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Lehman leads brokers lower
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November 1, 2000: 1:27 p.m. ET
Sector retreats after Goldman analyst revises opinion of earnings potential
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NEW YORK (CNNfn) - Shares of top U.S. investment banks, led by Lehman Bros. Holdings Inc., on Wednesday slumped after a highly-ranked analyst lowered his earnings estimates for the sector.
Lehman's (LEH: Research, Estimates) shares were trading off $4.06, or 6 percent, at $60.42 on the New York Stock Exchange. Shares of Merrill Lynch and Co. Inc. (MER: Research, Estimates), the world's top brokerage, were $2.62 at $67.18, a decline of nearly 5 percent. Morgan Stanley Dean Witter & Co.'s (MDW: Research, Estimates) shares were off $3.30, or 4 percent, at $77.
Analyst Richard Strauss of Goldman Sachs cut his fourth-quarter and 2000 earnings estimates for the three firms because of a weak stock market environment. Investment banking and trading revenue declines could lead to earnings declines, Strauss said in a research note.
 He said that banking lines remain soft, and although equity trading is a bright spot, with the surge in volumes and volatility, revenue could be light given the lack of primary market volumes.
"We've actually been at the low-end of the Street range for the fourth quarter ... (and) felt that we had to go even lower, so we did -- a nine percent across-the-board trimming here for the fourth quarter," Strauss said on CNNfn's Market Call. "The backlogs are still very significant, but the current environment is just not allowing deals to get done."
"On top of that, now it's clear that private equity is not going to be able to bounce back in time for this quarter," he added.
Morgan Stanley executives in a Webcast on Wednesday echoed Strauss' concerns about a slowdown in investment banking.
"We're going to get some reality back in the market," said John Mack, the firm's president.
"The business has slowed down, especially on the issuing side," he said, referring to the business of helping companies to sell stocks and bonds.
Mack contended that while domestic investment banking will be weaker than in the past, there are opportunities abroad in areas like China and Europe. Morgan Stanley in September reported a 3 percent decline in investment banking revenues, causing it to miss Wall Street earnings forecasts for the first time in nearly 4 years.
The shares of brokerages not mentioned in the Goldman report were also trading lower on the NYSE. Goldman Sachs Group Inc. (GS: Research, Estimates) shares slipped $4.50 at $95.31, down nearly 5 percent. Bear Stearns Cos. Inc.'s (BSC: Research, Estimates) shares fell $2.38, to $58.25. Also shares of A.G. Edwards Inc. (AGE: Research, Estimates) slipped about $1 to $49.75.
-- from staff and wire reports 
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