Banks
S&P Lowers Outlook on Lehman, Goldman
03/21/08 - 10:06 PM EDT
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In another sign of flagging confidence in the financial sector, Standard & Poor's Friday lowered its outlook on Goldman SachsGS and Lehman BrothersLEH to negative from stable. The change doesn't affect the debt ratings S&P has assigned to the two investment banks, but it does mean S&P could cut those ratings over the next two years if the companies' financial performance weakens even more than S&P is expecting. The ratings agency currently expects net revenue at the banks to fall 20% to 30% annually. The financial sector is suffering in the wake of the subprime meltdown and related credit crisis. Last week, the collapse of Bear Stearns'BSC stock price after a run on the bank illustrated just how dicey things are for big brokers. In a deal sanctioned by the Federal Reserve, JPMorgan ChaseJPM agreed to rescue Bear Stearns by purchasing it, but at the bargain-basement price of $2 a share. Market participants have wondered whether Bear Stearns' fate would befall another financial firm, although recent actions by the Fed -- including more interest rate cuts and the opening of the Fed's discount window to Wall Street securities firms -- have restored confidence in the markets somewhat. Shares of Goldman Sachs finished Thursday up $13.14 at $179.63. Shares of Lehman Brothers ended the session up $6.42 at $48.65. U.S. stock markets were closed Friday in observance of Good Friday.
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