Friday, June 4, 2010

· FINANCIALS: Sector slightly underperforms as banks (esp regionals); GS Another Bullshit Rumor $GS $XLF


· FINANCIALS: Sector slightly underperforms as banks (esp regionals) trade off following a disappointing jobs number and ahead of next week's return to focus on financial regulation on Capitol Hill. Overall, it appears derisking is in motion across markets however there aren't enough buyers to support an efficient and orderly procecss. Volumes and flows are elevated from what we've seen earlier this week. We maintain a buyside skew (1.2:1 better to buy) as HFs continue to be active and vanillas start to dip their toes back in the market. In banks, we're seeing vanillas active two ways and much more involved than HFs on this move lower. In the credit cards, we're seeing HF covering on weakness. In insurance, we're seeing trader types buy life names, vanillas add to defensive P&C names, and momentum players continue to unload positions in life stocks. Next week all eyes will be on the reconciliation of financial reform in Washington. Outside of that, stock specific stories are limited.

· Brokers – GS rallying on continued anticipation of a potential resolution w/the SEC.  Rest of the group in the red.

· Asset managers – weakness across the board; no really underperforming vs. the rest of the group really; off ~2-3% on average.  WDR is up 1% and outperforming.

· Life insurers – some of the weakest stocks in all of financials; worry centering on portfolio risk and whether there is large European sov or corporate exposure.

· Banks – getting hit across the board; PBCT is one of the few banks higher (JPMorgan’s S Alexopoulos had a pos. note out on PBCT this morning); rest of the regionals are for sale (off ~3-4% on average).  Money centers hold up slightly better, falling 1-2%.  Trust banks off 3-4%.

· Financial guarantors/MIs – weakness across the board – MTG, PMI, GNW, MBI, RDN, ABK all off 4-5%.

· Cards – AXP, DFS, COF all off 3%

· Best performing sp500 financials: PBCT

· Weakest performing: STI, LNC, MI, GNW, AFL, FITB, RF, PRU, MET, KIM

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