Downgrades Hammer Brokerages

Brokerage stocks underwent a fresh selloff on Tuesday after several analysts issued pessimistic outlooks on the businesses.

Shares of Bear Stearns(BSC Quote - Cramer on BSC - Stock Picks), Lehman Brothers(LEH Quote - Cramer on LEH - Stock Picks) and Goldman Sachs(GS Quote - Cramer on GS - Stock Picks) recently were dropping between 3% and 4%. Morgan Stanley(MS Quote - Cramer on MS - Stock Picks) and Merrill Lynch(MER Quote - Cramer on MER - Stock Picks) were falling between 3% and 5%, while shares of Citigroup(C Quote - Cramer on C - Stock Picks) and JPMorgan Chase(JPM Quote - Cramer on JPM - Stock Picks) were dipping more modestly.

Analyst Richard Bove of Punk Ziegel slapped renewed sell ratings on Bear Stearns, Lehman and Goldman. He already has sell ratings on Morgan Stanley and Merrill Lynch.

Bove had raised his ratings on the three brokerage firms in November to market perform, but wrote in a recent note that his upgrades were "premature."

"The brokerage business is undergoing a metamorphosis," Bove wrote in a note. "After benefiting meaningfully from the changes in its environment over the past decade, the markets have now turned ugly. November may have been one of the worst periods on record for the group. This will negatively impact the earnings of these companies near term. More importantly, however, is that it will take some time for these companies to recover and re-establish their record results."

So far, Goldman Sachs has been the most prominent among the major Wall Street players to avoid billions of dollars in writedowns due to the sharp decline in value of subprime mortgage-backed securities and collateralized debt obligations, or CDOs. The firm's stock, however, has not been insulated from speculation floating in the market several weeks ago that the Wall Street titan could take a similar hit as its peers. Goldman CEO Lloyd Blankfein flatly denied any truth to the rumor in early November.

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