Wall Street falls following Goldman’s earnings miss, as China worries weigh

Wall Street’s primary indexes fell on Tuesday as a result of Goldman’s Sachs missing quarterly profit forecasts, which worsened the already negative mood caused by worries about a slowdown in China’s economic growth.

The biggest drag on the Dow Jones Industrial Average was caused by Goldman’s Sachs Group Inc (GS.N), which dropped 3.5% after the bank disclosed a larger-than-expected reduction in quarterly profit (.DJI).

As its trading unit benefited from market volatility, Morgan Stanley (MS.N) saw a 4.4% increase as it outperformed analysts’ expectations for the fourth quarter’s profit.

According to Octavio Marenzi, CEO of consultancy Opimas, “Widely expected to be horrible, Goldman’s Sachs’ quarterly results were much more dismal than anticipated.”

The Nasdaq (.IXIC) was negatively impacted by Microsoft Corp. (MSFT.O) shares, which fell 0.4% after Guggenheim downgraded them to “sell” from “neutral” and warned of a potentially poor full-year outlook.

Despite mixed performance from other Big Tech and growth stocks like Apple Inc. (AAPL.O) and Amazon.com Inc. (AMZN.O), Tesla (TSLA.O) shares rose 4%, easing pressure on the S&P 500 benchmark (.SPX).

Consumer staples (.SPLRCS) and energy (.SPNY) were both up 0.6% on the S&P 500, while financial stocks (.SPSY) decreased 0.6%.

Big banks had a mixed reporting season, with Goldman’s Sachs and Morgan Stanley’s earnings capping it off. Most big banks have set away rainy-day money in anticipation of an impending recession.

According to Refinitiv statistics, analysts anticipate a 2.4% year-over-year profit decline for the quarter for S&P 500 businesses.

Later in the week, investors will be watching for economic data, particularly retail sales, as well as remarks from Federal Reserve officials for hints on the direction of the central bank’s rate hikes.

Markets have gotten off to a strong start in 2023 on the belief that a moderating of inflationary pressures and some indications of a cooling labour market may provide the Fed with cover to scale back the size of its interest rate hikes.

After China’s economic growth in 2022 plunged to one of its weakest levels in over half a century, U.S.-listed equities of Chinese firms like JD.Com Inc, Baidu Inc, and Bilibili Inc plummeted between 4.9% and 6.4%.

According to Peter Cardillo, chief market economist at Spartan Capital Securities in New York, “I think it’s a combination of some small profit taking after a really strong advance last week and the news out of China.”

The S&P 500 (.SPX) was down 2.24 points, or 0.06%, at 3,996.85 at 9:42 a.m. ET, while the Nasdaq Composite (.IXIC) was down 24.64 points, or 0.22%, at 11,054.51. The Dow Jones Industrial Average (.DJI) was down 147.35 points, or 0.43%, at 34,155.26.

The Dow was dragged down by the insurer Travelers Cos Inc (TRV.N), which dropped 3% after predicting fourth-quarter results below expectations.

On the NYSE, advancers exceeded decliners by a ratio of 1.17 to 1. On the Nasdaq, declining items outnumbered advancing shares by a ratio of 1.18 to 1.

The Nasdaq recorded 46 new highs and six new lows while the S&P index recorded seven new 52-week highs and no new lows.

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