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Pros: Increased Clarity to Unlock Gains in Financials?

Unless you trade stocks under a rock you’ve probably heard discouraged bulls ask if the rally can continue without the financials.

The XLF, the ETF that tracks financials is the worst performing S&P sector ETF down about 6% year to date.

And the conventional wisdom has been that until this sector can play catch up, S&P gains will probably be limited.

However two issues that have generated a serious drag in the sector have just been resolved.

Specifically:

- Bank of America agreed to pay $8.5 billion to settle claims it violated obligations regarding mortgages issued by Countrywide Financial

- The Federal Reserve issued final rules on debit card swipe fees; allowing banks to charge up to 22 cents per debit card transaction, 10 cents more than a cap that was proposed in September.

Will clarity on these key issues be enough to unlock gains in parts, or perhaps all, of the sector?

Trader Steve Grasso does, in fact, think these developments will unlock some value. “It makes me more constructive,” he says. “The more we can get rid of the overhang the better it is for bank stocks.” However Grasso emphasizes a long position in bank stocks is a long-term trade. “It’s not a quick bang for the buck.”

Anthony Scaramucci of Skybridge tells us that his hedge fund peers are interpreting developments as signs that the market is nearing the beginning of the end of the trauma generated by the 2008 financial crisis. “Big hedge funds including John Paulson, Appaloosa, Viking and Lone Pine to name a few are long banks as a bullish bet on the recovery. That’s positive news and potentially catalyzing,” he says.

Trader Joe Terranova also finds these developments encouraging. And he adds expectations ahead of earnings season are very low. If you’re looking for a trade he suggests looking at JPMorgan ahead of earnings.

Trader Tim Seymour sees the situation a little differently. Although he concedes developments remove uncertainty, he adds there are many other issues that could generate strong headwinds. “I do not think financials are broadly game on.” However, if you’re looking for a trade, names he likes include Goldman Sachs and
Morgan Stanley.

If you find Morgan Stanley tempting, trader Guy Adami suggests shooting against 22, a level that's emerging as support. “This is a good point of reference,” he says, “at least for a trade.” And he adds Goldman trading down to last year's low of $128.30 and then bouncing is also a good sign. "Over the last few days this is the first time we've seen some glimmer of hope, that allows investors to go long with a point of reference."

Trader Brian Stutland is somewhat cautious. He doesn’t think the clarity moved financials – instead he thinks nervousness came out of bank stocks after the parliament of Greece moved forward with austerity measures, staving off potential defaults.

And looking at developments in the credit card space, all the traders seem to agree that developments are priced in. Perhaps Steve Grasso sums it up best. “Let Visa and Mastercard settle.”






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Trader disclosure: On June 29, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU); Adami owns (INTC); Jon Najarian owns (AAPL) call spreads; Jon Najarian owns (MT) call spreads; Jon Najarian owns (CBS) call spreads; Jon Najarian owns (HOC) call spreads; Jon Najarian owns (MA) call spreads; Jon Najarian owns (MON) call spreads; Jon Najarian owns (POT) call spreads; Jon Najarian owns (X) call spreads; Jon Najarian owns (V) call spreads; Terranova Owns (VRTS); Terranova Owns (IBM); Terranova Owns (FCX); Terranova Owns (CVI); Terranova Owns (F); Terranova Owns (AAPL); Terranova Owns (CAT); Terranova Owns (BX); Terranova Owns (HPQ); Terranova Owns (MA); Terranova Owns (PEP); Terranova Owns (MCD); Terranova Owns (JWN); Terranova Owns (TM); Terranova owns (MSFT); Terranova Owns (LULU); Terranova Owns (WFM); Terranova Owns (DAR); Terranova Owns (BJ); Terranova Owns (HAS); Terrnaova owns (DIS); Terranova Owns (XOM); Terranova Is Short (DELL); Steve Grasso owns (AKS); Steve Grasso owns (AMD); Steve Grasso owns (ASTM); Steve Grasso owns (BA); Steve Grasso owns (BAC); Steve Grasso owns (C); Steve Grasso owns (D); Steve Grasso owns (HOV); Steve Grasso owns (JPM); Steve Grasso owns (LIT); Steve Grasso owns (LPX); Steve Grasso owns (MHY); Steve Grasso owns (NDAQ); Steve Grasso owns (PFE); Steve Grasso owns (PRST)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LHO)
Virtus Investment Partners Owns More Than 1% Of (NRCI)
Virtus Investment Partners Owns More Than 1% Of Sun Pharmaceutical Industries Ltd.
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of DOMINO'S PIZZA UK & URL PLC

For Steve Grasso
Stuart Frankel & Co and it’s partners own (AAPL)
Stuart Frankel & Co and it’s partners own (ABX)
Stuart Frankel & Co and it’s partners own (CSCO)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HPQ)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MU)
Stuart Frankel & Co and it’s partners own (MSFT)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (QQQQ)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)

Anthony Scaramucci
One of 8 national finance chairs for Mitt Romney campaign
Held a fundraiser for Mitt Romney
Has contributed to the Romney campaign

CNBC.com with wires.