The Dow Jones Industrial Average fell on Tuesday as investors struggled to keep building on early 2023 momentum and weighed the latest earnings results.
The blue-chip index lost 391.76 points, or 1.14%, to close at 33,910.85. The S&P 500 fell 0.2% to 3,990.97, while the Nasdaq Composite gained 0.14% to end the day at 11,095.11.
Goldman slid 6.44% after the bank reported its worst earnings miss in a decade for the fourth quarter. Its results were pressured by declines in investment banking and asset management revenues. Meanwhile, rival Morgan Stanley posted better-than-expected numbers, thanks in part to record wealth management revenue. Its shares jumped 5.91%.
Those results came after other major banks such as JPMorgan and Citigroup reported mixed quarterly reports.
“Goldman and Morgan Stanley have almost mirror-image price action today following their earnings,” Yung-Yu Ma, BMO Wealth Management’s chief investment strategist, told CNBC. “Even within the financial sector, individual lines of business are faring very differently and Morgan Stanley’s wealth management segment provided a strong ballast.”
“These divergences are indicative of what we expect in this earnings season — diverging fortunes based on industry and sub-industry,” he added.
About 7% of S&P 500 earnings have reported earnings through Tuesday morning, according to FactSet. Of those companies 70% have beaten expectations. United Airlines will report its quarterly results after the bell.
Wall Street is coming off positive back-to-back weeks to start the new year, but investors may have entered a hall of mirrors, according to Mike Wilson, chief U.S. equity strategist at Morgan Stanley.
“The rally this year has been led by low quality and heavily shorted stocks. However, it’s also witnessed a strong move in cyclical stocks relative to defensive ones. This move in particular is convincing investors they are missing something and must re-position,” Wilson said.
“Truth be told, it has been a powerful shift, but we also recognize bear markets have a way of fooling everyone before they’re done,” he added. “We’re not biting on this particular head fake/bear market rally because our work and process is so convincingly bearish, and we trust it.”
Dow Jones Industrial Average
Year-to-date, the Nasdaq Composite is leading the way up 6.01%, as investors buy beat-up technology shares amid rising hopes of an improving landscape for growth stocks. The S&P 500 and Dow have advanced 3.95% and 2.30%, respectively, since the start of the year.
Gains have come on the back of the first crop of inflation-related data, which investors have interpreted as an indication of a contracting economy. They hope this will give the Federal Reserve justification to slow interest rate hikes. Last week, the consumer price index for December showed prices cooled 0.1% from the prior month, but prices were still 6.5% higher than the same month a year ago.