Bear Stearns fell 0.4% after reports that investors in two of the investment bank's hedge funds that made big bets on subprime mortgages have been practically wiped out, in more evidence of the turmoil in that corner of the bond market. Dick Bove, an analyst at Punk Ziegel, said the Bear Stearns woes are likely an industrywide problem and cut his ratings on eight top banks and brokerages.
The news and the downgrade were felt throughout the sector and the broader market. Goldman Sachs Group fell 2%, and Merrill Lynch was off 3.3%. Dow component Citigroup declined 1.6%, and Bank of America fell 0.8%. Even J.P. Morgan Chase, which reported a better-than-forecast 20% profit rise, was down 2.4%. Shares of Lehman Brothers, meanwhile, fell 1.9% amid those market rumors of losses from its subprime business.
Here's a chart of the sector. Notice that all short-term moving averages are headed lower. Also note the shorter-term SMAs are below the longer term SMAs. This pulls the longer term SMAs lower, adding to bearish pressure in the sector. Finally, the index is below the 200 day SMA, another bearish signal.
