MORNING COFFEE

Toyota Hit with Fine. The government is fining Toyota (TM) $16.4 million for allegedly hiding gas-pedal problems from safety officials for four months instead of reporting it within five days after discovery as required by law. Transportation Secretary Ray LaHood said "we now have proof that Toyota failed to live up to its legal obligations. Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families."  The fine is the largest allowed by law against an automaker, and exceeds the previous record of $1 million.

Oil Prices Continue to Rise. Oil prices neared 18-month highs trading above $86 a barrel Tuesday as analysts considered whether the economic recovery it strong enough to warrant future gains.  Some on Wall Street are now calling oil to rise to over $100.00 per barrel.

AT&T to Improve Network. AT&T Inc.(T) announced it would spend $1 billion in 2010 to improve its mobile network for small business and support the proliferation of smart phones.  For years customers have complained about the company’s lack of coverage area.

Upgrades

Walt Disney (DIS): Soleil raised their rating from Hold to Buy and placed a target price of $42.00 on the company.

Downgrades

Pulte Homes (PHM): Credit Suisse lowered their rating from Neutral to Underperform.

KB Home (KBH):  Credit Suisse lowered their rating from Underperform to Neutral.

Coverage Initiated

Pulte Homes (PHM): Stifel Nicolaus initiated coverage with a Sell rating.

KB Home (KBH):  Stifel Nicolaus initiated coverage with a Hold rating.

Cisco Systems (CSCO): Wunderlich initiated coverage with a Buy rating and a target price of $33.00.

eBay (EBAY): Thomas Weisel initiated coverage with a Overweight rating and a target price of $34.00.

Coverage Reiterated/Price Target Changed

Sybase (SY): Wedbush reiterated their Outperform rating and changed their target price from $48.00 to $50.00

·         Futures: Dow -0.1%. S&P -0.2%. Nasdaq -0.2%. Crude -0.3% to $86.34. Gold -0.8% to $1124.70.

·         Asia: Nikkei -0.5% to 11282. Shanghai flat at 3159. BSE flat at 17941. Hang Seng closed.

·         Europe: London +0.6% to 5779. Paris +0.6% to 4057. Frankfurt +0.2% to 6250.