The S&P 500 Financial Index is now higher (+0.5%), while the broader market is showing a small gain (+0.1%). A rash of negative headlines chopped down the sector as U.S. equity markets opened for trade. The group has been attempting to stabilize but the group remains a favorite target of bears. Yesterday the index dipped 3.5%, its largest one day decline in 10-months. The index now sits at the 205 level which represented technical strength back in late 2010. Currently, valuation arguments from analysts are providing the only support for the group as a double dip in housing, regulatory uncertainty, and legal issues provide a significant obstacle for shares.

News of Note:

1) Sources say that Goldman Sachs (GS) has received a subpoena with regards to its role in the mortgage crisis. The news has been expected ever since the firm was demonized in a 600-page report by Senator Carl Levin and his Senate subcommittee. The WSJ reported on May 21 that these papers were likely forthcoming. Some analysts believe that new information on GS will likely make its way into headlines but for the most part they do not expect a criminal investigation and are quick to note that the subpoena is likely only asking for more information from the firm. GS is down 17% since the release of the Levin report.

2) Goldman Sachs (GS) at Sanford Bernstein Conference- Sanford analyst notes that GS is trading at the fourth percentile in terms of valuation which means 96% of the time it has traded at a higher valuation... GS says meeting Basel III capital requirements will not be an issue... Asked what employees think about being offered more equity and GS responds that employees are very happy to receive equity at these levels... can not accurately predict in the current environment what its ROE will be; as there is more clarity on the rules it will be able to provide a better forecast; says it is also a very competitive environment; have historically given targeted ROEs through the cycle; life to date ROE has run at 24%... says firm has no interest in splitting itself up.

3) Moody's placed BAC, WFC and C on review for a possible downgrade- Ratings agency review is due to a change in government support. Basically the current ratings are based under the implicit backing of the government. The agency believes that, under Dodd-Frank, this back stop is not necessarily in place and thus the ratings need to be reviewed. Housing issues naturally remain a primary concern for the group.

4) Bank of America (BAC): Rochdale out cautious on BAC due to potential impact from housing; but maintains a Buy saying impact is priced in.

5) Genworth Financial (GNW): Strength being attributed to rumor that Einhorn's Greenlight Capital picking up shares.

6) IntercontinentalExchange (ICE) announces volume for May 2011. Average daily volume for ICE's futures markets was 1,429,907 contracts, a decline of 1% from May 2010. Year-to-date through May 31, ADV across ICE's futures exchanges was 1,500,400 contracts, an increase of 12% compared to the first five months of 2010. Total futures volume in May 2011 was 30.0 million contracts, up 4% from May 2010.

7) CME Group (CME) announces May volume averaged 13.5 million contracts per day, up 11% from April 2011, but down 20% from the all-time record monthly average daily volume in May 2010. Total volume for May was 283 million contracts, of which a record 85% was traded electronically. May 2011 month-end open interest reached 97 million contracts, up 7% from the same period last year and up 4% from the same period last quarter.