Both Goldman and Morgan Stanley are due to report their second quarter results next week, and rumours are apparently doing the rounds that Goldman, in particular, will unveil something nasty.

"There's been rumours of a large write-off to be announced at Goldman Sachs, which has caused a lot of the financial stocks to swoon a little bit," Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, told Reuters.

Standard & Poors downgraded Goldman to negative earlier this month on account of its over-reliance on trading and an expected 20-30% decline in year-on-year revenues.

Dave Hendler, an analyst at CreditSights, said anything is possible at Goldman given Lehman’s woes (Fuld has, incidentally decided to take aim at Erin Callan and Joseph Gregory instead of himself).

And City headhunters say Goldman has joined other banks in slicing staff in fixed income and investment banking: “They’ve been cutting quietly in dribs and drabs across the piece.”

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