Six major Wall Street firms were warned Tuesday that their credit ratings could be downgraded in the latest sign that the profound slump in the securities industry is not expected to end soon.
Standard & Poor’s, a major ratings agency, said its unusually broad assessment was prompted by persistent turbulence in key financial markets and a downturn in trading and underwriting securities, which have steadily hammered profits.
The firms cited by S&P are Bear, Stearns & Co.; CS First Boston Group Inc.; Goldman Sachs Group LP; Morgan Stanley Group Inc.; PaineWebber Group, and Salomon Inc.
S&P’s warning comes despite a powerful rally in stocks and bonds in the last four months that has carried market indices to record heights. But S&P said troubles persist in markets for exotic derivative securities and other investments. S&P said it needs more evidence that the rally has translated into higher trading volume and stronger earnings at the firms.
