Coiled Springs for the New Week

By Alan Farley
8:00 a.m. EDT

Many stocks have gone straight up in the last week, increasing risk of entry because a downturn could start at any time. To lower the added danger, I've built of list of coiled-spring patterns, which are stocks that have tightened up at near breakout levels but still haven't started to run higher.

These offer two advantages. First, rallies often expand into these issues as hot money takes profits on big movers. Second, tight stops can be placed just under recently traded levels, making any losers easier to take.

The market is grinding out a bunch of decent-looking coils right now. Here are eight that look promising this morning:
  • Ashland (ASH)
  • BlackRock (BLK)
  • Bank of Montreal (BMO)
  • Ctrip.com International (CTRP)
  • Discovery Communications (DISCA)
  • Juniper Networks (JNPR)
  • Riverbed Technologies (RVBD)
  • Starent Networks (STAR)

Juniper rallied into an unfilled September gap at $24 in early June and dropped into a sideways pattern. It returned to the high last Wednesday and tightened into into a coiled spring right at the breakout level. A rally here could reach the 2008 high near $30. The company reports earnings on Thursday.

Positions: None


Human Genome Sciences

By Adam Feuerstein
8:04 a.m. EDT

Human Genome Sciences ( HGSI) will be the bio stock to watch today after positive results from its lupus drug trial were reported.

Already this morning, Citi upgraded the stock to buy and a $17 price target. Lazard upgrades to hold from sell with a $10 fair value. Piper Jaffray saying the stock is going higher and it's reviewing its $1.70 price target. (Obviously.)

Positions: None


Eaton?

By Tim Melvin
10: 54 a.m. EDT

The real story in Eaton ( ETN) is how bad the report really is if you read the whole thing. Profits fell 92% year over year, and revenue was down 32%. The company lowered annual guidance for the third time this year. The CEO commented that the outlook for the year was far weaker than anticipated, saying that end-markets would decrease by 26%. The story, as with so many other companies, was cost-cutting. This is like bleeding the patient and shaving off a limb or two to restore health.

The stock is trading at 25 times the high end of the new forecast. Would you pay that multiple to buy into this business? I would not, and neither would any rational businessman I have ever known. This "less bad is good" is starting to remind me of the Internet bubble pricing.

Positions: None


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This article was written by a staff member of RealMoney.com.

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