NEW YORK -
Shares of investment banks fell sharply Thursday as analysts said fixed income problems continued throughout February and will weigh heavily on quarterly financial results.
"Weak volumes and market valuations are likely to make the first quarter one of the worst quarters for investment banks collectively in years," Wachovia Capital Markets LLC analyst Douglas Sipkin wrote in a research note.
Aside from fixed-income deterioration, continued weak credit markets continued to drag down new issues and merger-and-acquisition activity at investment banks as well, Sipkin wrote in the note.
Shares of Bear Stearns Cos., Goldman Sachs Group Inc., Lehman Brothers Holdings Co., Merrill Lynch & Co. and Morgan Stanley all fell more than 3 percent Thursday afternoon.
Bear Stearns shares fell the furthest, dropping $5.31, or 7 percent, to $70.47.
Merrill Lynch shares fell $3, or 6.1 percent, to $46.32.
The broader markets tumbled as well, which could be weighing on the sector. The Dow Jones industrial average fell 131 points to 12,123, while the Standard & Poor's 500 fell 19 points to 1,314.
Deterioration in the markets could continue in the coming months as well, Lehman Brothers analyst Roger Freeman wrote in a client note.
"We believe that volumes will be meaningfully depressed in the near-term as the markets are currently under a significant amount of stress from technical pressures and illiquidity," Freeman wrote in the note.
Volume was down across high-yield, investment-grade and mortgage- and asset-backed securities in February and will likely remain weak, Freeman said.
Among other investment banks, shares of Goldman Sachs fell 3.3 percent to $159.53.
Shares of Lehman Brothers declined 4.2 percent to $46.03, while Morgan Stanley shares fell 3.8 percent to $39.88.
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