Thursday, August 5, 2010

FINANCIALS: Sector underperforming and weighing on mkt despite overall strength of financials overseas;Obama may direct a FNM/FRE/FHA-led mortgage bailout $GS

·         FINANCIALS: Sector underperforming and weighing on mkt despite overall strength of financials overseas. Insurance names are mostly in the red following earnings from PRU/HIG/ALL/PRE. Banks reacting negatively to a Reuters article that Obama may direct a FNM/FRE/FHA-led mortgage bailout (ALTHOUGH A TREASURY OFFICIAL JUST DENIED THIS STORY). Technically, the market continues to run into resistance above 1125. Volumes are running close to 20% below trend so far today, and are likely to become even lighter heading into the afternoon. Flows today show a sell-side bias, marking the first time in over a week we're not much better for sale. While early we saw vanillas buying aggresively on the pullback, HF supply is weighing on the group as they reduce longs across banks and insurers today. Not seeing any shorts being placed. The key catalyst for the market will be tomorrow morning's employment report.
·         Brokers – quiet and not a ton going on; AMTD and PJC outperform.  No one off much more than 1% (aside from LAZ, which is off ~2%).  There continues to be a ton of stories about GS making an announcement as soon as Fri about it spinning out its principle strategies group (mentioned on CNBC/Bloomberg).  GS shrs continue to have an underlying bid to them and people are watching the 200day MA @ $158 as its next big level. 
·         Asset managers – pretty quiet trading; AB, BLK, WDL, FII, WDR are all in the green while JNS, TROW, and LM are in the red (but off less than 1%).  Not a ton of major news in the group.  FIG is rallying 4% after its results came in today better than expected. 
·         Life insurance – weakness in the space today after earnings; the Canadian insurers in particular are getting hit (MFC is dwn 12% and SLF is dwn ~5%).  Among the US names, HIG off 4% and PNX is dwn 8%.  PRU was in the red earlier today but has rallied back into the green (up 0.6%). 
·         Credit cards – the AXP analyst meeting continues to prompt selling pressure – people disappointing w/the lower long-term ROE guidance.  Some tepid consumer spending data points also hurting the group.  TGT published its master trust #s today and revealed a small uptick in its 60day+ delinquency trends. 
·         MIs – some strength in the group today – the Fannie/Freddie story could be helping the space; MTG, PMI, GNW, RDN all higher; MBI and ABK are both dwn on the day (both ABK and MBI are due to report earnings Mon night). 
·         Banks – trading lower; relatively benign flow – not a ton going on; the Fannie/Freddie story being taken as a neg. for the banks as it could hurt MBS valuations (and also could hurt refinancing fees if the refinancings are automatic).  HCBK, PBCT, BXS, BBT outperform while CMA, FITB, MTB, RF, TCB, USB, and ZION are laggards. 
·         European financials – they dipped in European trading today after earnings from Barclays and Commerzbank disappointed, but the group remains pretty resilient considering the big run they have been on for a few wks. 
·         Best performing sp500 financials: GNW, ALL, AIZ, FII, MMC, NTRS, PRU, AON, AFL
·         Weakest: HIG, RF, FITB, DFS, MTB, AXP, ZION, ICE, ETFC

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