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Upgrades & Downgrades: Major Gains for Microsoft?

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Maybe the experts know something we don't know.

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Stocks surged, sending indices up by the biggest amount in three months, as a 14.09% increase in shares of British bank Barclays (BCS) boosted bourses on both sides of the Atlantic. (Shame the soccer league it sponsors acts as if it's about to go belly up.) Kevin Smith, director of Mallrats, milked a Fat Tuesday apology from Southwest (LUV), and Simon Property (SPG), owner of mall REITs, aims to expand in an acquisition. SLM Corp (SLM), aka Sallie Mae, rose 2.66% though Mustang Sally may have sung her last. There was new recognition for old fogies as Fossil (FOSL) gained 6.90% on impressive earnings and the elders of finance got an airing.

Exactly eighty seven years to the day after Howard Carter first set eyes on Tutankhamun's tomb, gold gapped up to a two week high, nothing to Tut-tut about. (Better not tell bullion bulls the yellow metal on offer at the Olympics is actually silver.) In economics, expect January industrial production and capacity utilization at 9:15AM Eastern and the FOMC's 1/27 meeting minutes at 2:00PM. Agnico-Eagle (AEM), Analog Devices (ADI), BNP Paribas, Career Education (CECO), Chesapeake Energy (CAKE), Deere (DE), Devon Energy (DVN), Genzyme (GENZ), Hewlett-Packard (HPQ), Kinross Gold (KGC), Las Vegas Sands (LVS), Martha Stewart Living (MSO), NetApp (NTAP), Nvidia (NVDA), Owens Corning (OC), and Priceline (PCLN) all announce earnings.

Initiations

Microsoft (MSFT): Citigroup initiates Microsoft with a Buy and assigns a $31 price objective, predicting PC trends are likely to drive earnings upside. Other favorable factors include 2010's strong product cycle of Office 2010, Exchange 2010, Server 2008 R2, and improving server shipments. See also Microsoft Reinvents the Smartphone Interface.

Software Stocks: The broker also rolls out coverage on McAfee (MFE), VMware (VMW) (each Holds), and has new Buys on Verisign (VRSN), Check Point Software (CHKP) ($40 target price), and Adobe (ADBE) ($39 target).

Dell (DELL): The computer maker is started with a Hold at Collins Stewart. For a related story, see Happy Days Almost Here Again for Dell.

Posco (PKX): BNP Paribas picks up Posco at a Buy.

Homebuilder Stocks: Bank of America/Merrill Lynch resumes coverage on Lennar (LEN), Pulte Homes (PHM), KB Home (KBH), Hovnanian Enterprises (HOV), and DR Horton (DHI) (all Buys). Beazer Homes (BZH) gets a Neutral and Toll Brothers (TOL) ($16 target) an Underperform.

Joy Global (JOYG): BB&T Capital Markets begins Joy Global at Buy with a $67 price objective.

Upgrades

Home Depot (HD): Oppenheimer upgrades Home Depot to Outperform from Perform and increases its objective to $37 from $26, saying the stage is now set for a significant acceleration in sector comp sales growth. Catalysts include stabilizing home prices and a pick up in appliance sales.

Dreamworks Animation (DWA): Thomas Weisel takes DreamWorks Animation to Overweight from Market Weight with the target price up $7 to $47.

Whole Foods (WFMI): JP Morgan upgrades Whole Foods Market (Overweight from Neutral).

SanDisk (SNDK): The stock is increased over at Morgan Stanley (Overweight from Equal Weight).

Prudential Financial (PRU): Morgan Stanley also raises its Prudential Financial rating to Overweight from Equal Weight.

Barclay's (BCS): The Royal Bank of Scotland boosts Barclays to Buy from Hold after yesterday's strong results.

TD Ameritrade (AMTD): Increased confidence in its ability to demonstrate above-peer organic client asset growth sees FBR Capital upgrade TD Ameritrade to Outperform from Market Perform.

Mattel (MAT): UBS moves Mattel to Buy from Neutral with a $26 target.

Downgrades

Scripps Networks (SNI): UBS downgrades Scripps Networks, now Neutral from Buy.

Reinsurance Group (RGA): The stock is reduced to Equal Weight from Overweight at Morgan Stanley.

Terra Industries (TRA): JP Morgan takes Terra Industries to Neutral from Overweight.

Pan American Silver (PAAS): The miner gets a Sector Perform-from-Outperform cut at RBC Capital.
No positions in stocks mentioned.
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