We are initiating coverage on Goldman Sachs (GS) with an Outperform recommendation. The company reported strong second-quarter results, significantly ahead of the Zacks Consensus Estimate, led by strong topline growth in all its key businesses.

Goldman's well-diversified business model, coupled with a more favorable operating environment resulting from improved equity markets, led to strong growth in fixed income and a turnaround in investment banking activity.

Though losses from the commercial real estate portfolio will likely weigh on the results in the near term, we think Goldman's sturdy capital and liquidity will lead to increased profitability from newer opportunities once the economy recovers.Zacks Investment Research

div style="text-align: justify;"Merrill Lynch downgrades span style="font-weight: bold;"JP Morgan (NYSE: JPM)/span to Undperform from Neutral while lowering tgt to $27 from $44.br //divbr /Merrill expects 4Q loss of -$0.11 from +$0.25 on expectation of another significant round of credit reserve builds exacerbated by cap mkts activity, mark-to-mkt losses. Also rationalizing ‘09E to better reflect the deteriorating economic environment and better reflect the impact of WaMu loan portfolio. Key driver of new forecasts is expectation of loss rates moving up in-line with higher unemployment. Accordingly, they cut ‘09E to $1.98 (details within). They also stresstest forecasts for very real possibility of higher unemployment and find 09E could easily fall into the red.br /br /span style="font-weight: bold;"Capital markets weak as marks continue/spanbr /They are now forecasting another substantial ($2.8bn) mark-to-market loss in the Investment Bank as asset spreads have gapped meaningfully almost across the board. Investment banking activity has fallen dramatically and ...

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