MORNING COFFEE

S&P Hits High. The S&P 500 closed yesterday at 1,150.24, a 17-month closing high. A late rally led by bank shares on speculation that new banking regulations being studied by Congress could be watered down.  This allowed the index to close above the 1150 resistance level.  The new resistance level is now 1153.99.

U.S. Credit Rating At Risk Of Downgrade. The triple-A credit rating of the U.S. could be downgraded unless the government reins in spending warned Standard & Poor’s. S&P said that unless action is taken, "external creditors could reduce their U.S. dollar holdings, especially if they conclude that Eurozone members are adopting stronger macroeconomic policies." This would hurt the dollar and "weigh on the AAA rating on the U.S."

China Warns U.S. About The Yuan. Chinese officials are warning the U.S. not to make a political issue out of the yuan, yesterday President Obama called on the country to move to a "more market-oriented exchange rate." China said the U.S. should look to itself to boost exports and not blame other countries.

Goldman Sachs Hired To Sell ResCap. GMAC (GKM) has hired Goldman Sachs (GS) to sell its troubled mortgage unit ResCap. Warren Buffett’s Berkshire Hathaway (BRKA/BRKB), which already owns a piece of the ResCap's debt, is seen as a possible buyer.

Aeropostale (ARO): Reported Q4 EPS of $0.99 beating estimates by +$0.04 on revenue of $801 million.  The company also sees Q1 EPS above consensus.

National Semiconductor (NSM): Reported FQ3 EPS of $0.22 beating estimates by +$0.04 on revenue of $362 million. Shares are up +4.6% in the premarket.

Pall Corp. (PLL): Reported Q1 EPS of $0.42 missing estimates by -$0.05 on revenue of $560 million.  The company also gave FY10 EPS guidance below consensus estimates.

Quiksilver (ZQK): Reported FQ1 EPS of -$0.02 beating estimates by +$0.09 on revenue of $433 million.

Upgrades

National Semi (NSM): Bernstein raised their rating from Underperform to Market Perform.

Aeropostale (ARO): Piper Jaffray raised their rating from Underweight to Neutral.

Downgrades

Abbott Labs (ABT): Citigroup lowered their rating from Hold to Sell.

Coverage Initiated

Genzyme (GENZ): Piper Jaffray initiated coverage with a Neutral rating.

Amgen (AMGN): Piper Jaffray initiated coverage with a Neutral rating.

Coverage Resumed

Intel (INTC): Needham resumed coverage with a Buy rating and a target price of $25.00.

Coverage Reiterated/Price Target Changed

Google (GOOG): Oppenheimer reiterated their Outperform rating and changed their target price from $700.00 to $715.00.

·         Futures: Dow +0.2%. S&P +0.2% to 1153. Nasdaq +0.1%. Crude +0.7% to $82.70. Gold +0.8% to $1,117. 30-year bond -0.13%. 10-year -0.07%. Euro +0.8% vs. dollar. Yen -0.15%. Pound +0.7%.

·         Asia: Japan +0.8%. Hong Kong -0.1%. China -1.2%. India -0.0%.

·         Europe: London +0.4%. Paris +0.5%. Frankfurt +0.7%.