Sector Watch: Investment Banks Tumble, Led by Merrill Lynch

By Chris Frankie ,

Financial services and investment banking companies were taking a beating in midday trading after

Merrill Lynch

(MER)

warned of a significant second-quarter shortfall.

Shares of Merrill Lynch dropped 11.7% to $58.69 in recent market activity.

Lehman Brothers

(LEH)

was also on the downside, slipping 2.9% to $74.60, and

Morgan Stanley

(MWD)

was down 4% to $61.97.

Bear Stearns

(BSC)

, which introduced a

new chairman today, fell 2.8% to $55.

Goldman Sachs

(GS) - Get Report

was off 3% to $88.20, while

J.P. Morgan Chase

(JPM) - Get Report

slid 3.7% to $44.12.

UBS

(UBS) - Get Report

lost 1.8% to $141.25.

Merrill Lynch forecast on Tuesday that the company's second-quarter earnings would fall

well short of Wall Street's expectations. The company said it would earn between 52 cents and 57 cents a share, but analysts are looking for income of 82 cents a share. Merrill also said second-quarter revenue would drop 15% sequentially and warned of a potentially weak third quarter.

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