S&P Financials are higher on the day but still lagging markets, outperforming only the utilities and telecoms as we head into the last part of the trading day. The group was able to hold the 200 level and has been building off that but still faces significant headwinds. Just today there were reports that a Fed report is due out that will accuse Bank of America (BAC) of interfering with an investigation by the Housing and Urban Development (HUD) organization. Still, today's movement is encouraging and may suggest the sector will see support at this 200 psyche level. However, the headwinds will not abate as there is a growing possibility that analysts will lower earnings estimates over the next few weeks. Particularly in the investment banks were there is a growing concern on Q2 performance. Earlier this morning we saw the world's largest commodity trading firm, UK-based Glencore, post results this morning with the majority of its earnings coming from mining operations and not its trading desk. One philosophy that is growing is that regulators will look to pullback some of the regulation as we hit this soft economic patch. This has been stemming since the well publicized face off between Mr. Bernanke and JP Morgan's CEO Jamie Dimon.

News of Note:

1) Bank of America Corp. (BAC) "significantly hindered" a federal review of its foreclosures on loans insured by the Federal Housing Administration, according to Bloomberg. U.S. officials will excuse the bank of being slow in providing data and say it offered incomplete information. "Our review was significantly hindered by Bank of America's reluctance to allow us to interview employees or provide data and information in a timely manner," William Nixon, an assistant regional inspector general for the agency, said in a sworn declaration.

2) RBC Capital Investment Bank initiation details: RBC Capital is initiated on the global investment banks; Barclays (BCS), Credit Suisse (CS), Deutsche Bank (DB), Goldman Sachs (GS), Morgan Stanley (MS) and UBS (UBS). Their preferred name is UBS (Outperform). Their least preferred names are Morgan Stanley (Underperform, $24) and Goldman Sachs (Underperform, target $132). Firm says they have a cautious outlook on the sub sector. A combination of significant regulatory headwinds and a lackluster operating environment are pressuring returns. The firm initiated BCS, CS, and DB with Sector Performs.

3) Oppenheimer's primary conclusion is that the regulatory authorities will ultimately be driven toward moderate and manageable differences between "big" SIFI and "little" SIFI buffer levels for comparable lines of business. While capital requirements for the globally interconnected businesses may well go higher, a high level of SIFI buffer against "plain vanilla" banking businesses would either drive disruptive loan price increases or create an unsustainable return differential that would effectively force the disaggregation of US universal banks. They estimate that C and JPM could reach a 10% Tier 1 common ratio by the end of 2012, though BAC would fall somewhat short. WFC's and USB's threshold would likely be lower. They continue to recommend C, GS, JPM, MS, USB and WFC.