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BJ's Wholesale Club (NYSE: BJ - option chain) shares are falling today despite reporting second-quarter profit that beat estimates and announcing a share buyback. This is possibly because discretionary item spending slowed. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on BJ or similar companies like COST.

This morning, BJ opened at $38.60. So far today the stock has hit a low of $37.11 and a high of $38.98. As of 12:45, BJ is trading at $37.99, down $2.69 (-6.6%). The chart for BJ looks neutral and S&P gives BJ a neutral 3 STARS (out of 5) hold ranking.

For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.5% return in two months as long as BJ is below $45 at October expiration. BJ's would have to rise by more than 18% before we would start to lose money.

BJ hasn't been above $45 at all in the past year and has shown resistance around $43 recently.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in BJ.

As the housing market continues to struggle, there is further evidence today that things have yet to turn around as mortgage applications last week fell to lows not seen in nearly eight years.

Today's data came from the Mortgage Bankers Association, which showed that its application index dropped down to 419.3 last week, its lowest level since all the way back to December 2000. Just since this past February the index is down by 61%.

For those of us who are anxiously awaiting any positive signs for the housing market, this week has proven to be anything but hopeful. Today's news comes on the heels of data yesterday that showed new home construction during July was at its lowest levels in over the past 17 years.

Minutes from the August Bank of England meeting may reveal a panel divided on an interest rate cut, but don't tell that to the currency market.

The pound fell about 1 cent to $1.8552 versus the dollar Wednesday -- approaching a 2-year low -- as sentiment grew regarding the need for the central bank to cut rates to avoid a recession.

In its August 7 meeting minutes (pdf), during which it kept its benchmark interest rate at 5%, some members argued for a rate cut after private banks in the United Kingdom cut GDP forecasts, while others said a rate increase was needed to check inflation expectations.

U.K. slowdown mirrors U.S. slump

London-based economist Mark Chandler told BloggingStocks Wednesday the inflation pressures stemming from oil's rise are real, but so is Britain's economic slowdown.

"Based on data I've reviewed, we're patterning America, only about a quarter late. GDP in Q2 slowed to 0.2% this year from 0.8% in Q2 last year, which is about the same deceleration rate as Q2 in America," Chandler said. "Almost certainly GDP will be negative for Q3, and I think the currency markets sense this and see a Bank of England rate cut or two up ahead."

Analyst upgrades:

• JP Morgan upgraded O'Reilly (NASDAQ: ORLY) to Overweight from Neutral, citing increased demand and CSK acquisition synergies.
  
• Yamana Gold (NYSE: AUY) was raised to Outperform from Sector Perform by RBC Capital, based on valuation and the firm's expectation that gold will rally.
  
• HSBC upgraded KLA-Tencor (NASDAQ: KLAC) to Overweight from Neutral with a $44 target.

Analyst downgrades:

• Bernstein dropped DISH Network (NASDAQ: DISH) to Underperform from Market Perform, citing continued weak operations, declining cash flow, and satellite sector headwinds, among other reasons.
  
• Macy's (NYSE: M) was downgraded to Neutral from Buy by Goldman Sachs based on valuation.
  
• Kohl's (NYSE: KSS) was also dropped to Neutral from Buy by Goldman based on valuation.
  
• UBS downgraded Dr Pepper Snapple (NYSE: DPS) to Neutral from Buy based on valuation.

Analyst initiations:

• Salesforce.com (NYSE: CRM) was started with a Buy rating by Kaufman Bros., which believes the core on-demand CRM application market is nowhere close to full penetration.
  
• Caris initiated Eli Lilly (NYSE: LLY) with a Below Average rating, citing the company's Zyprexa and Cymbalta patent expirations.
  
• Leerink Swann assumed coverage of Amgen (NASDAQ: AMGN) with an Outperform, as the firm predicts that the company's denosumab will allow the company to substantially increase its earnings starting in 2010.

SEC Chairman Chris Cox, who has been off battling the imaginary dragon of naked short selling as actual securities fraud continues to be as easy as ever to get away with, has a message for you about the recently-expired naked-short selling rule.

He said that failures to deliver in the 19 financial stocks affected "were reduced substantially" and added that "It was a very effective order from that standpoint." Fair enough. But then he dropped this bomb shell: "We expected and intended to have no impact whatsoever on the direction of prices. That's not the purpose of regulations."

Uh-oh. That takes quite a bit of the wind out of the sails of the naked shore-selling conspiracy theorists -- if naked short selling was an evil scheme driving down share prices, then wouldn't regulation designed to curb it be expected to impact the direction of share prices? That statement from Mr. Cox would seem to be an admission that failures to deliver are a procedural issue, not some conspiracy to drive down stocks involving crooked journalists and a "sith lord" as Overstock (NASDAQ: OSTK) CEO Patrick Byrne infamously suggested.

For a summary of the commentary on this mess, check out this post from Gary Weiss.

General Motors (NYSE: GM) has just announced that it will extend warranties on may of it used cars. According to Reuters, "GM said it would begin offering a 12-month, 12,000-mile "bumper-to-bumper" warranty on all used cars and trucks certified as eligible for the repair coverage by participating GM dealers." The firm has already said it will return to the extensive use of incentives to clear out new car inventory.

GM should have a better solution than to lose more money on each new car it sells and add costs to market its used products. It turns out that is not the case. Vehicle sales in the U.S. are just too awful and Toyota (NYSE: TM) and Honda (NYSE: HMC) take more market share each month.The talk of GM doing into Chapter 11 rings a bit more true as the time passes.

GM is now out of options. It still makes money overseas, but that is overwhelmed but its North American deficit. GM says it will stick to supporting all of its brands except the Hummer. That may end up not being true. GM did say it was moving away from incentives. It did not work out terribly well.

GM has a couple of brands that still sell only a modest number of cars. Saab is one. Saturn in another. Saab could be sold. Saturn could be closed. Saturn might not even be missed.

If GM has to continue using incentives, it will get to the point where it cannot support the marketing and product development costs of all of its brands. That point is probably coming in the next quarter.

Douglas A. McIntyre is an editor at 247wallst.com.

Heinz (NYSE: HNZ), famous maker of thick-and-rich ketchups and other foodstuffs, is due to report first-quarter results on Thursday. So, what might be in store for the company? Are we looking at a lot of growth for the bottom line?

Well, according to Earnings.com, analysts aren't looking for much growth at all. Last year at this time, Heinz served up 63 cents per share. Wall Street seems to be looking for three measly pennies of growth! Can Heinz beat the 66 cents per share that analysts believe it will report?

Looking at some past price history, I can't say that I'm overly optimistic that Heinz will beat the expectations by too much (if it beats at all, that is). Remember that consumer-products companies are having one heck of a time with inflation. Raising prices is key to survival, but those higher price-tags must be accepted by the consumer base.

Increased marketing spending also is important during times like these since many businesses want to see if they can capture some market share while the competition is hurting.

So investors will want to carefully evaluate the margins and volume of sales when Heinz issues its earnings release. This has been par for the course for businesses such as Hershey (NYSE: HSY), Kraft (NYSE: KFT), Campbell Soup (NYSE: CPB), PepsiCo (NYSE: PEP), and General Mills (NYSE: GIS).

Intel (NASDAQ: INTC) is beginning to offer its new "Atom" chip, which is designed to work in "low-end "netbooks" and other mobile computing devices, " according to the FT.

The trouble is that it is a chip for devices that no one wants.

Intel is trying to drive a wedge between low-end laptops that weigh only a couple of pounds and new smartphones like the products from RIM (NASDAQ: RIMM) and just about every other large handset company. The new smartphones can access the internet and use WiFi hotspots instead of the cellular system, access 3G broadband wireless, and read e-mail and attachments. Cheap laptops now cost as little as $500.

Intel is up against a PC market that is growing more slowly each year, especially in large markets like North American and Europe. It has decided to launch a product in the hope the new devices will come along because the chip is available.

Unfortunately, no one wants the products that Atom would drive. The niche is already crowded.

Douglas A. McIntyre is an editor at 247wallst.com.

Hewlett-Packard Corp. (NYSE: HPQ) reported very decent quarterly results Tuesday after the market close. The world's currently-largest PC maker reported a net profit gain of $2.03 billion, up from the year-ago period gain of $1.78 billion on the back of a $28 billion quarter in sales.

The company's EPS was 86 cents, beating analyst estimates of 84 cents. In news that was not shocking, 68% of HP's sales were from overseas markets, although that was a drop of 2% from the Q2 period. HP, like many manufacturers, has its wings spread out so far in global markets that it was able to weather the U.S. market downturn.

HP guided its Q4 sales at over $30.2 billion, although CEO Mark Hurd indicated that his company's introduction of sleep laptop designs was making a splash worldwide. "You've got a lot of places around the planet where the only access to the digital content out there is through a notebook and a wireless card ... we have a significant opportunity.''

He's right. How many households are transforming to a multi-notebook, wireless environment without a desktop in sight? In addition to that, HP's global finesse and product mix is continuing to beat competitor Dell, Inc. (NASDAQ: DELL), even though Dell wants to change that.

Palm (NASDAQ: PALM) is dead. That has been written before, but now the company needs an official funeral mass. According to The New York Times, "Palm's chief executive, will announce the debut of a new smartphone primarily for business customers - the Treo Pro." The company also has several other handsets in development.

Palm is now up against smartphone products from much larger companies like Samsung and Nokia (NYSE: NOK). Not to mention the Apple (NASDAQ: AAPL) iPhone.

In the last year, Palm had an operating loss of $105 million on a shrinking revenue base that fell to $1.32 billion. The company has $398 million in current and long-term debt.

Palm is not going to make it as an operating company, but it might be a good licensing entity. That would involve cutting almost all of the company's staff and licensing its brand and product designs to another company, perhaps Samsung or LG. The Palm name still carries some modest weight in the U.S.

Palm's revenue might drop to $100 million, but its costs would be negligible. It would, at least, make a profit, which is something that is out of the question with the company in its current form.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Infosys (NASDAQ: INFY), a technology services firm based in India, closed at $40.80 Tuesday. INFY chief executive said: "We are not seeing any trends towards driving prices downwards. There is (however) uncertainty about when the macro-environment will turn around" Down Jones. INFY overall option implied volatility of 43 is near its 26-week average according to Track Data, suggesting non-directional risk.

Satyam Computer Services (NYSE: SAY), a technology solution provider based in India, closed at $21.91 Tuesday. SAY overall option implied volatility of 53 is near its 26-week average, suggesting non-directional price fluctuations.

Wipro Ltd (NYSE: WIT), a technology services company based in India, closed at $11.60 Tuesday. Goldman Sachs raised its rating to Neutral from Buy on August 19. WIT overall option implied volatility of 50 is near its 26-week average of 47, suggesting non-directional price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

With all of the success of the Apple (NASDAQ: AAPL) iPhone and the RIM (NASDAQ: RIMM) BlackBerry, investors would think cellphone sales in the U.S. are booming. That assumption is wrong.

In the second quarter, handset sales in the U.S. fell 13% according to NPD Group, dropping to 28 million units. According to The Wall Street Journal, "That is the lowest number of phones sold in a quarter since NPD began tracking the category in 2005."

Motorola's (NYSE: MOT) market share fell from 32% last year to 21% in the second quarter this year.

The news shows the extent to which handset companies will have to rely on sales in emerging markets like China if they are going to continue to growing. Although recent figures for Europe are hard to come by, it is likely that sales growth there has slowed or has gone negative. In both the U.S. and EU there are almost as many cellphones as there are people and the economy is making it harder to sell replacement handsets.

While the new numbers say more a great deal about the near-term future of the major handset companies and the challenges they face for earnings, the data speaks volumes about Motorola. The company has modest market share outside the U.S. and its domestic market has been its salvation. That is clearly no longer the case.

Motorola plans to spin-off its handset unit next year. But its revenue is falling at the rate of about a third compared to last year and it loses several hundred million dollars a quarter. If the U.S. market turns against the company, shareholders have to ask if the unit has any value at all.

Douglas A. McIntyre is an editor at 247wallst.com.

U.S. stock futures were higher Wednesday morning, indicating markets could start on a positive note after two days of declines. Good results from Hewlett-Packard helped lift sentiment, overshadowing financial sector concerns, despite new worries over Fannie and Freddie. Oil remained steady ahead of inventory report later today.

Hewlett-Packard (NYSE: HPQ) shares are rising over 3% in premarket trading after the computer maker reported a 14% rise in fiscal third-quarter earnings and issues current-quarter earnings guidance that exceeded analyst estimates. Tech shares could get a boost from H-P.

Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) remain in focus due to concerns that a government bailout of the two firms is inevitable and would mean wiping out investors. Freddie Mac on Tuesday was forced to pay its steepest borrowing premium in 10 years, which is raising fresh concerns about its ability to withstand the housing and credit crisis without government help.

eBay Inc. (NASDAQ: EBAY) is cutting fixed-price seller listing fees. eBay will now charge 35 cents to list any number of the same types of fixed-price items. This is a dramatic change from charging fees based on item price.

HSBC upgrades KLA-Tencor (NASDAQ: KLAC) to Overweight from Neutral, according to Briefing.com. The news services also reports that Caris initiates Eli Lilly (NYSE: LLY) with a Below Average rating.

Comverge (NASDAQ: COMV) was cut to Neutral at Broadpoint Capital, according to 247wallst.com. DISH Network (NASDAQ: DISH) was cut to Market Perform at Bernstein.

In a move that the company wisely decided not to announce via a press release to investors, eBay (NASDAQ: EBAY) has lowered the listing fee for fixed-price items on its site to 35 cents, down from as high as $4, depending on the price. The listing duration will also jump from 7 days to 30; those changes will be at least partially offset by an increase in the commission on sold items but eBay did not break down any details on that.

According (subscription required) to The Wall Street Journal, "The company is playing catch-up to other Web sites that have focused on fixed-price sales."

That may be true for now but the fact that eBay feels a need to court that market with aggressive price cuts indicates that the company recognizes the many sellers are opting for that over its own flagship auction business. Almost since inception, eBay has miraculously managed to avoid a price battle with competitors, and has been able to steadily increase its fees while much-hyped and well-funded imitators like Auction Universe fell by the wayside. It may be that sites like Amazon (NASDAQ: AMZN) are finally posing a serious threat.

It also may be that eBay is just messing with people's minds. Back in February when eBay announced its last "fee cut", sellers protested, alleging that the increase in the commission more than offset the decrease and accused eBay of fuzzy math.

Details of the new fee structure will tell us whether eBay is desperate of just manipulative.