Writedown Talk Whipsaws Citi
Updated from 1 p.m. EDT
Another round of writedown talk sent brokerage stocks reeling for a second straight day Friday.
Merrill Lynch (MER) plunged as much as 11% on news reports that the firm faces regulatory scrutiny over its handling of potential losses on mortgage-backed securities. The news, along with the latest downgrade from Deutsche Bank analyst Mike Mayo, sent shares down 3% and more across the brokerage sector.
Mayo said Merrill and Citigroup (C) could together take $8 billion in further mortgage-related writedowns in the fourth quarter. Merrill shares have been sinking ever since last month's disclosure that the firm would have to take billions of dollars in writedowns on its holdings of collateralized debt obligations, the esoteric debt whose collapse has left financial firms across the world wallowing in losses.Also Friday, Goldman Sachs (GS) tumbled 6% on unconfirmed rumors that the firm faces a big writedown of its own. Goldman said the rumors are "untrue," but the notion that the big firm is under scrutiny unnerved investors. Goldman shares had been the standout in the brokerage group, hitting a 52-week high on Halloween as investors celebrated the firm's achievement in posting record third-quarter results back in September. But the good cheer evaporated Friday, as firms across Wall Street shared in the pain of renewed stock-market declines. Bear Stearns (BSC), Morgan Stanley (MS), Lehman Brothers (LEH), JPMorgan Chase (JPM) and Citigroup each dropped between 3% and 4%. The selloff has renewed pressure on CEOs whose firms have incurred steep losses as a result of this summer's credit crunch and mortgage industry deterioration.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV