UPDATE 1-RESEARCH ALERT-Goldman cuts U.S. packaging to neutral

May 29 (Reuters) - Goldman Sachs downgraded the U.S. packaging sector to "neutral" from "attractive," saying it expects the sector to lag the market when the economy begins its cyclical recovery.

"Specialty packaging generates most of its revenue from the food and beverage end markets, which we expect will show less cyclical rebound than the overall market," the brokerage said in a note to clients.

Goldman named Owens-Illinois (OI.N) as its top pick, with a "conviction list buy," on valuation and expects the glass-container maker's earnings to trough in 2009 but show solid growth in 2010.

"We believe fundamentals for Owens-Illinois' business will turn more favorable both seasonally and cyclically as we move through the spring and summer and the US and global economies begin to stabilize and recover," the brokerage said.

It also downgraded can maker Crown Holdings (CCK.N) to "neutral" from "buy," and bubble-wrap maker Sealed Air (SEE.N) to "sell" from "neutral."

The brokerage said Crown Holdings generates 80 percent of its revenue from its American and European can businesses, and historically, food and beverage cans have shown little correlation to changes in GDP growth.

To view the Goldman alerts double click [ID:nWNAB4549] (Reporting by Eric Yep in Bangalore; Editing by Aradhana Aravindan)