FINANCIALS Update $GS is down more than 1% on the day and lagging; the CFIC subpoena from last week is still pressuring

· FINANCIALS: Sector slight underperforms as large cap banks are the only area of strength in the group (regional banks, capital mkts, insurance all weak). The equity markets sold off early for technical reasons, and then recovered on what seems to be strength in the euro and commentary from the SNB. Volumes are healthier today than yesterday, but are still lighter than recent avgs. Flows are active as the tape whips around (balanced between buyers & sellers), with both HFs and vanillas actively engaged. In the banks, we're seeing a large amount of both HF and vanilla supply, especially in the regionals (more short sales than we've seen in a while). HF covering is not that prevalent today, and the only buying being seen is being done in the more defensive names. Brokers are likewise heavy for sale, mostly by directional accounts (short). In insuance, we're seeing HF accounts continue to sell positions in life names as concerns over credit markets continue. Overall, sentiment feels overly bearish in the group ahead of a busy week (financial reform resumption, ECB meeting, European debt sales, etc).

· Banks – the space is outperforming.  Larger money centers are higher – BAC, C are up more than 1%.  Regional banks are also strong – CMA, FITB, KEY, MTB, MI, RF, STI, TCB are all up 1% or more.  There is some optimism that the reconciliation process will soften some of the edges of the Senate bill (this will kick off tomorrow).

· Brokers – GS is down more than 1% on the day and lagging; the CFIC subpoena from last week is still pressuring.

· Asset managers – some green spots in the group – BEN, LM, and IVZ are all outperforming.

· Life insurers – the group outperforms today; AFL, MET, PFG, HIG, PL, PRU are all trading in the green.

· MI/financial guarantors – the group is mostly lower (MTG, PMI, GNW, MBI, RDN all lower) although ABK sees a short squeeze on back of last night’s announcement about commuting ABS exposure (the co also warned about liquidity in a filing this morning).

· Best performing sp500 financials: IVZ, MI, SLM, PFG, BAC, C, MTB, TMK, BRK’b

· Weakest performing: ETFC, BK, PLD, GS, FHN, GNW, CBG, JNS, CME