Stocks falter as investors enter the thick of earnings season

U.S. stocks struggled to orient themselves at Tuesday’s open as a shortened but busy week filled with corporate earnings began on Wall Street.

The S&P 500 (^GSPC) edged up 0.1%, while the Dow Jones Industrial Average (^DJI) edged down 50 points, or 0.2%. The tech-heavy Nasdaq Composite (^IXIC) was just above breakeven.

The rest of the financial sector results are expected to trickle down over the next few days, with all eyes on megabanks Goldman Sachs (GS) and Morgan Stanley (MS) reporting their results before the bell on Tuesday after a lackluster series of updates. quarterly updates from their peers. late last week.

Goldman Sachs posted a 69% bigger-than-expected decline in fourth-quarter profit, due to a substantial decline in trading revenue and a higher provision for loan losses. The shares fell 2.3% in early trading.

Morgan Stanley, meanwhile, reported a lower-than-expected profit decline. Like its Wall Street peers, the bank saw lower investment banking revenue, but a rise in net interest income and a record quarter for its wealth management business helped dampen the overall numbers. The shares rose 4%.

Earnings reports from other sectors will also rise in the coming days, with Thursday’s Netflix (NFLX) numbers in focus. The update is likely to serve as a potential sign of things to come for the tech sector’s earnings, which are expected to start in earnest the following week.

The S&P 500 is expected to post a 3.9% year-over-year earnings decline for the fourth quarter, according to data from FactSet Research. It would be the first year-over-year decline in revenue reported by the index since a 5.7% decline in the third quarter of 2020.

“We expect earnings to take center stage going forward, where earnings reactions have increased, while inflation/FOMC reactions have declined,” wrote Savita Subramanian and Ohsung Kwon of Bank of America in a note Friday.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 5, 2023. REUTERS/Andrew Kelly

Global business leaders are gathering in the mountains of Davos, Switzerland, this week for the World Economic Forum. The prospect of a global recession, post-pandemic challenges, climate change and the crisis in Eastern Europe are about to top the agenda of politicians, CEOs and billionaires in attendance. The President of the European Central Bank, Christine Lagarde, is among the participants.

The week ahead will also be busy with Fedspeak, with several members of the US central bank due to deliver speeches across the country in the coming days.

US Treasury yields rose Tuesday morning, with the benchmark 10-year note rising about 5 basis points to 3.55%.

Oil futures rose slightly. West Texas Intermediate Crude Oil (WTI) futures were trading around $80 a barrel as of 6:55 a.m. ET.

Tuesday’s decisions come after a long weekend in which U.S. stock and bond markets closed Monday, Jan. 16, in honor of Martin Luther King Jr. Day. On Friday, the three major averages closed their second consecutive winning week.

The tech-heavy Nasdaq Composite posted an outsized 4.8% gain for the week, while the S&P 500 and Dow Jones Industrial Average posted their best performances since November, posting weekly gains of 2.7% and 2%, respectively.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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