EmailThe S&P 500 Financial Index continues to push higher above the 200 level as a bounce in the markets and recent M&A activity has been able to stave off the negative headwinds the industry faces. The index has no moved above 204 for the first time in three weeks with the 208 level shaping up as the next level of resistance. A notable underperformer YTD, the S&P 500 financial & banking sector, represented by the XLF ETF, has recently performed what chart technicians refer to as the 'death cross', an occurrence that takes place when the 50dma cross through & below the widely followed 200dma. Often times this development represents a bearish technical signal warning of further downside. However, we would note that the last occurrence back in the summer of 2010 marked a near bottom for the space as XLF began a strong uptrend in late Aug.
News of Note:
1) Regions Fincl (RF) trading higher after announcing Morgan Keegan settled regulatory issues; Regions to explore strategic alternatives for Morgan Keegan. Co announced earlier that its brokerage and investment banking subsidiary, Morgan Keegan & Company, Inc., and its asset management subsidiary, Morgan Asset Management, have agreed to a settlement of previously disclosed regulatory matters with the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and a group of state securities regulators with respect to issues concerning certain mutual funds and closed-end funds (the RMK Funds), a business that Morgan Asset Management divested in 2008. As part of the settlement, Morgan Keegan and Morgan Asset Management agreed to pay $210 million, of which $200 million will be placed into two Fair Funds for the benefit of investors in the RMK Funds in any state. The full amount of the settlement was previously accrued.
2) Susquehanna Bank (SUSQ) upgraded to Buy from Neutral at Janney Montgomery Scott ; Susquehanna Bank upgraded to Outperform from Market Perform at Keefe Bruyette; Lloyds TSB plc (LYG) downgraded to Neutral at HSBC; Royal Bank of Scotland (RBS) downgraded to Neutral at HSBC; Barclays PLC (BCS) downgraded to Neutral at HSBC
3) Bloomberg story out that is cautious on the Investment Banks as we head into earnings season. A number of analysts have been dialing down the earnings estimate for the group. This has been expected and the recent performance this week by Jefferies has only added to the concern. This can be a drag on the group as we head into July and approach earnings with the majority of financials expected July 18-22. It is worth noting that the Greek issues have helped overshadow the estimate cuts so upside surprises could be well received by the markets.
4) Another story out there suggest that European Union's top securities regulator is recommending the release of the bank stress-test results at night or on a weekend when global stock markets are closed. While a date for the results hasn't been set, regulators expect them to be released in mid-July. If true, that would certainly lend further credence that the EU bank balance sheets are lagging the U.S.
