Wednesday, April 14, 2010

Afternoon Look at the Financials in Play $JPM $GS $BAC


·         Financials: After a strong run into earnings since Q2 began, the group continues to rally after earnings officially kicked off this morning. Money center and regional banks are expected to report over the next week-and-a-half, and will be the major focus for the market as they try to gauge credit fundmentals and outlook. Readthroughs on the consumer, delinquency trends and the credit outlook from earnings this morning have been the major catalyst for the group in today's trading. Volumes and flows have both been very active in today's trading. Banks are the most active sector in trading today at the commencement of earnings seasson. HFs are the most active traders, being very balanced in flows (no shorts). In both the money centers and the regionals, we're simply seeing a squeeze. Aggressive short covering is being met with passive selling, allowing the group to continue to rise. We're seeing a similar effect in the brokers and life insurers. Online names are very active, with SCHW notably weak ahead of reporting earnings. In exchanges, we're seeing momentum buyers continue to purchase stock. In non-life names, we're seeing some vanillas continue to add, while HFs are using the group as a continued source of funds.

·         Brokers – MS and GS both rally today on back of strong IB earnings this morning.  Each up ~2-3% (people don’t seem to be bothered by the cautious real estate article in the Journal this morning re MS).  JEF also strong in sympathy.  SCHW dips ~1% on the day and underperforms. 

·         Asset managers – group up ~1% and outperforms.  AB, BLK, EV, LM all outperform. 

·         Life insurers – big rally in the group today; the lower quality names leading on the upside – PNX is up 15% and PL is up 7% (PL was upgraded at UBS).  PRU, MET, LNC, HIG are all in the green. 

·         Banks – the big story of the day as earnings kick off; strength across the board.  BAC, C, WFC all up several % (~3-4%).  Next up will be BAC earnings on Fri morning.  Regional banks are all strong – BBT, FITB, PNC, RF, STI, ZION all up several %.  PBCT, which is a relative safe haven, is off small on the day.

·         Trust banks for sale after #s this morning came in below some people’s expectations; STT, NTRS, BK all in the red (off 1-2%). 

·         MI/financial guarantor stocks are all very strong – MTG, PMI, GNW, MBI, ABK, AIG, AGO are all up several %.  ABK remains very volatile and is back up ~10%. 

·         Best Performing sp500 financials: RF, ZION, PGR, FITB, C, GNW, KEY, STI, HBAN, WFC

·         Weakest performing: BK, SCHW, STT, NTRS, KIM, VNO

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