Moody’s announced this morning that it is reviewing several big banks for possible downgrade.
Bank of America (NYSE: BAC), Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), JPMorgan Chase (NYSE: JPM) and Morgan Stanley (NYSE: MS) were among the big banks put on notice today, sending each stock falling in Thursday morning trading.
Morgan Stanley’s stock has taken the biggest hit, falling 3.5% as of 10:10 a.m. Fellow investment bank Goldman Sachs was down 1%. Citigroup (-1.2%), Bank of America (-0.6%) and JP Morgan (-0.2%) have also taken slight dips.
Moody’s said that a downgrade of each of those big banks is possible due to concerns over their long-term profitability. Eight other financial institutions are under review, including the Royal Bank of Scotland (NYSE: RBS), whose stock is down 0.8% this morning.
The pullback in the banks could signal that the market as a whole is finally due for a pullback after what has been close to a three-month rally. As our own Jason Cimpl has written repeatedly in recent weeks, banks have led the rally. Now, as the past few days have revealed, banks are leading the retreat.
The pullback hasn’t truly begun yet. The S&P 500 is up 0.4% this morning despite bank stocks falling. Overall, the index is virtually unchanged this week.
Should the big banks’ pullback become more pronounced in the coming days, the market retreat that seems so long overdue at this point may suddenly begin in earnest.
So keep an eye on the banks. Right now most of the big boys are simply “under review.” If Moody’s does start handing out downgrades…look out below.