Goldman Sachs suffered one of the sharpest declines in the Dow Jones index on Tuesday morning on the New York Stock Exchange, weighed down by a note from HSBC saying it was adopting a less favorable view of the US banking group's fundamentals.

In late morning trading, the stock was down 2%, while the Dow was down 0.4%. Since the beginning of the year, Goldman shares have risen by 24%, outperforming a rise of around 4% for the Dow.

In a research note, HSBC analysts estimate that Goldman Sachs' current valuation incorporates much of the good news that is currently driving the sector.

In their view, a failure to continue the strong performance in investment banking in the coming months, or a deterioration in the financial market environment, could lead to disappointment or even a correction in the stock.

They say they are therefore downgrading their recommendation on the stock from "hold" to "reduce."


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