It may not be fair to kick a stock when it's down on the ground, but that's what Moody's Investors Service did this afternoon in downgrading

J.P. Morgan Chase's

(JPM) - Get Report

long-term debt rating by a notch.

The action pushed shares of the nation's second-biggest bank down 90 cents, or nearly 6%, to around $15.70 in late-day trading. If the stock closes at that price, it will set a new 52-week low and break the old mark, which was set just two days ago.

For the year, investors have cut J.P. Morgan's stock price by more than half.

The downgrade, which affects some $42 billion in debt issued by the nation's second-biggest bank, was not unexpected. Indeed, the credit-rating agency signaled the move last month, when it announced a review of J.P. Morgan's debt ratings.

Moody's says it took the action because the bank's "financial performance has lagged behind similarly rated peers." The downgrade could make it a bit more costly for J.P. Morgan, which is considering eliminating several thousand jobs, to borrow money in the public markets.

"We are somewhat skeptical of their abilility to merge commercial and investment banking successfully," says Peter Nerby, a Moody's senior vice president. Nerby's comment suggests that J.P. Morgan's leadership, including the bank's chairman William Harrison, faces an uphill battle in convincing Wall Street that the 2-year-old merger of Chase Manhattan and J.P. Morgan still makes sense.

Moody's announcement, meanwhile, comes three weeks after Standard & Poor's, another credit-rating agency, took a similar action. In fact, the Moody's downgrade, which reduced the bank's senior unsecured debt rating to "A1," is on par with S&P's rating downgrade.

Still, the Moody's action only reinforced the notion on Wall Street that J.P. Morgan is a troubled institution and that it's become the banking industry's poster child for bad loans. Last month, the big bank stunned Wall Street by announcing that its third-quarter earnings would come in well under expectations because of a big $1 billion increase in nonperforming loans to the telecom industry.

Nonperforming loans are loans on the verge of default. When a bank has too many nonperforming loans, it's forced to bolster its reserves for bad debts -- a move that reduced its income and profitability. If the problem gets very bad, a bank may have to write off a loan as uncollectable and take a charge against earnings.

In light of the earnings warnings last month, the Wall Street analysts that follow J.P. Morgan now expect the bank to earn just 8 cents a share in the third quarter, according to Thomson Financial First Call. The bank is set to announce earnings on Oct. 6.