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U.S. stocks were mixed Tuesday afternoon, with the Dow Jones Industrial Average weighed down by a fall in Goldman Sachs after a poor earnings report, though other benchmarks were steady as investors digested company results after an early 2023 rally.
How stocks are trading
-
The S&P 500
SPX,
-0.14%
was up 1 point, or nearly flat, at 3,999 -
The Dow Jones Industrial Average
DJIA,
-1.04%
fell 323 points, or 0.9%, to 33979 -
The Nasdaq Composite
COMP,
+1.25%
gained 31 points, or 0.3%, to 11,110
On Friday, the Dow rose 113 points, or 0.33%, to 34,303, the S&P 500 increased 16 points, or 0.4%, to 3,999, and the Nasdaq gained 78 points, or 0.71%, to 11,079. Markets were closed Monday to commemorate the Martin Luther King Jr. holiday.
What’s driving markets
Investor focus turned away from macroeconomic drivers like perceptions of the Federal Reserve’s monetary policy trajectory and towards the fourth quarter earnings reporting season.
The results from Morgan Stanley
MS,
beat analyst expectations while the results from Goldman Sachs
GS,
disappointed. Goldman Sachs fell after the investment bank reported sharply lower fourth-quarter earnings that missed analyst expectations, after a blockbuster year-ago period. Shares were down nearly 7%. Morgan Stanley shares rose after earnings topped Wall Street expectations Tuesday, in part due to record wealth management revenue. Shares are up 7.9%.
These follow Friday’s reports from many of the big banks, including JPMorgan Chase & Co.
JPM,
Bank of America
BAC,
Citigroup
C,
and Wells Fargo
WFC,
on Friday.
See: Goldman Sachs misses its earnings estimate, while Morgan Stanley beats as profits drop
The fourth quarter earnings season is a story of spotting the winners and losers — not only the individual companies, but also the economy’s sectors, said Kimberly Forrest, founder and chief investment officer at Bokeh Capital Partners.
It’s too soon to try gleaning much from the initial wave of results, Forrest said. “We haven’t gotten a clear direction yet in your handful of earnings. But it’s skewing to there being more meets and beats than there are misses. I think that shows us companies are able to mange expectations,” she said.
Overall, S&P 500 index company aggregate earnings are forecast to fall 2.3% in the fourth quarter, according to S&P Global Market Intelligence.
“Fourth quarter earnings season is underway and probably won’t bring much good news,” said Jeffrey Buchbinder, LPL Financial’s chief equity strategist. “Lackluster global growth, ongoing profit margin pressures from inflation, and negative currency impacts are likely to translate into a year-over-year decline in S&P 500 Index earnings for the quarter. As always, guidance matters more as market participants look forward. The key question coming into this earnings season is whether the pessimism surrounding 2023 earnings has gone too far.”
The S&P 500 index rose 4.2% in the first two weeks of 2023, with trader sentiment underpinned by hopes that easing inflation will reduce the need for the Federal Reserve to increase borrowing costs by much more.
“Markets have started off the year strong…While this can be an early sign of a sustained new uptrend, this type of move over the first two weeks after a bad year is not atypical,” said Jonathan Krinsky, chief technical strategist at BTIG.
“The third week of the year following -10% years, however, is when things get more difficult. The average week 3 following -10% years is -0.63%, and when the first two weeks are positive like they are now, the average week 3 return is -1.03% and down 7 of 10 times,” Krinsky wrote in a note to clients.
Also on Tuesday, the New York Federal Reserve’s Empire State Manufacturing Index fell sharply, to negative 32.9 in January, from negative 11.2 during the prior month. That’s a fall to the worst level since the pandemic’s toughest times in 2020, according to the Federal Reserve Bank of New York.
The New York region’s read on manufacturing output is just one look, and it may not stack up against the manufacturing base in other regions, like the south, Forrest noted. “You pay attention to it, but you take it with a grain of salt.”
Companies in focus
-
Alibaba
BABA,
-1.47%
stock is trading lower after meme-stock investor Ryan Cohen amassed a stake in Alibaba Group Holdings and is now actively pushing the Chinese e-commerce giant to expand its share buyback program. Shares are down more than 1.4%. -
Travelers Cos. Inc.
TRV,
-4.87%
stock is slumping after a profit warning from the insurer. The guidance ahead of its earnings results noted the impact from a massive winter storm in December that spanned 37 states, the District of Columbia and Canada. Shares are down more than 5%.
—Jamie Chisholm contributed to this article.
