The S&P 500 Financial Index has tumbled to the 169 area its worst level since July 24, 2009 as the group continues to get rocked by the sovereign debt crisis in Europe and the U.S.. The latest round of news includes of course the S&P downgrade of U.S. debt but also continued litigations issues facing the industry and Bank of America in particular. BAC stated late Friday that the original price tag of the $3.5 billion settlement with Fannie and Freddie may end up being higher than originally projected. This has led to fears that the recent $8.5 bln settlement would be rejected by the New York AG. In addition, AIG announced that they would also be suing the bank. And if that was not enough for the troubled institution, CLSA's Mike Mayo cut it's rating to Underperform from Outperform. As Mr. Mayo was one of the last supported for BAC this is certainly a disappointment. The group is now in full decline as the market awaits further government moves to try and shore up the troubled debt markets.

News of Note:

1) BAC Color- BAC said it is weighing how to counter Fannie Mae's more aggressive demands that the bank repurchase faulty mortgages as Chief Executive Officer Brian T. Moynihan "We are considering a number of potential responses to this changed behavior. It is unknown whether Fannie Mae's continuing claims will result in increased representation and warranty liability."... American International Group (AIG) sued Bank of America Corp. (BAC) over $10 billion in losses on mortgage-bond investments. AIG bought more than $28 billion in residential mortgage- backed securities marred by a "massive fraud" from BAC and businesses it took over including Countrywide Financial Corp. and Merrill Lynch & Co., the insurer said in a lawsuit filed today in New York state Supreme Court... BAC downgraded earlier to Underperform from Outperform at Credit Agricole... also CNBC reported that hedge fund manager David Tepper has sold his stake in BAC, WFC, and most of C. Mr. Tepper had recently been bullish on financials saying at the Ira Sohn conference that BAC could run to $27.

2) BlackRock (BLK) releases statement regarding recent credit rating actions related to U.S. Government Debt: "The downgrade of U.S. sovereign credit by S&P on Friday reflects facts that have been well known to the market for some time. So, it does not imply a fundamental increase in risk, and we don't believe that investors should change their behavior based solely on the downgrade. However, in combination with continued economic weakness and regulatory uncertainty, this may provide a signal to some investors to reassess their risk appetite. BlackRock has been preparing for the possibility of downgrade over the past month, and, the firm has no need to execute any forced selling of securities in response to the S&P action."

3) NYSE Euronext (NYX) announces trading volumes for its global derivatives and cash equities exchanges for July 20111. Global derivatives average daily volume of 8.0 million contracts in July 2011 increased 12.6% versus the prior year driven by a 33.7% increase in U.S. options ADV partially offset by a 6.2% decrease in European derivatives. Cash equities ADV in July 2011 was mixed, with European cash ADV increasing 15.8% and U.S. cash trading ADV decreasing 23.9% from July 2010 levels.

4) Transatlantic Hldngs (TRH) confirms that co has received a proposal from National Indemnity, a member of the group of insurance companies of Berkshire Hathaway (BRK.A, BRK.B), to acquire all of TRH outstanding shares of common stock for $52.00 per share.