
legislation – when it finally passed, the HMOs (the stocks most exposed) rallied sharply and briefly, but gave a lot of the gains back and have been in a range ever since. For financials, the reg reform bill is now in the hands of the various regulatory agencies for specific implementation (as we have seen w/NAIC and health care, this process can be just as important as the initial legislation) while the Basel process looms on the horizon (we could hear more about this over the weekend at the G20). While regulatory headlines have dominated the group, the Q2 earnings season is fast approaching and this week a slew of sell-side firms cut numbers on the brokers and large capital-markets banks (due to the slow pace of activity, esp. in the month of May). While JEF had strong earnings this week, investors weren’t really extrapolating it to the broader space. While trading has been slow, credit continues to move in the right direction – DFS this week showed further improvement when it reported earnings (this is one of the reasons why the smaller regionals, which lack the large banking arms of the larger money centers, rallied more on Thurs/Fri as investors rotated into the most credit-sensitive banks into earnings)
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