Friday, May 28, 2010

Financials Brokers, Asset Managers Banks Update $XLF $GS $BAC

· Financials: On a quiet trading day both in terms of news and flows, financials are the worst performing sector after leading the tape higher yesterday. The lack of newsflow today has us trading in a tight range, and eyes are mostly on technical levels today. Flows remain better to buy, with mostly HFs continuing to cover/add. Vanilla flows pretty quiet, which is adding to the lack of liquidity. Volumes should increase during next week's holiday-shortened week. Next week, mgmt commentaries will be closely followed as a few sell-side conferences are ongoing. Also, a slew of economic data for the month of May will be released, including an employment report on Friday.

· Brokers – mild sell-off across the board for the group; declines aren’t major; GS flattish and outperforming amid reports that settlement talks w/SEC avoid fraud charges. 

· Asset managers – off ~1-2%; pretty quiet on newsflow front; AMG, BLK, EV, CNS, FII, etc, all off ~1%; TROW and WDR are both laggards (dwn 2-3%). 

· Banks – regional banks are off 1.5-3% (BBT, BXS, CMA, MTB, PNC, MI, STI, TCB, all off ~2%); Money center banks off ~1.5%.  pretty quiet trading for the most part; the space is giving back some of the rally from yesterday. 

· MI/financial guarantor stocks have been on a decent run for the last few days and are outperforming today; there have been a couple pos. news items this week.  After the close yesterday, FNM released its monthly credit update (serious delinquencies fall for first time in yrs in the month Mar vs. Feb; Fannie said the amount of loans at least 90 days behind fell to 5.47% in March from 5.59% in February).  earlier this week, the WSJ had an article pos. on the industry - "capital makes its return to mortgage insurers".  Going back over the last few weeks, there are indications that the government's HAMP program (mortgage modifications) is seeing momentum (a pos. for the sector) and that insurers are having some success in backing out of mortgages found to have been originated under false pretenses.  MTG was upgraded a few weeks ago (Piper) and the industry data out at the end of Apr was viewed as a positive also (  Technicals are improving - MTG broke above its 20day MA recently and today RDN is making it above those levels too.

· Best performing sp500 financial stocks: ALL, AIV, TRV, ICE, CINF, GS, AON, CME, AXP, NYX

· Weakest performing: ZION, TROW, MI, PNC, BK, STI, RF, AIG, BBT, SCHW

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