Salomon Smith Barney downgraded Goldman Sachs (GS) to neutral from buy, and cut Bear Stearns (BSC) to neutral from outperform. Salomon also downgraded Lehman Brothers (LEH), Merrill Lynch (MER) and Morgan Stanley Dean Witter (MWD) to outperform from buy.
Analyst Guy Moszkowski says the run took stocks to, or near to, the tops of narrow relative price-to-book bands in which they've traded since December 2000. He notes a major cyclical improvement would be needed to make them break out of bands towards more typical cyclical peaks. He says he has little doubt this will eventually occur, but says there's not much visibility here.
Moszkowski notes that the mergers and acquisitions business was particularly hard hit, foreshadowing a bigger fee drought in 2002 than he forecast -- the major reason for taking Goldman Sachs to neutral, along with the fact that the company has reached the top of his trading band.