Goldman Sachs (NYSE: GS) advised selling shares of the financial services firm Citigroup, which sent shares sharply lower on the day. Goldman cut its recommendation for US Brokers to neutral from attractive and strongly recommended that investors sell shares of Citigroup, citing multiple problems, including more asset write-downs, higher loss provisions for consumer credit and the potential for more capital raises, dividend cuts or asset sales.

Shares of Citigroup fell more than 6% on the news, reaching a brand new 52-week low. Goldman's recommendation marks a sharp reversal from the positive stance that it took following the near collapse of Bear Stearns. The news also comes just days after Goldman Sachs itself was downgraded to market perform by analysts at Wachovia "in light of renewed economic fears" despite being the strongest investment bank in the U.S.

Goldman Sachs cut its second quarter and fully year forecasts for several brokers. The largest cuts were made on Citigroup and Merrill Lynch where it now sees the firms posting losses in both the second quarter and full year. Goldman expects Citigroup to take a $9 billion writedown and Merrill to take a $4.2 billion writedown in the most recent quarter. Both firms are expected to report their second quarter earnings in mid-July.

In the end, the brokers and investment bankers are still in big trouble and face large future writedowns. Goldman Sachs remains one of the few large investment banks that has been faring well against the problems, but even they have seen a downgrade. It will be very interesting to see where things head from here now that the negative sentiment is now out in the open with even analysts beginning to downgrade the sector...

Related Companies
Merrill Lynch & Co., Inc. (MER)
Morgan Stanley (MS)
UBS AG (UBS)
Credit Suisse Group AG (CS)
Malaysia Fund Inc. (MAY)
JPMorgan Chase & Co. (JPM)
Interactive Brokers Group, INc. (IBKR)
Citigroup Inc. (C)
Jefferies Group, Inc. (JEF)