Financials

· Group continues to underperform the overall market as sovereign debt
concerns and money center bank concerns weigh on the group. Regional
banks are top performers on a rotation out of the large caps. Insurers are
outperforming after a week of dramatic underperformance and last night's well
received earnings from the group. Flows remain lighter than last week, as catalysts
are fewer. A more macro trade seems to be placing more of an emphasis on trading
futures and ETFs versus single stocks as well. Vanilla accounts remain beter for
sale across the group. HFs are much more balanced, continuing to set up defensive
pair trades within the group. We're seeing deep value money in select sub-sectors,
namely the larger regionals and exchanges which have underperformed recently.
Today's most interesting flows are in the life insurers. HFs were very quick to cover
stocks early on, but we're even quicker to lay out and press shorts on weakness.
Hands are very weak in the group, which should lead to continued volatile trading in
the group. The recent selloff in the group appears to abating. Bias feels to be for the
upside.

· Brokers – pretty quiet; AMTD and SCHW fall amid further pricing worries. Asset
managers also quiet – not a whole lot going (IVZ is up >1% and outperforming).
· Exchanges – NYX climbs >4% after earnings this morning; NDAQ is bouncing
~0.8% (recall NDAQ sold off Mon after reporting disappointing earnings). ITG falls
>1% and hits fresh lows (stock remains for sale and has been since they reported
disappointing earnings).

· Life insurance – busy night of earnings; LNC trading up >3% while HIG and PFG
both fall 5% post earnings. Non-life insurance is outperforming – ACE, PGR, ALL
are all up 0.6%.

· Banks – some of the regionals are seeing strength today; CYN, FITB, KEY, MI, RF
all trading up ~0.5% on the day. The money centers underperforming, led by BoA
and C. S&P came out today and lowered its outlook on C and BoA from stable to
negative b/c of a diminished systemic backdrop from Washington (there was a conf
call @ 11amET today)....S&P actually says both Citi and BoA have made
improvements in earnings and capital.

· Credit card stocks strong – AXP, COF, and DFS are all up >1%.

· Best Performing SP500 financials (from Bloomberg): NYX, LNC, SLM, IVZ, PRU, ZION, COF, PLD, RF, MI

· Weakest performing sp500 financials (from Bloomberg): HIG, PFG, SCHW,AVB, FII, BAC, CINF, TMK