Highlighted stocks include Huntington Bancshares Inc. (HBAN), MGIC Investment Corporation (MTG) and MBIA Inc. (MBI).

While we remain negative over all, we would note our outlook has begun to improve a bit around the edges given the comparatively limited downside potential remaining for certain entities.

The financial markets and financial stocks in particular have experienced a significant percentage-point lift following the pending modification to the mark-to-market accounting rules (an artificial adjustment to capital) and the announcement for the Public Private Investment Partnership (PPIP) -- though we would point out that there is nothing of note to what was proposed approximately two months ago, we will soon find out if the issues with the securities in question were based on the buyers or sellers being out of whack, or a question of valuation or solvency.

Since the Troubled-Asset Relief Program (TARP) is effectively out of money -- more than $665 billion out of $700 billion has already been used -- we would currently expect nearly $2.0 trillion needed to rectify the problem in the end.

However, uncertainties within the economy (both here and abroad) remain. We have yet to see how much of a "haircut" these toxic assets will require to have for investors to be interested in buying them. Though new home sales have increased, the levels remain compressed and home valuations remain under pressure. While the banking system has begun to experience signs of life, as FICO credit score requirements appear to have moderated from more than 750 to 725 or better out of a 300-850 range, pressures from credit card providers on raising interest rates and lowering borrowing limits have put pressure on mortgage borrowers that could have qualified just a couple of months ago.

As credit score requirements continue to be ratcheted higher, additional hurdles have been added, though the credit scoring agencies continue to have excessive errors in their data. More times than not, these errors can only be addressed by paying for your credit report for a number of months from the three agencies (there is clearly unfair business practices afoot which the US governmental agencies should address). Therefore, it does not really matter how low interest rate levels go if you cannot get credit.

Where does the fault lie? With ourselves for not understanding our personal finances and what we could ultimately afford, as well as our senators and congressional representatives (from both sides) that kept pushing the idea that everyone needs to buy a home.

In addition, the President's stimulus plan continues to be hatcheted at by both sides of the aisle.

OPPORTUNITIES

We think the market gyrations of the past week are a bit a head of the curve. We continue to think the pay-day lenders and pawnbrokers still represent an opportunity, currently.

WEAKNESSES

At this point in time, we fail to see signs of enough positive catalysts to mitigate our negative outlook for the near-term prospects. In 2008, we covered our Sell recommendations on the shares of Washington Mutual and Ambac Financial (ABK) -- combined, these calls yielded in excess of a 90% return -- and in 2009 we recently covered our Sell recommendation on Hudson City (HCBK).

We continue to retain our Sell recommendation on the shares of Huntington Bancshares Inc. (HBAN), MGIC Investment Corporation (MTG) and MBIA Inc. (MBI).