Wednesday, May 19, 2010

· FINANCIALS: Group trades essentially in-line with the overall market, with insurance names weighing most on the group and banks slightly outperforming. Outside of some headlines swirling around the EU/Germany/Greece, headlines are pretty quiet. Ahead of a cloture vote this afternoon (which should result in a final vote by tomorrow), accounts are back to doing more single stock trading following what seemed to be a lot of hedging/macro positioning the past two days. Flows are much more active today, and are much more balanced in nature between buyers/seller and HFs/long-onlys following a HF driven selloff over the past two days. The long-only community continues to be much better for sale in asset managers, brokers and exchanges. Only seeing long-only money go into select regional banks thanks to the sharp pullback. HFs are more balanced in their approach today than they have been (were much better for sale). We're seeing both some covering and opportunistic buying being done, however we also continue to see some short sales being put on (esp in regional banks). The next few days will be centered around Washington and the financial regulation bill.

· Brokers – GS bouncing a bit after a steep decline on Tues.  Others are for sale, but outperforming.  The electronic brokers are all off less than 1%.  ETFC outperforming slightly after its DARTs this morning came in ahead of peers.  Note today that JPMorgan’s K Worthington started coverage on SCHW w/an OW. 
· Asset managers – quiet for the most part; the group for sale but not really out/underperforming the broader financial tape.  EV off 1% after earnings.  JNS, LM, TROW all off ~2%+ and underperforming. 
· Life insurance – PRU falls 4% on the Barclays downgrade.  Rest of the space for sale but outperforming PRU. 
· Banks – actually some strength in the larger money centers for a change (people happy w/the Dodd tweaks on Lincoln derivatives language); people thinking the money centers a bit oversold as Dodd sentiment has become a bit too negative.  C outperforming most – up 1.5%.  WFC lagging in money centers – the Treasury warrant sale could be pressuring, also worries around Buffett (people nervous after Buffett revealed he sold out of some of his other regional banks in filings out on Tues).  Bulk of regional banks off ~2%.  MTB off 1% despite WSJ/FT talking about how the co had been in deal talks w/Santander.  ZION off 4% on the capital announcement this morning. 
· Credit cards – seeing a decent bounce in the group following a steep sell-off in the last few days.  COF, DFS, V, MA all higher today. 
· MI/financial guarantors – selling pressure in this group; ABK off another 8% (adding to declines from yesterday). 
· Best Performing sp500 financials: COF, C, MCO, BAC, GS, DFS, ETFC, CINF, MS
· Weakest performing: PRU, ZION, AFL, KIM, AIG, GNW, LM, FHN, PNC, MET

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