Goldman Sachs says U.S. brokers no longer “attractive”

By Daniel | June 26, 2008

By Steve Goldstein, MarketWatch

Last Update: 6/26/2008 5:37:00 AM

LONDON (MarketWatch) - U.S. stock futures dropped on Thursday as Goldman Sachs
said U.S. brokers no longer look attractive and as Research In Motion, Nike and
Oracle all issued cautious outlooks.

S&P 500 futures dropped 7.7 points to 1,314.90 and Nasdaq 100 futures dropped
10.25 points to 1,922.00. Dow industrial futures fell 63 points.

U.S. stocks ended Wednesday with moderate gains after the Federal Reserve held
interest rates at 2% and took a step toward preparing the market for rate hikes
down the road. The Dow industrials rose 4 points - the blue chips were limited by
a Boeing downgrade — the S&P 500 added 7 points and the Nasdaq Composite rose
nearly 33 points.

The economics calendar on Thursday features the final reading of first-quarter
GDP as well as weekly jobless claims and existing-home sales. Also on the housing
front, builder Lennar (LEN) is expected to report its quarterly results.

The euro hit a record against the Japanese yen, while trading was muted for the
greenback. Oil futures rose 20 cents to $134.75 a barrel.

Goldman Sachs cut its rating on U.S. brokers to neutral from attractive, and put
Citi (C) on its conviction sell list, saying that while it still believes the
market is putting too much weight on the possibility that another investment bank
may fail, it is “hard pressed” to find a catalyst to move the group significantly
higher over the next few months as fundamentals continue to deteriorate.

In pre-open trade, Citi shares dropped 5%. The downgrade of U.S. brokers appeared
to affect Goldman Sachs (GS), which lost 1.5%; Goldman analysts don’t provide
coverage of their employer.

BlackBerry maker Research In Motion (RIMM)(CA:RIM) said late Wednesday that it
doubled its revenue and earnings during the fiscal first quarter but gave signs
that it’s going to ramp up spending to sustain its growth rate.

“We were concerned about the disappointing guidance, a small miss on gross
margins, larger-than-anticipated operating expense increases and capital
spending,” said Deutsche Bank analysts. “All of this seems to indicate that
growth has become incrementally harder to achieve.”

RIM shares tumbled 9% in Frankfurt.

Nike (NKE) reported a 12% profit for the fourth quarter to May 31 on Europe and
Asian growth but noted that U.S. orders were flat. Nike shares fell 4% in
Frankfurt.

Oracle (ORCL) said its fiscal fourth-quarter net rose 27% but issued profit
guidance for the first quarter at the low end of analyst expectations.

“Although Oracle’s fourth-quarter results clearly beat consensus, it should be
kept in mind that Oracle’s final quarter is traditionally the strongest, driven
by discounts and buying incentives. The good news is that the money to be spent
is still there, despite the economic uncertainties. But there is still the risk
that the spending environment will deteriorate in the remainder of the year,”
said Knut Woller, an analyst for UniCredit.

Oracle shares dropped 6% in Frankfurt. Anheuser-Busch (BUD) is going to formally
reject InBev’s $46 billion takeover offer and announce a plan to dispose of its
theme park division, according to a report in The Wall Street Journal.

In Asia, the Nikkei 225 fell marginally, the Tokyo index’s sixth straight loss.
The FTSE 100 dropped 1.2% in London.

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