Goldman, Travelers drag Dow lower as earnings season picks up
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[January 18, 2023] By
Herbert Lash and Chuck Mikolajczak
NEW YORK (Reuters) - The Dow fell more than 1% on Tuesday as weak
earnings from Goldman Sachs dragged the index lower, but a jump in Tesla
shares helped the Nasdaq stay postive as the corporate earnings season
took center stage.
The rise in Tesla Inc after the electric-vehicle maker's January retail
sales surged in China helped growth-oriented shares eke out gains, but
small caps and value stocks fell as fears of a recession unsettled
investors.
Earnings from Goldman Sachs and Morgan Stanley closed out what was a
mixed bag for big banks, many of which have stashed rainy-day funds to
gird against a potential downturn.
Analysts are anxious to hear from corporate America about the demand
environment amid signs of an upward trend in the economy, said Anthony
Saglimbene, chief market strategist at Ameriprise Financial in Troy,
Michigan.
"Earnings estimates have declined so much at the start of earnings
season that there's potential for companies to hurdle past a really low
bar," Saglimbene said.
"If the demand environment is still relatively healthy, that would
exceed expectations because I think analysts took down earnings so
much."
Goldman Sachs Group Inc slumped 6.44% after the bank reported a
bigger-than-expected drop in quarterly profit and was the biggest drag
on the price-weighted index. A stock's share value is proportional to
its contribution to the index, in contrast to the market
capitalization-weighted S&P 500.
Goldman Sachs posted its biggest one-day percentage drop since a year
ago in January.
Also weighing on the blue-chip Dow index was insurer Travelers Cos Inc,
which fell 4.60% after forecasting fourth-quarter earnings below
estimates.
But a 7.43% jump in Tesla helped keep the Nasdaq afloat after recent
price cuts the company made on its top-selling models, data from China
Merchants Bank International showed.
Tesla was the largest percentage gainer on both the S&P 500 and the
Nasdaq 100.
The Dow Jones Industrial Average fell 391.76 points, or 1.14%, to
33,910.85 and the S&P 500 lost 8.12 points, or 0.20%, to 3,990.97. The
Nasdaq Composite added 15.96 points, or 0.14%, to 11,095.11.
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Traders work on the trading floor at the
New York Stock Exchange (NYSE) in New York City, U.S., January 5,
2023. REUTERS/Andrew Kelly
The Dow snapped a four-session win streak, while the Nasdaq notched
its seventh straight gain, its longest streak since November 2021.
Volume on U.S. exchanges was 11.11 billion shares.
Morgan Stanley rose 5.91% after it beat analysts' estimates for
fourth-quarter profit as its trading business got a boost from
market volatility.
Analysts expect year-over-year earnings from S&P 500 companies to
decline 2.4% for the quarter, according to Refinitiv data, compared
with a 1.6% decline at the start of the year.
Data showed New York state manufacturing contracted sharply in
January as orders collapsed and employment growth stalled, pointing
to continued weakness in national factory activity, fueling
recession concerns.
Equity markets have posted a strong start to the year after a dismal
2022, on hopes easing inflation and a slowdown most notably in the
labor market would allow the Federal Reserve to pare the size of
interest rate hikes it is using to combat high prices.
Money market participants are currently expecting a 25-basis point
interest rate hike from the U.S. central bank on Feb. 1 and see
rates peaking at 4.9% in June and then falling. The Fed projects
rates will be more than 5% into next year.
U.S.-listed shares of Chinese companies declined, with JD.Com Inc
down 5.72% and Baidu Inc off 6.02% after China's economic growth in
2022 slumped to one of its worst levels in nearly half a century.
Advancing issues outnumbered declining ones on the NYSE by a
1.17-to-1 ratio; on Nasdaq, a 1.07-to-1 ratio favored advancers.
The S&P 500 posted 14 new 52-week highs and one new low; the Nasdaq
Composite recorded 118 new highs and 11 new lows.
(Reporting by Chuck Mikolajczak, editing by Deepa Babington)
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