Tuesday, June 1, 2010

Financials: Sector slightly underperforms as credit spreads on heightened global growth and sovereign debt concerns $XLF

· Financials: Sector slightly underperforms as credit spreads widen on heightened global growth and sovereign debt concerns. The group was lifted to its highs after the ISM and Construction data at 10am, but have fallen off heading into mid-day. Volumes are on pace to be lighter than Friday, and flows are following suit. HFs are contributing to almost all of our flow, as long-onlys are almost completely dark today. Our skew is to the buyside (call it 1.5:1), as HFs continue to cover/add on weakness. Small cap stocks are much more active than large caps, as it appears HFs are trying to pick up stocks that have been pummelled in the recent market volatility. Focus for the rest of the week will be economic data, a few financial services conferences and releases from rating agencies regarding financial regulation.

· BrokersGS, ETFC, AMTD are flattish; MS and JEF are off 1%; overall pretty quit action.  We should start to receive DART figures in the next week for the month of May.  Also investors continue to watch for reports on the progress of the GS/SEC settlement talks. 

· Asset managers – pretty quiet action; AMG, BLK, EV, BEN, TROW off ~1%; JNS lagging, w/a 3% decline.  LM is flattish.  IVZ off small despite raising the accretion forecast from the MS deal.

· Banks – the group had a bid earlier in the day but is now off small; not a ton of newsflow; regionals are underperforming money centers.  CMA, FITB, MTB, STI, RF, USB, ZION are off ~2%.  KEY and PBCT making small gains.

· Financial guarantors/MIs – the group is off 4-5% on the day; weakness across the board.

· Best Performing sp500 financials: BRK, AIZ, NDAQ, KEY, ETFC, CME, SPG, LM, AIV, PBCT


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