Thursday, July 1, 2010

Financials; Not a ton of real money buying on this pullback.; Sentiment remains extremely negative Senate's vote and tomorrow's $XLF

NYTimes Leads with Facts, Photo...

  • ·Financials: Following last night's successful House vote on financial reform, the sector underperforms following disappointing Jobless Claims, ISM and Pending Home Sales data. Banks (especially the large caps) are weak in early trading.
  • Volumes are heavy on the sell-off and increased dramatically following the 10am economic reports. Likewise, flows remain very active. The 10am number brought out real money sellers and led fast money to press shorts aggressively. Once we held the 1006 technical level, shorts to come in and cover.
  • Haven't seen a ton of real money buying on this pullback. We're seeing some institutional support within life insurers and defensively positioned banks, but nowhere else.
  • Sentiment remains extremely negative heading into the Senate's vote and tomorrow's June Employement report. As estimates continue to come down for Q2 earnings, it is unclear what positive catalyst (other than valuation arguments) is going to lift the group between now and Q2 report.
· Brokers – GS broke briefly under the $130 level before bouncing (its now flattish).  MS, JEF, PJC, RJF all off 2-3%.  Pretty quiet for the most part.  The Barclays comment from Wed (hit mid-day) about how IB business was slow in May and June getting attention, although not really impacting the stocks all that much. 
· Life insurers – the space is weak across the board; LNC, MET, PNX, PFG, HIG, PL, PRU all off 3-4%; AFL very mild outperformer (but still off 1%+) on back of an upgrade.  People worried about earnings sensitivity to the falling stock market. 
· Banks – the group is for sale today; there continues to be number cuts among the sell-side heading into earnings season; also the new higher FDIC assessments getting attention (following the House passage of the Dodd/Frank bill last night, although this isn’t really “new” news as we first heard about them on Mon).  Loan growth is tepid (there was data out overnight talking about how small business lending has declined to multi-month lows).  MTB is one of the few banks in the green (the STD potential keeping a bid to the stock).  Regionals weak across the board – BXS, CYN, FITB, KEY, MI, PNC all off ~3%.  BAC and WFC are off ~4%. 
· Best performing sp500 financials: MTB, GS, HCBK, JNS, IVZ, PBCT, NTRS, NDAQ
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