Goldman's first loss?

Analysts are speculating that Goldman Sachs (NYSE: GS) may post its first quarterly loss as a public company. According to Reuters, "The potential for a quarterly loss, combined with the generally weaker environment for financial institutions, has some investors wondering if Goldman Sachs really deserves to trade at a higher valuation than Morgan Stanley (NYSE: MS)." Based on that point of view, a bad quarter could cause the premier investment bank's shares to fall sharply.

The factors that may cause the red ink are write-downs in the value of public and private assets and the firm's real estate portfolio.

Leaving Goldman aside, the analysis is an indication that the worst may not be behind many other large U.S. banks and brokerages. If the best-run company in the industry faces substantial losses, what about the rest of the group?

Most investment bank shares are off 60% or more this year. A month or two ago, some were off closer to 80%. More bad news from any firm in the sector could push these stocks to new bottoms. Shares in Morgan, which has recovered to $17, could be driven back down to $7, its 52-week low.

Financial stocks could be heading for another big sell-off.

Douglas A. McIntyre is an editor at 247wallst.com.