Monday, June 14, 2010

Financials;Sector slightly underperforms as financial regulation concerns $GS $LAZ $XLF

· Sector slightly underperforms as financial regulation concerns will be in focus this week. The group bounced off morning lows as rumors around a softer Volcker rule circulated. More headlines/articles/rumors should be expected throughout the week. Volumes and flows continue to be light, continuing last week's trend. Outside of a couple stocks where there was news over the weekend, accounts appear to be passively adding/trimming positions passively. We're seeing some incremental buying across the money center banks and online brokers, but trends outside of that are hard to detect. Mostly, it feels as if we are purely in a 'wait-and-see' mode until more visibility around the outcome of financial regulation can be determined. Other catalysts are few and far between.

· Brokers – the electronic names are under a bit of pressure as the SCHW monthly numbers fail to wow, although selling not too intense (SCHW showed DARTs up 17% M/M but assets had a large decline b/c of a single MF clearing client leaving the platform).  GS opened weaker but has rallied into the green; MS is flattish.  Some worry about the Volcker Rules & the Lincoln amendment weighing on the brokers, although Volcker just clarified his views on CNBC (he isn’t in favor of an outright spin) and Reuters is reporting that Lincoln is considering a compromise for her legislation.  LAZ is lagging. 
· Asset managers – the stocks are higher across the board (AMG, EV, TROW, LM FII, WDR among the best performing w/all up ~2%; no major asset manager is in the red). 
· Life insurers – the group is up ~1.7% today; life names rallying despite the capital raise. 
· MMC – the stock is trading on back of the Alaska settlement
· Banks – regional banks rallying today – CMA, CYN, FITB, MI, RF, ZION are all outperforming.  USB and HCBK are laggards.  C is outperforming in the money centers, w/a 1% gain. 
· MI/financial guarantors – MTG, PMI, GNW, MBI, RDN are all up ~4-5% on the day and outperforming (MTG’s monthly stats update this morning helping).
· Best performing sp500 financials: HIG, MMC, CBG, GNW, CMA, HST, PFG, RF

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