AET Aetna -- After continuing to struggle surpassing its 20-day ema off the open, stock slips to fresh intraday lows as it comes into Friday's low near 23.66 (23.73 -0.58) 13:06 TALKX Floor Talk: Surge in financials continues The recent surge in financials is continuing today, with the group leading the market higher (XLF +5%) along with the energy sector (OIH +5%). There are a number of factors helping the financials to extend their recent rally, including news over the weekend that included positive comments from Barclays (co said it had a great start to the year and has talked with several interested parties regarding the sale of its ETF business) and encouraging remarks from Fed Chairman Bernanke, who said in a rare 60-Minutes interview that the recession could end in 2009, and that there have been signs of stabilization. What's most interesting is that we're seeing significant strength in the distressed companies that the govt has taken a big stake in: AIG +55%, C +33%, FRE +30%, FNM +30%. There are rumors in the market today suggesting that the government will request delivery of stock certificates held by AIG and other institutions in which it has a major investment, thus preventing short-sellers from borrowing the shares they hold... To get a better understanding of the implications of such a move, we'd note that financial institutions that hold large positions of securities have historically participated in the business of securities lending. This process allows the institution's holdings to be borrowed by a securities lender to facilitate a short seller. While it is hard to quantify the impact of a move to call in the borrowed securities, such a move (or the possibility of such a move) could create a major short squeeze as the supply of securities available to be borrowed would shrink. We'd caution that this is purely a rumor at this point and there have been no official comments on the idea. However, in the event that any sort of announcement to this effect was made, watch for momentum in the most heavily shorted stocks (see March edition of highly shorted stocks - click on image to enlarge)... Outside of the most distressed companies, a number of banks and insurers are showing strong gains today: BCS +19%, MET +18%, FITB +16%, BAC +15%, ZION +12%, AFL +11%, HIG +10%, KEY +9%, RF +9%, USB +7%, JPM +5%, GE +6%. The financial sector ETF (XLF) has gained ~38% in the past 5 sessions... Dow +153, SPX +17, Nasdaq +9.