Financial stocks are beginning the week deep in the red after Goldman Sachs led a parade of bearish analyst forecasts for the sector.
Goldman said it erred in upgrading financials to neutral last month, and returned its outlook to underweight. The group of analysts led by David Kostin cited four reasons why the financial sector would lag and why a turnaround was not imminent: Credit deterioration will not peak until 2009, capital raising is harder, earnings estimates are all over the place and a flat yield curve will keep performance down.
All of the investment banks traded down as positive news is missing in action.
plunged 4% to $34.51,
fell 3.9% to $23.25 and
sank 3.1% to $37.50.
Meanwhile, shares of
traded down 2.9% after
The Financial Times
reported the firm was cutting 10% of its investment banking staff. Shares were recently down $5.39 to $178.38.
The Wall Street Journal
was readying pink slips for 10% of its work force, as the banking giant attempts to recover from bad mortgage investments. Shares of Citi were giving back 3.4% to $18.64.
A Bank of America analyst said he expects more markdowns on troubled loans as well as a weak sales number in the second quarter at Merrill and
. Michael Hecht now expects a loss of $1.00 per share at Merrill, vs. his earlier view of a 23-cent-a-share profit, and sees a loss of $1.70 a share at UBS, compared to his earlier expectation of a profit of 31 cents a share. He cited the Swiss bank's exposure to subprime as the main reason for concern, and the stock hit a new 12-month low of $20.82, a loss of 4.9%. Shares of UBS are off 63% over the past year as investors sold the stock down in heavy trading on Monday.
Not one to be left out of the party, a Stifel Nicolaus analyst cut his outlook on
. The regional bank plummeted 13.3% after the analyst said it would continue to face asset quality problems. The bank was trading at $5.79, below its 52-week low.
also suffered a drubbing from a
analyst, who raised his loss forecast.
Jim Cramer also said Fannie was the worst of all bank and finance stocks to own. Fannie slid 5.5 to $22.50 and Freddie shed 7.2 to $20.25.
Financial Sector Index was losing 122.901 to 6,511.19.
shares continued to plummet after the company on late Friday disclosed how it planned to respond to recent ratings agency downgrades. The bond insurer said it will require $2.9 billion to satisfy potential termination payments and expects to be required to post roughly $4.5 billion in eligible collateral to satisfy potential collateral posting requirements. The stock swooned 13.8% to $4.82 on Monday, as shares of its chief competitor,
, also descended 6.3% to $1.92.
was a rare bright spot on Monday. The exchange operator said its board had authorized a $1.1 billion share buyback and a special dividend of $5 per share. One analyst suggested that the move was an attempt to drive up the stock price, which has fallen 20% over the past year. The derivatives exchange has a deal to acquire
and the value of the deal has fallen along with the stock price. CME shares jumped 1.9% to $437.19 and Nymex rose fractionally to $91.45.