The S&P 500 Financial Index is trading lower today as we see some profit taking ahead of the weekend. The index had rallied approx 10% during the week so a pullback from this 176 area should not come as a surprise. News was relatively light with the markets following the buzz around the UBS rogue trader that is likely to cost the bank $2 bln this quarter. Still there were some defenses for UBS with S&P saying that they could still turn a profit. There has been little news out of the Ecofin meeting in Poland surrounding a European TARP which has also aided the decline. But, there was little expected from the meeting so this should hardly come as a surprise.

News of Note

1) On September 14, 2011, St. Joe Company (STJ) entered into a Stockholder Agreement with Fairholme permitting it to acquire beneficial ownership of up to 50% of outstanding common stock. Co had previously approved, in 2009, Fairholme's acquisition of beneficial ownership of up to 30% of outstanding common stock. Pursuant to the terms of the Stockholder Agreement, Fairholme has agreed that, until September 14, 2016, it will vote any shares that it beneficially owns or has proxy voting authority in excess of 33.33% of outstanding common stock in proportion to the manner in which all outstanding shares of common stock are voted. However, the proportional voting requirement will not apply in connection with any public solicitation of proxies for the removal of the directors or nominees by a person or group other than Fairholme.

2) Transatlantic (TRH) and Allied World Assurance (AWH) have mutually terminated their previously announced merger agreement. Consistent with the terms of the merger agreement, Transatlantic has agreed to pay Allied World, within two business days, a termination fee in the amount of $35 mln (and expense reimbursement in the amount of $13.3 mln), and has agreed to pay an additional fee in the amount of $66.7 mln in the event that, prior to September 15, 2012, Transatlantic enters into any definitive agreement in respect of any competing transaction or recommends or submits a competing transaction to its stockholders for adoption, or a transaction in respect of a competing transaction is consummated. TRH's plans includes the approval of a $600 mln open market or negotiated share repurchase program, which adds $455 mln to the co's existing share repurchase authorization.

3) Bloomberg.com reports that sources believe Bank of America (BAC), the lender burdened by its Countrywide Financial takeover, would consider putting the unit into bankruptcy if litigation losses threaten to cripple the parent. The option of seeking court protection exists because the bank maintained a separate legal identity for the subprime lender after the 2008 acquisition. A filing isn't imminent and executives recognize the danger that it could backfire by casting doubt on the financial strength of the largest U.S. bank, the people said. But BAC does want to hold this nuclear option open in case litigation expenses get out of hand.

4) Austria's Finance Minister says Geithner rejected the idea of financial transaction tax.

5) Lloyds Banking (LYG) added to Conviction Buy List at Goldman.