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Upgrades & Downgrades: Arch Coal on a Roll

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Maybe the experts know something we don't know.

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Equities ended mixed as the market seemed to be caught between a Santa Claus rally and bear claws regression. Coal stocks were hot, producers up 3.4% to their highest level since September of '08 with the fossil fuel seen as an increasingly competitive cold-weather alternative to natural gas. Alas across the Atlantic frigid temperatures and tight finances are compelling armies of elderly to view book burning as an even more cost effective approach to keeping warm. Southwest Airlines' (LUV) stock soared 5.28%, putting an extra spring in the step of employees who already work for the best company in the country. More Americans than ever however can't get no satisfaction from their job, in the siren song of a Rolling Stone. (Mick might consider gathering some Moss, since it seems money is no object for Kate.)

Two key December employment gauges are already out this morning ahead of Friday's critical jobs report. Challenger Gray and Christmas revealed layoffs fell 10% to 45,094 and ADP's separate survey showed 84,000 private sector payroll cuts. In 10:00 AM Eastern economics, expansion is expected in last month's Institute for Supply Management's non-manufacturing index. Finally, meeting minutes for the FOMC's December 15-16th confab are due at 2:00PM. Expect earnings out of Acuity Brands (AYI), Bed Bath & Beyond (BBBY), Family Dollar (FDO), Monsanto (MON), Ruby Tuesday (RT), and Shaw Group (SHAW).

Initiations

AOL (AOL): The media company is begun with a Neutral at JP Morgan.

rue21 (RUE): JP Morgan is also picking up rue21, another recent IPO, at an Overweight.

Macy's (M): An unlucky 13 blocks uptown, there's no miracle on 34th Street for Macy's, assigned only a Neutral at Sterne Agee.

Kohl's (KSS): This retailer by contrast is rated Buy with a price objective of $66 at the same broker.

Thomson Reuters (TRI): Bank of America/Merrill Lynch rates Thomson Reuters a new Buy and establishes a sets a price objective of $39.

Alcatel-Lucent (ALU): Capstone now covers Alcatel-Lucent with a Sell and $2.70 target as capex cuts may not have bottomed even as competition has gotten more cut-throat.

Safeway (SWY): The supermarket stock is started with a Sell at Hapoalim Securities due to the negative impact of a consumer trade-down.

Upgrades

Arch Coal (ACI): The stock is up before the open after a Buy-from-Neutral upgrade at UBS, with the target price taken to $28 from $24. Higher pricing assumptions are among factors cited. See also Two Ways to Play: Lump of Coal for Christmas.

American Express (AXP): The Dow's best performer in '09 gets an Outperform-from-Neutral upgrade at Macquarie, which has an objective of $49.

Tyson Foods (TSN): The stock is upgraded to Outperform from Market Perform by BMO Capital Markets.

Insurance Stocks: Macquarie raises AFLAC (AFL), American Equity Investment Life (AEL) and StanCorp Financial (SFG), all now Outperform from Neutral.

Marsh & McLennan (MMC): The stock is moved to Outperform from Market Perform at FBR Capital, which takes its target up $5 to $27 as its CEO has done an excellent turnaround job.

Lincoln Electric (LECO): The energy stock is boosted to Neutral from Underweight at Piper Jaffray.

Boise Inc. (BZ): The stock is increased to Buy from Neutral at Goldman Sachs.

3M (MMM): 3M is added to Americas Conviction Buy list at Goldman Sachs. For more, see Why Wall Street is Bullish on 3M.

Brooks Automation (BRKS): The stock is sharply higher before the bell following an Overweight-from-Equal Weight boost by Barclays Capital.

Dow Chemical (DOW): Barclays also upgrades Dow Chemical (Overweight from Equal-weight, target taken up $10 to $40).

Miscellaneous: Bank of America/Merill has been busy, upgrading Brinker International (EAT) (Buy from Neutral), Clean Energy Fuels (CLNE) (Buy from Neutral; $21 target), Covanta (CVA) (Neutral from Underperform), and Cree (CREE) (Buy from Neutral; $70).

Employment Services: Citigroup raises its recommendations on Robert Half International (RHI) and Manpower (MAN), both now Buy from Hold.

Sierra Wireless (SWIR): Raymond James upgrades Sierra Wireless (Outperform from Market Perform).

Cerner (CERN): Robert Baird moves Cerner to Outperform from Neutral with the target now $104 (from $89) after its impressive contract wins announced earlier in the week.

Downgrades

International Paper (IP): The stock gets removed from the Americas Conviction Buy list at Goldman, though the Buy rating is intact.

Kansas City Southern (KSU): The stock is cut to Sell from Neutral at UBS.

Deutsche Telekom (DT): UBS takes Deutsche Telekom to Sell from Neutral.

Philip Morris International (PM): The stock is now Reduce (from Neutral) at Nomura.

McKesson (MCK): Raymond James reduces McKesson to Market Perform from Outperform.

IntercontinentalExchange (ICE): ICE is also lowered to Market Perform from Outperform by Raymond James.

Sonic (SONC): The stock is now Market Perform at Morgan Keegan, having previously been Outperform.

Embraer (ERJ): Brazilian jet maker Embraer falls to earth with Underweight from Neutral ($18 price target) at JP Morgan.

No positions in stocks mentioned.
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