It was Merrill Lynch's turn in the spotlight Tuesday, as analysts revised their views on the firm's immediate prospects. Merrill's shares closed 1.1% down, after Fox-Pitt Kelton analyst David Drone said that the firm is likely to post a first quarter loss, and may end up writing down another $8bn in assets. There are, however, no liquidity concerns.

In the meantime, JPMorgan analysts lowered Merrill's earnings estimates 45%, predicting write-downs of some $5.1bn. UBS analysts are now also predicting that Merrill will post in loss in the first quarter.

And Trader Daily reports that Merrill is about to commence laying off between 10 - 15% of staff in its investment banking unit. Quoting an unnamed 'source familiar with the plans', the website says that up to 300 bankers are likely to be axed in the coming weeks. Directors and Managing Directors are said to be those mostly in the line of fire.

Reuters reports that the bad news already out this week is not confined just to Merrill. Oppenheimer analyst Meredith Whitney came out with a late report Tuesday, downgrading the earnings outlook for Bank of America, Citi, JPMorgan Chase and Wachovia. Ms Whitney said: 'Despite cutting estimates for financials by over 30 times since November, we are confident this will not be our last reduction in 2008....We anticipate the current credit cycle to be the worst in generations'.

The Oppenheimer analyst said that she expects Citi to suffer $13.12bn in asset write-downs in the first-quarter, around $9bn from CDOs. She also expects further possible write-downs at Bank of America ($4.29bn), JPMorgan ($2.83bn) and Wachovia ($1.53bn)

Bloomberg reports that Goldman analysts are now estimating that investment banks, brokerage firms and hedge funds are likely to sustain credit losses of up to $460bn - around 4 times the amount already disclosed. The news agency also reports that consumer confidence in the US economy is currently at a 35-year low.

The Wall Street Journal reports that Standard & Poor's has cuts its ratings on another $39.5bn of US CDOs, bringing the total ratings cuts on these instruments to $165.7bn in the last 4 weeks.

Finally, Dow Jones Newswires reports that Morgan Stanley has been sued in New York for 'deceptively' marketing auction-rate securities as alternatives to money-market funds for investors who were in need of liquidity. The lawsuit is seeking class-action status. The firm said that it denies the allegations detailed in the complaint, and issued a statement that said that: 'The auction-rate securities market has existed for over 20 years without significant disruption until recent market events. In response to these events, Morgan Stanley is working to address its clients' liquidity needs'.

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