Upgrades and Downgrades: Caterpillar in the Catbird Seat

Stocks rebounded sharply from Monday's swoon, rising on upbeat economic data and the return of acquisition activity. Ex-Chicago resident President Obama would have been delighted with the Windy City's own CBOE Group (CBOE), up 12% in a strong IPO, and the White House was unlikely to have shed any tears as a Fitch downgrade of "British Petroleum", a.k.a. BP Plc (BP), saw its shares slip a further 3.8% in London. The empire struck back however with BSkyB (which stands for British Sky Broadcasting, as Englishman are only too quick to point out in the current climate) surged 16.6% on a takeover proposal from News Corp (NWS).

World Cup action continued with impoverished North Korea, whose citizens are known less for playing on than eating grass, gave a good account of themselves against booming Brazil, on the day a new report said it and other BRIC nations are poised to become the world's breadbasket and agricultural epicenter. And tournament favorite Spain finally takes to the field today, each of its players on a tournament-high £500,000 win bonus to lift the trophy even as its banks borrowed a record $105.7 billion from the European Central Bank last month. With the Iberian Penninsula's undivided attention on the playing fields of South Africa, Prime Minister Zapatero has chosen a fine time to unveil new labor laws aimed at reigning in 20% unemployment. A busy morning on the macro front in the States includes May industrial production and capacity utilization at 9:15AM Eastern. In corporate news bellweather name FedEx (FDX) highlights today's earnings announcements. Also read FedEx to Ship News About the Global Economy.

Initiations

Energy Stocks: Sandridge Energy (SD) is a new Market Perform at BMO Capital, which assigns Whiting Petroleum (WLL) and Outperform.

Caterpillar (CAT): Jefferies starts Dow component Caterpillar at a Buy.

Shire (SHPGY): The stock is begun with a Buy at Deutsche Bank.

JP Morgan (JPM): FBR Capital picks up coverage of JP Morgan with a Buy and sets a $45 price objective. Credit stabilization is seen in most of its loan portfolios. For more on the sector, see Banks Will Likely Have to Spin Off Swap Desks.

East West Bancorp (EWBC): EWBC is among the regional financial institutions begun with an Outperform at Credit Suisse.

Oshkosh (OSK): Jefferies starts Oshkoshat Hold.

Chemical Stocks: Credit Agricole now covers Agilent (A) at a Buy and rates Sigma Aldrich (SIAL) and Mettler-Toledo (MTD) new Underperforms with respective price objectives of $57 and $114.

Upgrades

Reliance Steel (RS): UBS raises its Reliance Steel recommendation to Buy from Neutral.

Starwood Hotels (HOT): The stock is hoisted to Buy from Hold with a $57 target price at Soleil Securities.

Semiconductors: BMO Capital boosts both ON Semiconductor (ONNN) and Power Integrations (POWI) to Outperform from Market Perform.

Downgrades

Gaming Stocks: An overall downgrade of the gaming sector at Goldman Sachs sees IGT Technology (IGT) and Bally Technologies (BYI) each taken to Sell from Neutral.

BHP Billiton (BHP): Mining giant BHP Billiton is now Underperform from Neutral at JP Morgan. Also read Why Afghanistan's Mineral Deposits Will Do More Harm Than Good.

Dreamworks Animation (DWA): The stock gets a Buy-from-Neutral downgrade at Goldman.