The Goldman Sachs Group reported earnings with a 66% drop in profit from the fourth quarter of 2021 and a 16% drop in revenue.
After the long weekend in the U.S., the stock indices started the week in a gloomy mood, mainly due to the mixed results being released from North American banks thus far.
The Goldman Sachs Group reported earnings with a 66% drop in profit from the fourth quarter of 2021 and a 16% drop in revenue. Rising costs and a higher provision for credit losses impacted the results, with investment banking fees falling nearly 50%. The company's shares dropped more than 4% during the session.
However, Goldman Sachs's rival, Morgan Stanley, exceeded expectations and posted record revenues in its wealth management business. Its shares rose more than 6% during the session. This week, regional banks and other financial services firms will continue to reveal their performance results.
The results from Goldman Sachs and Morgan Stanley have rounded out the big financials, and now the focus shifts to the other listed companies that have yet to report, including Netflix, later this week. It will be the first to announce its profits among the big technology companies.
Analysts forecast that S&P 500 corporate earnings will decline this quarter due to the economic slowdown caused by rising interest rates. However, the market's reaction will depend on how much the actual figures differ from expectations.
Investors will also follow other data this week, such as retail sales and the Federal Reserve's Beige Book.
China's GDP and industrial production numbers were released in the morning and were better than analysts had expected. This indicates that, although a slowdown in the economy may be expected, it may not be as severe as predicted. Furthermore, the recent opening of markets could boost market sentiment positively.
Quite unexpectedly, Bloomberg got hold of a leak from the European Central Bank yesterday afternoon, which showed that rate hikes by the bank might not be as aggressive as initially anticipated. In the news, there was talk of one rate increase of 50 basis points for the next meeting, followed by another of only 25 basis points. This contradicts the comments of President Lagarde and other ECB officials, who have insisted on continued higher rate hikes to combat inflation.
In any case, the market reaction to the news was significant, with yields on European bonds, particularly peripheral ones, falling significantly. At the same time, the euro also experienced downward pressure, which the ECB would not appreciate as a higher euro is an anti-inflationary factor.
The EUR/USD tumbled nearly a full figure from the 1.0870 highs upon hearing the news. Despite this, the consensus in the market is that the pair will continue its bullish path in the near future.
Sources: Bloomberg, Reuters