The unofficial closing bells put the DJIA down about 74 points to 12,660.61 (-0.58%), the NASDAQ rose more than 11 points (0.40%) to 2,816.55, and the S&P 500 fell -0.16% or about 2 points to 1,316.33.

There were several analyst upgrades and downgrades today, including Best Buy Co. Inc. (NYSE: BBY) started as ‘outperform’ with a $32 target price at Credit Suisse; Sandridge Energy Inc. (NYSE: SD) started as ‘buy’ at Canaccord Genuity; The Allstate Corp. (NYSE: ALL) started as ‘outperform’ at William Blair; J.C. Penney Co. Inc. (NYSE: JCP) raised to ‘overweight’ at Piper Jaffray and maintained as ‘buy’ with target price raised to $49 at Argus; and Kimco Realty Crop. (NYSE: KIM) cut to ‘neutral’ at Citigroup.

Earnings reports since markets closed on last night have led to some price changes as of the last half hour of trading today: American Electric Power Co. Inc. (NYSE: AEP) is down -2.62% at $40.20; Chevron Corp. (NYSE: CVX) is down -2.10% at $104.35; Dominion Resources Inc. (NYSE: D) is down -1.91% at $49.88; Ford Motor Co. (NYSE: F) is down -3.69% at $12.27; Honeywell International Inc. (NYSE: HON) is up 1.31% at $58.59; and Proctor & Gamble Co. (NYSE: PG) is down -0.51% at $64.47.

Other standouts from today include the following stocks:

Solutia Inc. (NYSE: SOA) is up more than 40% at $27.35, after posting a new 52-week high of $27.85 earlier today. The specialty chemicals company has agreed to be acquired by Eastman Chemical Co. (NYSE: EMN) for $3.4 billion in cash and stock.

Cepheid (NASDAQ: CPHD) is up more than 25% at $42.98 after posting new 52-week high of $43.03 earlier today. The medical diagnostics equipment maker has boosted its sales outlook and is enjoying a halo effect from the hostile takeover bid for Illumina Inc. (NASDAQ: ILMN).

Infinity Pharmaceuticals Inc. (NASDAQ: INFI) is down -40% at $5.97. The drug maker has cancelled further trials of a pancreatic cancer drug that does not perform better than placebo.

Inergy L.P. (NYSE: NRGY) is down nearly -24% at $17.31 after posting a new 52-week low of $17.23 earlier today. The natural gas distribution company is cutting payouts to its unitholders.

Riverbed Technology Inc. (NASDAQ: RVBD) is down nearly -19% at $24.38. The networking technology company warned this morning that first-quarter sales growth would not meet previous expectations.

Stay tuned for Monday. We have noted the following events on the schedule (all times Eastern):

• 8:30 a.m. – Personal income and outlays
• 11:30 a.m. – 3- and 6-month Treasury bill auctions

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Have a great weekend.

Paul Ausick

In the firm’s equity income allocations, the firm is selling 100% of its allocation in American Electric Power Co. (NYSE: AEP) at $41.14 and is adding in Williams Companies Inc. (NYSE: WMB) at $28.22.

As far as growth and income, Argus is recommending to buy CSX Corp. (NYSE: CSX) at $23.32 and Monsanto Co. (NYSE: MON) at $79.00; and it is recommending that the model portfolio sell all of its positions in Occidental Petroleum Corp. (NYSE: OXY) at $97.17 and Weyerhaeuser Co. (NYSE: WY) at $19.18.

Finally, in mid-cap growth the firm’s model portfolio is buying VeriFone Systems Inc. (NYSE: PAY) at $37.12 and buying MDU Resources Group Inc. (NYSE: MDU) at $21.50.  It is selling 100% of its position in IntercontinentalExchange Inc. (NYSE: ICE) at $113.13.  Another selling stock, but only by 20% of its allocation is Hain Celestial Group Inc. (NASDAQ: HAIN).

Speaking of model portfolios, here were the 5 most undervalued DJIA stocks and the 5 least attractive DJIA stocks based upon consensus targets.  Here are the top 4 DJIA stock picks from Jim Cramer for 2012.

Also, we made a lot of changes this year to the 24/7 Wall St. 2012 Model Dividend Portfolio.

JON C. OGG

Each year, you often see the same trend over and over: “Buy the weakest sectors and dump the strongest.”  Maybe there is a value in the weakest links and maybe too much a premium in the strong sectors.  The Financial Select Sector SPDR (NYSE: XLF) is off to a great start in 2012, while the Utilities Select Sector SPDR (NYSE: XLU) has been very weak.

All you have to do is look at the extremes… Bank of America Corporation (NYSE: BAC) was the worst DJIA stock of all in 2011 but now shares are up literally 19% since the end of 2011.  J.P. Morgan Chase & Co. (NYSE: JPM) is even up over 9% since the end of 2011 and it has earnings due in just two days.  With the huge discounts to book value, the thought is that there is value even with the headwinds facing the banking sector’s ability to generate solid earnings.  BofA was recently shown as one of the DJIA stocks with the most implied upside.

What about American Electric Power Co., Inc. (NYSE: AEP) bounced a bit off the lows in the last two days but its shares had been down almost 2% so far this year after just six trading sessions. Duke Energy Corporation (NYSE: DUK) was down almost 3% from the end of 2011 before a small bounce.  Many utilities are trading at close to 13-times earnings now, which historically could imply a premium being paid to get those dividend yields of 4% and higher.  AEP remains in our 2012 Model Dividend Portfolio and that will only change if the price rises too much.

All you are seeing is a reverse of the flight to safety because many believe that the economy has escaped another recession or that the worst was priced in.  Before giving up entirely, interest rates are likely to remain very low and that drives investors toward stable income sources.  Utilities also win from low interest rates because of borrowing costs.  As far as the banks, the woes of Europe are not yet gone and the utilities have little to no real exposure there.  If everyone is wrong about no second recession, which has better visibility… utilities or banks?

JON C. OGG

It turns out that many stocks with high dividend yields are now more attractive than sovereign debt in the U.S. and abroad. Part of the allure, besides income or reinvestment, is that dividend stocks often hold up better than other investments during jittery markets. It is hard to imagine, but the high-yield utility sector was one of the top performers of the S&P in 2011. In some cases, half of an investor’s total return through time may come from dividends. Warren Buffett generally picks dividend-paying companies for Berkshire Hathaway Inc. (NYSE: BRK-A) after following some of the principles of Benjamin Graham.

The 24/7 Wall St. 2012 Model Dividend Portfolio includes the following stocks: American Electric Power Co., Inc. (NYSE: AEP); American Water Works Company, Inc. (NYSE: AWK); AT&T, Inc. (NYSE: T); General Electric Co. (NYSE: GE); Government Properties Income Trust (NYSE: GOV); Kimberly-Clark Corporation (NYSE: KMB); Senior Housing Properties Trust (NYSE: SNH); and Wal-Mart Stores Inc. (NYSE: WMT).

While exchange-traded products have been avoided in the past, recent trends merit a look at the open-end or closed-end mutual funds and ETF products as follows: SPDR Barclays Capital High Yield Bond (NYSE: JNK); JPMorgan Alerian MLP Index ETN (NYSE: AMJ); ALPS Alerian MLP ETF (NYSE: AMLP); and PowerShares Financial Preferred (NYSE: PGF).

Lastly, there have been some exits due to upside price performance: Altria Group Inc. (NYSE: MO); Digital Realty Trust Inc. (NYSE: DLR); Enterprise Products Partners LP (NYSE: EPD); and Kinder Morgan Energy Partners LP (NYSE: KMP).

We have described the features and outlook for each component of our Model Dividend Portfolio.

The dividend yield is roughly 4.7% and it pays out close to 60% of its expected income as dividends. It also has a double-digit return on equity and it trades at just under 12.5-times expected 2012 earnings estimates. Shares are trading around $39.75 and its consensus price target is about $41.10. Our own internal target is actually $44.00 on the stock and that means any pullbacks are buying opportunities. The dividend was just raised in November and we would not look for another dividend hike until late in 2012.

The giant utility has a new CEO and the stock is close to a 52-week high, but it also would have to rally another 25% or so before challenging its multiyear highs around $50.00. The utility sector is often invested in via the Utilities Select Sector SPDR (NYSE: XLU), of which AEP is a key component, but AEP is cheaper than many of the components inside the ETF. This sector is also one which many former CD-investors (certificates of deposit) are still buying into for high dividend yields.

Depending on pricing on any given market trading day, an alternative currently would be NextEra Energy, Inc. (NYSE: NEE) with a lower yield but with a dividend that should rise in the first quarter of 2012. PPL Corporation (NYSE: PPL) is another alternative with very close to many of the same financial characteristics as AEP.

AEP and other utilities will benefit from the low interest rate climate that Ben Bernanke has promised will continue through at least mid-2013. The company serves more than 5 million power customers and its geographic footprint spans 11 states. Finally, AEP has been decreasing its coal mix, and that is on the path to drop to under half of its power generation fleet share in the coming years.

Two issues to consider are that AEP is fighting many proposed regulations that would increase the costs for it and its rivals. AEP may also choose to use its financial strength to make selective acquisitions here and there.

If you want to receive the full 24/7 Wall St. 2012 Model Dividend Portfolio, it is being offered in full, with more than 10 different stocks, to those who sign up for our free daily email subscriber list below. Each morning we send our free email list subscribers a snapshot of the key feature stories, the top daily analyst upgrades and downgrades, previews for key events and many other aspects governing your finances.

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Markets opened higher this morning on renewed hope for a deal on Europe’s debt debacle. At a meeting of EU leaders, the group approved a 9% capital buffer to go into effect by June 2012. That’s a start, but hardly the end of the long-running disagreement on how the continent should deal with its banking problems. Stocks got a boost from solid earnings from Boeing Co. (NYSE: BA) and Corning Inc. (NYSE: GLW). Oil prices have dropped more than $2.50/barrel following the weekly EIA report that US crude inventories increased by 4.7 million barrels. New home sales were also up for the first time in five months, following price cuts averaging 3.1%.

The unofficial closing bells put the DJIA up nearly more than 162 points to 11,869.04 (1.39%), the NASDAQ rose more than 12 points (0.46%) to 2.650.67, and the S&P 500 rose 1.05% or nearly 13 points to 1,241.97.

There were several analyst upgrades and downgrades today, including target price and estimate cuts on Amazon.com (NASDAQ: AMZN) at BofA/ML, but the firm maintained its ‘Buy’ rating on the stock. Bed Bath & Beyond Inc. (NASDAQ: BBBY) was maintained at ‘buy’ with a raised target price of $70 at Argus; First Solar Inc. (NASDAQ: FSLR) was cut to ‘hold’ at both Kaufman and Jefferies, and cut to ‘sell’ at S&P Capital IQ; 3M Co. (NYSE: MMM) was lowered to ‘market perform’ at William Blair; and The New York Times Co. (NYSE: NYT) was cut to ‘neutral’ by Citigroup.

Here are today’s big post-earnings news reactions with prices during the last half-hour of trading: Boeing is up more than 5% at $66.91; Corning is up 3.6% at $14.22; American Electric Power Co. Inc. (NYSE: AEP) is up 0.67%, at $38.91; ConocoPhillips Corp. (NYSE: COP) is up nearly 2%, at $72.03; Exelon Corp. (NYSE: EXC) is up 1%, at $42.75; and Complete Production Services, Inc. (NYSE: CPX) is up slightly, at $31.06, after trading lower for most of the day.

Several other standouts from today are as follows…

Cheniere Energy, Inc. (AMEX: LNG) is up about 70%, to $10.41. The company signed a 20-year agreement with BG Group plc to sell the British company 3.5 million metric tons of liquefied natural gas annually. The deal is worth about $8 billion, and deliveries are scheduled to begin in 2015.

First Financial Holdings, Inc. (NASDAQ: FFCH) is up more than 24%, at $6.76. The company has sold $198 million of some performing loans and other classified assets.

Rentech, Inc. (AMEX: RTK) is up more than 25%, to $1.51. The company successfully launched an IPO today of Rentech Nitrogen Partners, L.P. (NYSE: RNF) at an offering price of $15-$19/share. RTK owns about 61% of RNF and all of the general partner interests in the new company.

Human Genome Sciences, Inc. (NASDAQ: HGSI) is down about -21%, at $10.05, after posting anew 52-week low of $9.68 earlier in the day. The company reported weak earnings today, and its lupus drug failed to meet already low sales expectations.

DeVry Inc. (NYSE: DV) is down-17%, at $38.36. The company’s earnings failed to meet analysts’ estimates and enrollment also declined in its undergraduate degree programs.

Radioshack Corp. (NYSE: RSH) is down nearly -12%, at $11.80. The company missed earnings expectations as it transitions from being a T-Mobile reseller to a Verizon Wireless reseller.

Stay tuned for Thursday.  We have noted the following events (all times Eastern):

8:30 a.m. – Third quarter GDP report
8:30 a.m. – Unemployment claims
10:00 a.m. – Pending home sales from National Association of Realtors
10:30 a.m. – EIA weekly natural gas report
1:00 p.m. – Seven-year US Treasury note auction
4:30 p.m. – Federal Reserve balance sheet released

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Low (or no) interest rates are here to stay for at least another two years and investors are being pushed out of the safe debt markets to go find investment income elsewhere.  You are being forced to take on risks for income.  We just showed how the high-yield bond funds and ETFs may have finally hit a floor as spreads reached astronomic levels.

24/7 Wall St. tracks a myriad of dividend stocks and on August 11, 2011 our “Great Dividend Portfolio” was released.  At the time, the 10-Year Treasury yield was about 2.14% and our average dividend yield in the ten-company portfolio was a whopping 5.5%.  That yield is now about 5.3% due to price appreciation and the DJIA has risen about 4% since then.

The high-yield dividend winners are as follows: Altria Group Inc. (NYSE: MO); American Electric Power Co., Inc. (NYSE: AEP); American Water Works Company, Inc. (NYSE: AWK); AT&T, Inc. (NYSE: T); Digital Realty Trust Inc. (NYSE: DLR); Enterprise Products Partners LP (NYSE: EPD) or Kinder Morgan Energy Partners LP (NYSE: KMP); General Electric Co. (NYSE: GE); Government Properties Income Trust (NYSE: GOV); Kimberly-Clark Corporation (NYSE: KMB); Senior Housing Properties Trust (NYSE: SNH); and Wal-Mart Stores Inc. (NYSE: WMT).

All of these ten dividend leaders are trading higher than they were in August, and some are up well over 10% and still offer high implied dividend yields.  We are actually approaching levels now where some of these portfolio positions may need to be reviewed.  Our aim is to find dividends which are safe, but we have to also adjust for issues around projected upside to price targets, market performance, and the ability to continue dividend growth even in choppy times.  If we have grown less enthusiastic or more cautious on these names, we have noted at the end of each summary.

The merger would create the country’s largest wholesaler of market-priced electric power, and that’s the rub, according to The Wall Street Journal.  The combined companies will have the capacity to generate some 35,000 megawatts of electricity and Maryland officials, including the state’s governor, are worried that the combined companies would have sufficient market power to drive wholesale electricity higher.

A study conducted for the state indicates that the merger could increase wholesale electricity costs up by 12%-37% for parts of the market that the new company serves. According to an Exelon official, the study assumes that the combined company would sell large amounts of electricity into the market managed by PJM Interconnection LLC, when, in fact, the company sells a large part of its capacity directly through utilities and other resellers and would have little impact on the daily auctions the PJM conducts.

Utility stocks have been getting more interest as the US and global economies have gotten weaker. We have suggested that utilities are replacing certificates of deposit and bonds as preferred retirement investments.

Exelon’s annual dividend is $2.10 and its dividend yield is 5.20%. Constellation pays a $0.96 annual dividend and its dividend yield is 2.60%. At Entergy Corp. (NYSE: ETR), the dividend yield is also 5.20%, and American Electric Power Co. (NYSE: AEP) pays a yield of 5%.

In contrast 5- and 7-year US Treasuries currently pay a negative yield and 10-year Treasuries pay just 0.7%. An average CD pays less than 1.5%. For income investors, utilities are safe, high-dividend investments.

Whether a combined Exelon-Constellation would yield to investors than the two companies separately is certainly arguable, but assuming that Exelon’s yield doesn’t fall, Constellation shareholders have got to love the proposed merger. Now it’s up to Exelon to make state regulators at least like the deal.

Paul Ausick

The most attractive stock investments for periods when GDP growth stalls are those of corporations that proved they could improve sales during the 2007-2009 recession. Many of these corporations have additional attractions. They often generate so much cash they can afford to pay large dividends. This gives investors yields when the value of many equities fall due to concerns about the economy and in a period that interest rates on bonds are near all-time lows.

Recession-resistant companies are also often part of recession-resistant industries. Many of these industries’ sales come from a number of countries around the world. Their sales may slow in the U.S. and Europe, but remain strong in emerging nations. Coke and P&G are examples of corporations in such industries. Other companies are in sectors whose products are used in almost any economic environment. Tobacco companies like Altria and Reynolds American are examples of these. Still other industries have companies that have appeal in an economic downturn. McDonald’s, which offers many meals for a few dollars, often prospers when people cannot afford fresh groceries or more expensive restaurants.

24/7 Wall St. picked its recession proof companies by choosing: 1) corporations with revenue that grew during the last recession or where sales dropped slightly and profits rose, 2) companies in industries that are not usually sensitive to changes in the economy, 3) corporation that have demonstrated they have the balance sheet to pay large cash dividends, 4) corporations that are large enough to be among the most dominant companies by sales or market share within their sectors, and 5) stocks that trade within 10% of their 52-week highs. With the S&P 500 near a one year low, these are obviously companies that Wall St. thinks will do well over the next several quarters.

This is the 24/7 Wall St. “America’s Recession-Proof Companies”

While many investors are opting for safety at any cost, there is an army of retirees and near-retirees that are depending upon income from their life savings in order to live, and these investors are being forced to look elsewhere in predictable dividend stocks and other instruments that they feel are low in risk. Utility stocks have accidentally become the new CDs and bonds for investors due to their safety, suitability and high dividends.

Generally speaking, utilities have fairly predictable earnings and they pay out a substantial portion of their income as dividends. Some utilities now pay dividends that yield more than 4% to investors. The power companies often have local competition in their local markets now due to deregulation and the ongoing regulatory pressure of carbon emissions is actually keeping a lid on some of the upside that might otherwise be there. The trick is for investors to find the utilities where the dividend is safe even if these companies are forced to spend the collective billions due to new environmental areas.

Utilities have not been immune to the market pressure this week, but the reality is that the sector was within about 2% or 3% of the yearly highs as recently as last Friday. A 5% sell-off in the past two days may be an opportunity for those investors with long-term outlooks. The utility sector appeals to many investors looking for income, value, predictable growth, and they also classify as defensive stocks. Investors used to look for the highest yielding CDs from insured banks and savings & loans, but now that opportunity is only found in utilities.

We have compiled a list of the key liquid exchange-traded funds and a closed-end funds for investors who want diversification. We have also screened out three of the top electric utility stocks for retail investors that offer the following minimum criteria: $5 billion in market value, a 4% or higher yield, not trading at a 52-week high but also not down more than 10% from the highs (avoiding the troubled players) and which also have 10% or more upside to the consensus analyst price targets from Thomson Reuters. Lastly, we have our top water utility in America that is slightly outside of the normal utility parameters for the power generation and electric utility companies.

In ETFs and Funds, we have highlighted the Utilities Select Sector SPDR (NYSE: XLU), iShares Dow Jones US Utilities (NYSE: IDU) and the Reaves Utility Income Fund (AMEX: UTG). In utility and generation companies we have identified American Electric Power Company (NYSE: AEP), FirstEnergy Corporation (NYSE: FE) and PP&L Corporation (NYSE: PPL). In the water utility sector, we have discussed American Water Works Company, Inc. (NNYSE: AWK). What matters most here is the current situation and opportunity on each. As we always stress: understand what you are investing in!