The Dow closed nearly 400 points lower and ended a 4-day winning streak under pressure from Goldman shares.
The Dow Jones industrial average edged lower on Tuesday as investors weighed recent earnings results as they struggled to continue building momentum from early 2023.
The blue-chip index lost 391.76 points, or 1.14%, to close at 33,910.85. The S&P 500 fell 0.2% to 3,990.97, while the Nasdaq Composite rose 0.14% to end the day at 11,095.11.
Goldman fell 6.44% after the bank made the announcement worst earnings in a decade for the fourth quarter. Its results were pressured by lower revenues from investment banking and asset management. Meanwhile, rival Morgan Stanley posted better-than-expected numbers thanks to accounting for income from wealth management. Its shares increased by 5.91%.
The results came after other major banks, including JPMorgan and Citigroup, posted mixed quarterly results.
“Goldman and Morgan Stanley have mirrored price action today after their earnings,” Jung-Yu Ma, chief investment strategist at BMO Wealth Management, told CNBC. “Even within the financial sector, individual lines of business operate very differently, and Morgan Stanley’s wealth management segment has provided strong ballast.”
“These divergences reflect what we expect this earnings season – industry and sub-sector-based fortunes,” he added.
About 7% of the S&P 500 reported earnings Tuesday morning, according to FactSet. 70% of these companies exceeded expectations. United Airlines will report its quarterly results after the call.
Wall Street is getting a mixed bag of positive results to start the new year, but investors may have entered a hall of mirrors, said Mike Wilson, chief U.S. equity strategist at Morgan Stanley.
“This year’s rally has been associated with low-quality and heavily shorted stocks. However, it has also seen stronger movement in cyclical stocks than defensive stocks. This move is especially reassuring to investors that something is missing and they should reposition,” he said. Wilson said.
“To be honest, it’s been a strong shift, but we understand that bear markets have a way of cheating before they’re all over,” he added. “We are not biting into this fake/bear market rally because our work and process is so bearish and we believe in it.”
Dow Jones Industrial Average
Year-to-date, the Nasdaq Composite has led the way with a 6.01% gain as investors buy high-tech stocks amid rising hopes for an improving equity growth landscape. The S&P 500 and Dow are up 3.95% and 2.30%, respectively, year-to-date.
The gains came on the back of the first batch of inflation-related data, which investors interpreted as an indication that the economy is contracting. They hope this will give the Federal Reserve reason to slow rate hikes. Last week’s consumer price index for December showed that prices cooled 0.1% from the previous month, but prices were still 6.5% higher than a year ago.
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