Financial Winners & Losers: Merrill Lynch

Financial stocks were mixed Friday as weak employment data pummeled the broader market and an analyst downgraded Merrill Lynch (MER Quote - Cramer on MER - Stock Picks) to "sell," citing the potential for "very weak" results from investment banks and the likelihood that credit markets will deteriorate further.

Recent data on rising unemployment, falling oil demand, weak retail sales and new records for mortgage delinquencies indicated the economy isn't likely to improve any time soon and sent chills through the market.

The NYSE Financial Sector index shed 0.7% Friday as the Dow Jones Industrial Average dropped a more modest 0.5%.

Merrill shares fell 2% recently to $25.69 after Goldman Sachs analyst William Tanona said Merrill shares were far more overvalued than the company's peers, despite its relatively weak positioning in the sector. Tanona based his downgrade on Merrill's potential for higher writedowns on mortgage-related assets, higher compensation costs and costs related to an auction-rate security probe.

Bank of America (BAC Quote - Cramer on BAC - Stock Picks) on Friday became the latest bank to say it is ready to settle the auction-rate securities investigations being pursued by state and federal authorities. Reuters reported the bank reached an agreement in principle about two weeks ago, although officials said no deal has been reached yet. Bank of America shares rose 1% to $30.91.

M&T Bank (MTB Quote - Cramer on MTB - Stock Picks) shares also responded to an analyst downgrade on Friday, falling 3% to $70.46. Robert W. Baird analyst David George downgraded the stock to "neutral," citing share-price performance, rather than the company's fundamentals. He called M&T "one of the higher-quality names" in the sector.

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