US equities closed on a mixed note on Tuesday as a short but busy week of corporate gains erupted on Wall Street.
The Dow Jones Industrial Average (^DJI) lost nearly 400 points, or about 1.1%, under pressure from banking stocks after Goldman Sachs (GS) posted its biggest profit miss in a decade. The S&P 500 (^GSPC) ended the day up 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) was up a modest 0.1%.
Goldman Sachs recorded a larger-than-expected 69% drop in earnings for the fourth quarter, disastrous for a substantial drop in deal-making revenue and a higher provision for credit losses. The stock fell 6.5%.
Morgan Stanley (MS), meanwhile, reported a smaller-than-expected decline in earnings. Like its Wall Street peers, the firm’s investment banking business took a big hit, but higher net interest income and a record quarter for its asset management business helped dampen overall numbers. The stock rose 5.8%.
The reports come after a lackluster round of quarterly updates from rivals late last week.
Earnings reports from other sectors will also rise in the coming days, with United Airlines (UAL) reporting after the close.
Figures from Netflix (NFLX) from Thursday are also in focus. The update will likely serve as a possible sign of things to come for tech sector results, which will begin in earnest next week.
For the fourth quarter, the S&P 500 is expected to report a year-over-year decline in earnings of 3.9%, according to data from FactSet Research. This would be the first year-over-year decline in earnings reported by the index since a 5.7% decline in the third quarter of 2020.
“We expect earnings to take center stage going forward, where reactions to earnings have widened, while reactions to inflation/FOMC are waning,” Bank of America’s Savita Subramanian and Ohsung Kwon wrote in a note Friday.
World business leaders are gathering this week in the mountains of Davos, Switzerland, for the World Economic Forum. The prospect of a global recession, post-pandemic challenges, climate change and the crisis in Eastern Europe are poised to be at the top of the agenda of the politicians, CEOs and billionaires in attendance. Christine Lagarde, President of the European Central Bank, is among those present.
The week ahead will also be busy with Fedspeak, with several members of the US Federal Reserve making comments in speeches across the country over the next few days.
US Treasury yields were higher on Tuesday, with the benchmark 10-year bond rising about 5 basis points to above 3.55%.
Oil prices rose, with West Texas Intermediate Crude Oil (WTI) futures rising 1.6% to above $81 a barrel.
Tuesday’s moves come after a long weekend in which US stock and bond markets closed on Monday, Jan. 16, for the observation of Martin Luther King Jr. Day. On Friday, all three big averages concluded their second consecutive winning week.
The tech-heavy Nasdaq Composite posted an outrageous gain of 4.8% this week, while the S&P 500 and Dow Jones Industrial Average posted their best performances since November, with weekly gains of 2.7% and 2% respectively.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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