Financial stocks declined as
reported $1.5 billion in losses since July.
The investment bank said that trading conditions have "substantially deteriorated" in the third quarter, and that spreads on mortgage-backed securities had widened.
Much of the market drop is attributed to
sale of $30.6 billion in toxic bonds to Lone Star Equity. That deal basically set a price much lower than was on the books. JPMorgan tumbled 9.5% to $37.92.
Investment banks traded down as a group, with Merrill dropping 4.8% to $24.88,
losing 6% to $167.30 and
giving back 12% to $16.21. Goldman Sachs also suffered a downgrade by a Deutsche Bank analyst from buy to hold.
The NYSE Financial Sector index slid 218.29 to 6,403.20.
faced its losses head-on, saying it had taken more writedowns, this time for $5.1 billion. The new losses come on the heels of $37.4 billion that has already been written down. The Zurich-based bank announced more management changes as money continues to flow out of the bank. Investors sold off the stock, sending it down 6.4% to $20.30.
Still not able to gain any traction,
American International Group
continued its downward trend, falling another 6.6% to $22.85. Stifel Nicolaus analyst Michael Paisan wrote that "there appears to be no let-up in the crisis" affecting the company; he cut his full-year earnings estimate for the insurer.
Another bank struggling on Tuesday was
, which tumbled 12.2% to $16. The bank is closing down mortgage offices, cutting 125 jobs and planning to eliminate 11,350 jobs. Wachovia also reported in a regulatory filing that it recorded an additional $500 million in legal reserves. The increase is due to settlement discussions regarding auction-rate securities.
Bank of America
traded in the red as investors got anxious over the negative news that continues to flow in the financial sector. The bank declined 6.7% to $31.13.
But it wasn't all gloom and doom for the group, as the big winner of the day was
. It jumped 12.6% to $65.50. The San Francisco-based bank received a $3 billion bid from Japan's largest bank,
Mitsubishi UFJ Financial Group
Japanese banks mostly missed the U.S. subprime disaster and are looking to boost their presence in the market. The banks are so beaten down and the dollar so weak, that foreign investors can pick up good banks on the cheap.