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Goldman Sachs (NYSE: GS) advised selling shares of the financial services firm Citigroup, which sent shares sharply lower on the day. Goldman cut its recommendation for US Brokers to neutral from attractive and strongly recommended that investors sell shares of Citigroup, citing multiple problems, including more asset write-downs, higher loss provisions for consumer credit and the potential for more capital raises, dividend cuts or asset sales.

Shares of Citigroup fell more than 6% on the news, reaching a brand new 52-week low. Goldman's recommendation marks a sharp reversal from the positive stance that it took following the near collapse of Bear Stearns. The news also comes just days after Goldman Sachs itself was downgraded to market perform by analysts at Wachovia "in light of renewed economic fears" despite being the strongest investment bank in the U.S.

Goldman Sachs cut its second quarter and fully year forecasts for several brokers. The largest cuts were made on Citigroup and Merrill Lynch where it now sees the firms posting losses in both the second quarter and full year. Goldman expects Citigroup to take a $9 billion writedown and Merrill to take a $4.2 billion writedown in the most recent quarter. Both firms are expected to report their second quarter earnings in mid-July.

In the end, the brokers and investment bankers are still in big trouble and face large future writedowns. Goldman Sachs remains one of the few large investment banks that has been faring well against the problems, but even they have seen a downgrade. It will be very interesting to see where things head from here now that the negative sentiment is now out in the open with even analysts beginning to downgrade the sector...

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MBIA Inc. (NYSE: MBI) shares are trading higher on the day in a continued recovery from its recent lows as some investors are beginning to find themselves bullish on the bond insurer. This sentiment is apparent in the price of the July $5 options, which are trading at a high $0.75 per contract. The price implies that some investors are betting that MBIA will rise above $5.75 during the next 23 days before the July options expiration.

Investors who are neutral to bullish may be interested in purchasing a covered call on MBIA to take advantage of this premium. The return on investment for this position would be approximately 15.31% for a 23-day period assuming that the stock doesn't plummet below $4.90 during that time.

Shares of MBIA have plummeted in recent weeks after an analyst from UBS noted that the company could face an additional $6.8 billion to $7.5 billion in losses on its mortgage-backed securities and structured finance portfolio. Brian Meredith noted that these calculations were based on UBS' mortgage research team's cumulative mortgage-securities and credit loss expectations.

Recently, MBIA's credit rating was cut to "AA" from "AAA", which means that the insurer may face difficulty generating new business. After all, who is going to insure their bonds with someone who has a less than perfect credit rating.

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Dow Chemical Company (NYSE: DOW) has raised its prices once again in an effort to counteract rising commodity prices. The move represents the second price hike this month alone while the company also noted that it would trim its capacity for several products and add on new freight surcharges to certain orders.

The move also underscores the problem the Federal Reserve faces as it modifies its interest rate policy to address the rising threat of inflation amid weak economic growth. The Fed has already aggressively cut rates from last September through April, but the result has been a dramatic decline in the value of the dollar.

Dow Chemical also noted that things weren't going to improve anytime soon. The company said it will raise prices as much as 25% starting on July 1st, which would come on top of the up to 20% increase that took effect June 1st and led several others to make similar price adjustments of their own.

The company made its first dramatic move back in December when it announced that it would cut 1,000 jobs and shut a number of underperforming plants in order to put the savings to work in higher-growth opportunities. It also unveiled a joint venture with Kuwait Petroleum, which allowed it to sell a big piece of its less profitable assets by selling a 50% stake for $9.5B.

It appears that for the next few months, consumer prices will continue to rise unless the Fed takes action.

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