In other words the market wanted to know what the rules of the game would be, adds JJ Kinahan of TD Ameritrade. Now that we know them, investors feel comfortable betting Goldman will the play the game very, very well.
Also Goldman stock is trading at 1 times book, adds Mike Khouw. I think it’s a compelling valuation and that’s also why the stock went higher.
I think most financial firms will make out just fine, adds Patty Edwards of Storehouse. All of the smarter operators will find a way to make money -- they always have.
WHO WINS FROM FIN REG
A relief rally pushed bank stocks higher on Friday after lawmakers finally agreed on a financial regulation bill.
But when the euphoria settles; who ultimately comes out on top?
Because financial regulatory reform mandates derivatives be cleared by an exchange all the exchanges win to fin reg, says Sandler O’Neil analyst Rich Repetto on the Halftime Report. However CME and ICE look best positioned because their current model is most compatible with the new regulations.
I agree that financial regulation is a net positive for the exchanges, says JJ Kinahan of TD Ameritrade.
I don’t think it’s as good for CME and ICE as you think, counters Patty Edwards. Right now OTC derivative traders know who their counter-party risk is with. We’re not going to have that with the CME or ICE. As a result more collateral will be required, which will dry up liquidity and reduce return on investment.
I wouldn’t assume that the exchanges are going to take the over-the-counter business from the top 3 or 4 banks anytime soon, counters Christopher Whalen of Institutional Analytics on the Halftime Report, that’s going to be a gradual process.
RELIEF RALLY LIFTS S&P
The S&P closed modestly higher on Friday buoyed by a relief rally in the financials .
Investors snapped up beaten down bank stocks feeling more certain that the new financial regulation bill won’t crimp Wall Street profits as badly as feared.
How should you be positioned?
I thought the rally in banking stock was justified. Bank stocks have needed clarity and now they’ve gotten it, says Karen Finerman, and it seems like most of financial regulation is fairly benign.
As far as I can tell, the most profitable parts of the business aren’t going off the balance sheets, says Tim Seymour.
Now that ambiguity is coming out of the financials, I'm bullish Bank of America and Goldman Sachs, says Mike Khouw, .
TOPPING THE TAPE: OIL
Crude oil spiked higher on Friday due to a weaker dollar and a weather report that suggested a tropical depression forming in the Gulf of Mexico could force oil rig evacuations.
"The storm threat is a big story, with odds rising that it will turn into a hurricane," explains Phil Flynn, analyst at PFGBest Research in a Reuters interview.
What’s the trade?
In the space I like the refiners, says Tim Seymour. Look at Tesoro and Valero.
TOPPING THE TAPE: COPPER
Copper was a big winner this week, rallying over 7%, its largest weekly gain since February.
What must you know?
I think copper is an asset that goes up in value long-term, says Mike Khouw.
BP BREAKDOWN...BREAKS $29 AND KEEPS GOING
BP continued its path lower on Friday with shares of the oil giant now trading at levels not seen since 1993.
Meanwhile a note issued by Nomura said: "Perception of near-term credit risk is highly damaging for BP, likely leading to constraints around counterparty trading, the attractive roll of drawn commercial paper and the ability to dispose of assets at attractive prices."
Five-year BP credit default swaps, an insurance-like instrument against debt default, widened 19 basis points to 555 basis points, CDS monitor Markit said.
What’s the trade?
I would not own this stock, says Tim Seymour.
If you think they’re going to pull through, I’d look at their debt, says Mike Khouw.
ANALYZE THIS: TRADER: BANKS WIN ON TOOTHLESS BILL
According to Phoenix Partners analyst Michael Block the big winners out of the new financial regulation legislation are banks.
The bottom line is that fin reg is a toothless bill, he tells the desk. Now there’s a big overhang out of the way.