Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Goldman shares tumble on "sell" rating

By David Ellis, staff writer


NEW YORK (CNNMoney.com) -- Goldman Sachs stock tumbled Friday after a pair of analysts cut their rating on the firm amid reports of a federal criminal investigation into the Wall Street investment bank.

Goldman (GS, Fortune 500) shares finished over 9% lower on the New York Stock Exchange.

goldman.png
Goldman shares have struggled since the SEC filed charges against the firm earlier this month. Its stock extended its recent decline in Friday trading.

Citing the company's growing legal woes, Matthew Albrecht, a stock analyst for S&P, lowered his rating on the stock to a "sell" from a "hold".

"Though traditionally difficult to prove, we think the risk of a formal securities fraud charge, on top of the SEC fraud charge and pending legislation to reshape the financial industry, further muddies Goldman's outlook," he wrote in a note to clients.

News of a federal probe also prompted Bank of America-Merrill Lynch analyst Guy Moskowski to downgrade the firm Friday, lowering his rating to a "neutral" from a "buy."

"We continue to believe that GS has long-term earnings power beyond what is discounted in the share price," he wrote. "However, it is very difficult to see the shares making further progress until the matter has been resolved."

The ratings cut comes after reports surfaced late Thursday that the company and some of its employees were facing a federal criminal investigation into the dealings of its mortgage-trading operations.

A Goldman spokesperson would not confirm those reports, but said the company was not surprised given the scrutiny surrounding the firm recently. He added that the company would cooperate with any requests for information from authorities.

Another probe would be a major setback for Wall Street's top firm, which has already been reeling from recent civil charges brought against the company by the Securities and Exchange Commission.

Earlier this month, the agency alleged that Goldman defrauded investors in the sale of securities tied to subprime mortgages.

Goldman has been under intense scrutiny ever since. Earlier this week, a group of seven current and former executives at the firm endured a grueling 10-hour hearing from Senate lawmakers over their role in the financial crisis, including bundling and selling toxic mortgage securities.

The company has vehemently denied the SEC's charges though, claiming that investors in the deal were never deceived in any way. To top of page

Index Last Change % Change
Dow 17,891.16 117.52 0.66%
Nasdaq 4,817.59 42.24 0.88%
S&P 500 2,081.43 16.13 0.78%
Treasuries 1.86 0.05 2.53%
Data as of 5:51am ET
Company Price Change % Change
Bank of America Corp... 14.77 0.21 1.44%
Ford Motor Co 13.62 0.06 0.44%
Apple Inc 93.64 -0.10 -0.11%
Freeport-McMoRan Inc... 13.55 -0.45 -3.21%
Frontier Communicati... 5.44 -0.12 -2.16%
Data as of May 2
Sponsors

Sections

Johnson & Johnson has suffered a second costly court defeat over claims its talcum powder caused cancer, and that may be only the beginning. More

It's getting worse for Puerto Rico. The island defaulted on $422 million in bonds related to its Government Development Bank on Monday. Congress is currently debating an aid package for the island. More

Tech leaders Apple, Alphabet and Microsoft all disappointed Wall Street with their latest earnings reports. And that's dragged the Nasdaq back near correction territory. Is this the beginning of another huge pullback or an overreaction? More

Visa says new software will allow consumers to check out with chip cards as fast as swiping a card with magnetic strip. More