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."
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.
Stocks end the day mixed, Dow falls almost 400 points
The Dow Jones Industrial Average Index fell to end the day, as Goldman Sachs shares weighed on the stock index.
The Dow lost 391.76 points, or 1.14%, to close at 33,910.85. The S&P 500 fell 0.2% to 3,990.97. The Nasdaq Composite gained 0.14% to end the day at 11,095.11.
— Tanaya Macheel
Truist downgrades Roku, cites high revenue exposure to advertising market
Truist downgraded shares of Roku on Monday, citing the streaming company's high revenue exposure to advertising and low visibility when compared to its peers.
"We view visibility as most challenged for Roku within our Streaming coverage," analyst Matthew Thornton said. "We view 4Q22 consensus as likely a low hurdle (our expectation is for upside to what will prove to be conservative guidance, but with conservative/cautious forward guidance)."
Streaming stocks have come under pressure in recent months on fears of a slowing advertising environment and potential recession. About 55% of Roku's revenues and gross profit stem from brand advertising.
Thornton also views Roku as the "most macro sensitive" in its coverage and expects dim active account growth, given the economic pressures on TV. He anticipates continued weakness within this market as the year progresses.
The firm's $50 price target implies shares could fall modestly from Friday's close, or about 2%.
— Samantha Subin
New year rally is a 'hall of mirrors' requiring strong views and clear vision, says Morgan Stanley's Wilson
Many investors expect a challenging first half of 2023 for stocks to be followed by a strong finish. They're also predicting a recession is on the horizon, although views about when it will begin are mixed.
In any case, margins and earnings are likely to "significantly disappoint whether there is a recession, or not," according to Morgan Stanley's chief investment officer and chief U.S. equity strategist, Mike Wilson.
"Bear markets are like a hall of mirrors, designed to confuse investors and take their money," he said in a note Tuesday. "We advise staying focused on the fundamentals and ignoring the false reflections."
— Tanaya Macheel
Bank of America sees a later start to the recession
A recession probably won't start now until later in 2023 as consumer spending has been stronger than expected and the Federal Reserve eases up on the intensify of its interest rate hikes, according to Bank of America.
"We push back the timing of our outlook for a mild recession in the US economy by about one quarter given durability in consumer spending on account of strong labor markets, excess saving, declining energy prices, and easier financial conditions," the firm said in a client note. "That said, we think the headwinds will lead consumers to reduce spending and push the saving rate higher as the year progresses."
That puts the recession into the second quarter, driven by a an investment-led slowdown leaking to consumer spending.
After pushing its benchmark borrowing rate up by 4.25 percentage points in 2022, the Fed is expected to ease back, with a 0.25 percentage point increase in February. That is forecast to be followed by additional quarter-point increases in March and May.
Rate cuts likely won't come until 2024, the firm said.
Stocks making the biggest moves midday
These are the stocks making the biggest moves in midday trading:
- Goldman Sachs — Shares of the Wall Street investment bank shed more than 7% after it reported its worst earnings miss in a decade.
- Morgan Stanley— The bank stock jumped 6% after the firm reported fourth-quarter earnings that exceeded Wall Street expectations.
- Roblox — Shares of the video game company surged nearly 13% after Roblox's December metrics report showed solid growth for users and bookings.
For more, check out our full list here.
— Tanaya Macheel, Samantha Subin
Roblox pops after strong December metrics report
The company said daily active users were up 18% year over year, with bookings rising at a similar rate.
The stock is now up nearly 30% this year.
— Jesse Pound, Ashley Capoot
Goldman accounts for half of the Dow's losses
The Dow fell about 300 points in early trading, and a big chunk of that decline can be attributed to one stock: Goldman Sachs.
Goldman's 6% drop shaved off about 150 points from the 30-stock average. The Dow is a price-weighted index. In other words, the higher a stock's price, the greater its influence on the index's overall move. Even with Tuesday's losses, Goldman's share price is the second-highest among Dow members.
— Fred Imbert
Goldman shares sink 6% after fourth-quarter earnings disappoint
Goldman Sachs shares sank 6% in morning trading after posting fourth-quarter results that disappointed investors.
The investment bank on Tuesday posted its largest earnings miss in a decade as revenue fell and expenses and loan loss provisions came in higher than expected.
Perhaps more concerning to investors, however, were some cautious comments from Goldman leaders during a call to discuss the results.
The bank may struggle to reach its return targets until the environment improves, executives said Tuesday.
And Goldman is seeing "early signs of consumer credit deterioration" as the economy slows and more borrowers are at risk of falling behind on payments, CFO Denis Coleman told analysts.
Stocks open flat to start the week
Stocks opened flat on Tuesday morning.
The Dow Jones Industrial Average fell 48 points, or 0.1%. The S&P 500 opened above the flat line at 0.01%. The Nasdaq Composite was lower by 0.08%.
— Tanaya Macheel
New York manufacturing activity plunges in January
Manufacturing activity in the New York area has slowed to its lowest level since the early days of the Covid pandemic, according to a Federal Reserve gauge released Monday.
The New York Fed's Empire State Manufacturing Survey registered a reading of -32.9 for January, a tumble of nearly 22 points from a month ago. The last time the survey showed that low of a reading was the -48.5 level recorded in May 2020. January's reading was below anything recorded before the pandemic, according to data going back to July 2001.
The survey measures the percentage of companies reporting expansion against those seeing contraction. Economists surveyed by Dow Jones had been looking for a -7.
New orders collapsed for the month, dropping 27.5 points to -31.1. Shipments also crumbled, to -22.4, down nearly 28 points. Employment also fell, off 11.2 points to a barely expansionary reading of 2.8.
One bright spot in the report was on inflation-related measures: Both the prices paid and prices received indexes fell sharply, though both were still growing with respective readings of 33 and 18.8.
Chevron CEO says there's still a 'disconnect' in energy valuations
Energy was the best performing sector by far in 2022, and Chevron was one of silver linings in the playbook for many investors. Chevron CEO Michael Wirth said Tuesday that the group and his stock is still undervalued.
"We've been leading out industry. We've got a higher multiple than our competitors do, but the whole industry is still really undervalued. you find earnings or cash flow multiples still in the single digits in our industry. The market is kind of in the mid-teens, and there's a lot of tech companies still in the 20s," Wirth said on "Squawk Box."
"We represent 5% of the S&P by market cap, but over 10% by earnings, so there's still a disconnect I think in terms of the valuation of the sector," he added.
Wirth's comments come after Bank of America downgraded Chevron to neutral from buy earlier this month. The bank analyst said Chevron was "a victim of its own success" and likely to see more modest gains this year.
— Jesse Pound
Goldman Sachs shares fall on earnings miss
Goldman Sachs shares declined 2.4% after the Wall Street investment bank shared fourth-quarter earnings results that missed analysts' expectations on both the top and bottom lines.
The bank reported earnings of $3.32 per share on $10.59 billion in revenues. Consensus estimates called for earnings of $5.48 a share on revenues of $10.83 billion, according to analysts surveyed by Refinitiv.
Provisions for credit losses also came in slightly above expectations.
— Hugh Son, Samantha Subin
Activist investor Ryan Cohen takes stake in Alibaba, report says
Ryan Cohen, an activist investor best known for his big bets on meme stock Bed Bath & Beyond and his chairmanship of GameStop, has built a stake in e-commerce giant Alibaba, according to The Wall Street Journal. The report also said Cohen is pushing the company to boost its stock buyback program.
U.S.-listed shares of Alibaba were little changed in the premarket. Alibaba is coming off a tough year, losing 25.8% in 2022. That decline came after the stock dropped nearly 49% in 2021.
— Fred Imbert
Pfizer slides after Wells Fargo downgrade
Pfizer shares traded 1.5% lower in the premarket after Wells Fargo analyst Mohit Bansal downgraded the pharmaceutical giant to equal weight from overweight.
"We think PFE needs a COVID reset before the stock could work again," Bansal said in a note, adding that " uncertainty around COVID business could make investors nervous."
— Carmen Reinicke
European markets mixed as economic concerns dominate Davos
European markets were muted on Tuesday, with concerns about the global economy high on the agenda at the World Economic Forum in Davos this week.
The pan-European Stoxx 600 hovered around the flatline in early trade, with autos adding 0.5% while retail stocks dropped by a similar amount.
CNBC will be speaking to a range of delegates at the forum on Tuesday, including the leaders of Spain, Latvia, Lithuania and Poland and the CEOs of Unilever, UBS, Allianz, Swiss Re and many others. Follow our coverage here.
- Elliot Smith
Where the major indexes stand coming off the first two weeks of 2023 trading
With the first two weeks of 2023 trading done, the three major indexes are up so far for the year.
The Nasdaq Composite is leading the way, adding 5.9% as investors bought beaten-down technology stocks on rising hopes of an improving landscape for growth holdings. The S&P 500 and Dow followed, gaining 4.2% and 3.5%, respectively.
— Alex Harring
RBC downgrades KB Homes, Lennar amid expectations for challenging year for housing stocks
KB Home was moved to sector perform from outperform though the price target was unchanged. The $34 target implied the stock will lose 3.1% from where it closed Friday.
"Our updated ests. reflect our view for a continued significantly challenging fundamental housing environment through '23 before a modest rebound in '24," analyst Mike Dahl said in a Friday note to clients on the KB Home downgrade.
Lennar was dropped to sector underperform from sector perform. Dahl cut the price target by $3 to $76, which implies the stock will drop 30% from Friday's close.
— Alex Harring
Stock futures open lower
Stock futures were lower despite the market coming off a winning week.
Futures tied to the Dow dipped 0.1%. S&P 500 and Nasdaq-100 futures fell 0.2% and 0.4%, respectively.
— Alex Harring