FINANCIALS;Vanilla buyers Have Turned to Dark Side; Hedge Funds putting on Pair trades-- active sell-side tilt (1.3:1 better for sale) $$

 FINANCIALS: Sector outperforms on earnings from DBK/UBS, a strong Spain debt auction and a well-received agreement on Basel capital rules. Banks (BKX +0.6%) trade higher for the fourth consecutive day as earnings season concludes for them. They are outperforming insurance stocks (KIX -0.2%) which trade more in-line with the tape as their earnings season ramps up. The group has traded off from morning highs, but remain in the black as the tape trades around the flat-line on elevated volumes. Flows are healthy alongside volumes as we maintain a sell-side tilt (1.3:1 better for sale). We're seeing a ton of vanilla rotation around the group, and HFs putting on pairs trades. Vanillas have actually turned from better buyers into better sellers (banks, credit cards). HFs continue to take profits on this move, but we're not seeing short-sellers today (banks, asset managers). The aggressive short-sellers we've seen in regional banks are not back today. Insurance names will become the focus of the market over the days as the major life insurers report results. Alongside those numbers, look for the Beige Book and jobless claims to help move the tape.