US stock markets suffer heavy losses

By: Miguel A. Rodriguez

16:02, 19 January 2022

The Goldman Sachs abysmal earnings report was the main trigger for the falls.

On Tuesday, Goldman Sachs stock fell as much as 8% after Wall Street's leading investment bank missed quarterly earnings expectations due to weaker trading revenues and rising expenses. Global markets revenue fell  7% in the fourth quarter to nearly $4 billion because of lower equity and fixed income trading revenue compared to a year ago.

The stock slump put Goldman on track for its worst single-day performance since June 2020, shedding around $10 billion market valuation since last Friday.

Once again, the impact of inflation on salary costs was to blame, in addition to a decrease in fixed income operations due to the reduction in the purchase of government bonds.

What's coming next?

Two large banks are left to publish earnings results for the last quarter - Bank of America and Morgan Stanley, scheduled for today. Should they follow the already established trend, the downward pressure on indices could grow even stronger.

Technology stocks have not escaped the selloff either. Microsoft fell more than 2% after announcing the acquisition of the video game company Activision, while Alibaba dropped  2% after learning that the US government was investigating its cloud business practices, specifically concerning data protection of North American clients.

Inflation reports in Europe are also scheduled for publishing.

Today will be an important day in terms of economic figures with the publication of the CPIs for the United Kingdom, Germany, and Canada. These reports could serve to assess the extent to which inflation extends outside the United States and whose results can affect the price of the euro, the pound, and the Canadian dollar.

Since the end of December, the latter currency has been strengthening uninterruptedly due to its correlation with oil, which exceeded October’s highs, technically making its way towards the triple-digit price.

Although global economic growth forecasts have been lowered considerably and, in principle, this should negatively affect the demand for crude oil, the supply remains insufficient. This might be partly due to the lower shale oil production in the United States, whose production costs have increased, as indicated yesterday by the Energy Information Administration.

Sources: Bloomberg, Reuters.

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