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 - Get Report) 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 - Get Report) 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 - Get Report) 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.