Financial stocks hit by Goldman woes

Updated at 2:20 p.m. ET

 

It's a terrible day to be invested in financial stocks today, not just a terrible day to be invested in Goldman Sachs (GS).

Just about every stock in the sector was lower this afternoon after the Securities and Exchange Commission said it had sued the investment bank for fraud in the marketing of a financial product based on subprime mortgages that was secretly designed to lose value.

The financial-sector index of the Standard & Poor's 500 Index ($INX) was off 3.4% today and had been down as much as 5.3%, its steepest intraday decline since September.

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The group had been up as much as 18.6% for the year as of Wednesday. That gain has been trimmed to 14%.

The S&P 500 Financial exchange-traded fund (XLF), which is based on the financial sector, was down 3.1% to $16.46 and had been down as much as 5.4%.

Goldman Sachs was down more than 11.5% to $162.25 at 2 p.m. ET. It had been down as much as 15.6% in the morning.

Goldman said the SEC charges are "completely unfounded in law and fact" and promised to "vigorously contest them and defend the firm and its reputation."

 JPMorgan Chase (JPM) was down 4% to $45.92, subtracting 14 points from the Dow Jones Industrial Average ($INDU) by itself.

At 2:20 p.m. ET, the Dow was down 97 points to 11,047. It had been down as much as 171 points before turning up again.

The Securities and Exchange Commission's fraud accusations against Goldman Sachs spurred concern the fallout from the financial crisis isn’t over.

Indeed, Robert Khuzami, the SEC's director of the Division of Enforcement, said the commission is still investigating the subprime-mortgage disaster.

Bank of America (BAC), despite returning to profitability in the first quarter, was down 4.1% to $18.68, subtracting nearly 7 points from the Dow.

Morgan Stanley (MS) was off 4.5% to $29.49.  Citigroup (C) dropped 5.4% to $4.55.

Rating agency Moody's (MCO) was off 4.8% to $28.21.