Wall Street Stocks Wavered After Weak Goldman Sachs Earnings, Global Markets Advanced

Barry Adams
17 Jan, 2023
New York City

U.S. stocks struggled and investors weighed the latest earnings and looked ahead for economic growth drivers. 

Investors focused on the latest corporate earnings and international news dominated the news cycle. 

Goldman Sachs said fourth quarter earnings plunged but Morgan Stanley earnings were ahead of expectations after wealth management provided stability in earnings. 

Investors also digested the latest report from the OPEC indicating a demand recovery of oil 2023. 

Moreover, China reported a sharp slowdown in economic growth in the fourth quarter and in 2022 on the account of zero-covid policy. 

The economic growth fell to the lowest level in nearly five decades after retail sales and industrial production declined.

Three years of lockdowns in China have devastated most small businesses and several medium sized businesses in retail, construction and manufacturing are struggling to survive.   

With little support from the central or regional governments, Chinese businesses are facing severe financial liquidity crunch and shortage of workers. 

 

U.S. Indexes Lack Direction 

Benchmark indexes on Wall Street struggled to get traction ahead of the pick up in earnings season. 

The S&P 500 index declined 8.12 points to 3,990.97 and the Nasdaq Composite index increased 15.16 points to 11,095.11. 

 

Demand Recovery Hope Lifts Oil Price 

Crude oil prices advanced to the highest level since early December after OPEC said oil demand is expected to rise 2.2% to 22.2 million barrels a day on the hopes of economic recovery in advanced economies and rising demand from China. 

"US crude imports followed seasonal trends, falling to an eight-month low of 6.2 mb/d in December. 

US crude exports  remained above 4 mb/d for the third-consecutive month. 

US product flows were broadly steady, despite a cold wave  that shut-in US refineries and disrupted travel," noted the report. 

Crude oil price increased $2.15 to $80.96 a barrel and natural gas immediate month futures contract price rose 2 cents to $3.64 a thermal unit. 

 

Treasury Yields Hover Near 4-month Low 

The yield on 2-year Treasury notes increased to 4.20%, 10-year Treasury notes inched higher to 3.55% and 30-year Treasury bonds inched up to 3.66%. 

 

U.S. Stock Movers 

Goldman Sachs fell 2.4% to $365.11 after the financial services provider reported a sharp decline in revenues and earnings. 

Goldman Sachs said fourth quarter revenue fell 16% from a year ago to $10.6 billion and net income plunged to $1.2 billion from $3.8 billion or diluted EPS fell to $3.32 from $10.81 from a year ago.

Morgan Stanley rose 5.4% to $96.37 after the financial services provider reported better-than-expected quarterly results. 

Fourth quarter revenue fell to $12.7 billion from $14.5 billion a year ago and diluted earnings per share dropped to $2.2 billion from $3.7 billion or $1.26 from $2.01 a year ago.

United Airlines fell 0.9% to $51.20 in the regulator trading session and advanced 3% to $52.76 in the after-hours trading after the airline reported higher-than-expected revenues on the resilient demand despite higher fares. 

After the market closed, United Air said fourth quarter revenue increased to $11.2 billion from $8.2 billion a year ago. 

The airline swung to a net income of $840 million from a loss of $646 million and diluted earnings per share was $2.55 compared to a loss of $1.99 a year ago.  

The airline also estimated revenue in the first quarter 2023 ending in March to increase 50% from the previous year and earnings per share between 50 cent and 51 cents. 

 

Whirlpool Sells Europe Business 

Whirlpool Corporation increased 2.2% to $157.70 after the household equipment maker said it plans to sell its Europe, Middle East and Africa business and form a partnership with Turkey-based Arcelik AS. 

Whirlpool will contribute its European domestic appliance business, and Arcelik will contribute its domestic appliance, consumer electronics, air conditioning, and small domestic appliance businesses into the newly formed entity. 

Whirlpool will own 25% and Arcelik 75% of the newly formed company and Arcelik will retain full-ownership of its Turkish business. 

 

European Investors Look to China for Growth 

European markets edged lower but hovered near 11-month highs after oil, gas and mining stocks advanced following the hopes of demand recovery in advanced economies and in China. 

Stocks in Paris struggled after luxury stocks fell on the worries of China's economic growth. 

 

China Reported Second Weakest Annual GDP Growth In Five Decades

China reported its worst economic growth in nearly five decades in 2022 after zero-Covid policy dampened economic activities despite record trade surplus in the year. 

China's GDP growth in the fourth quarter 2022 slowed to 2.9% from 3.9% in the third quarter. 

On a quarterly basis, the economy was flat after expanding at 3.9% in the previous three months to September. 

For the full-year 2022, the economy expanded at 3%, the slowest pace since 1976 excluding 2.2% advance in 2020 during the onset of the coronavirus pandemic. 

Retail sales declined 1.8% from a year ago in December and fell 0.2% in full-year 2022. 

Industrial production increased 3.6% in full-year 2022 and advanced 1.3%. 

 

European Indexes Hovered Near 11-month Highs 

The DAX index fell 9.4 points to 15,124.66, the CAC-40 index was nearly unchanged at 7,043.77 and the FTSE 100 index fell 0.1% to 7,850.83. 

The euro traded higher at $1.085, the British pound edged higher to $1.227 and the Swiss franc inched lower to 91.96 U.S. cents. 

 

Energy Prices Trade Higher In Europe 

Energy prices rose in Europe following the optimistic report from OPEC. 

"Preliminary figures show crude imports into OECD Europe remaining at healthy levels through the end of the year, despite imports of Russian crude falling to near zero excluding flows to Turkey. 

OECD Europe product imports are also seen to be higher in anticipation of the impending February sanctions on Russian oil product imports," the report from the OPEC highlighted. 

Brent crude oil rose $1.94 to $86.32 a barrel and the Dutch TTF natural gas futures price rose 5% to €58.63 per MWh. 

The yield on 10-year German Bunds traded lower to 2.16%, French bonds declined to 2.63%, UK Gilts to 3.40% and Italian bonds inched higher to 4.002%. 

 

Europe Stock Movers 

Nordex SE closed nearly unchanged at €14.76 after the Germany-based wind turbine maker reported a fall in orders in the fourth quarter and in 2022.  

In the fourth quarter, the company received orders for 386 wind turbines compared to 678 with a total output of 1.9 GW compared to 3.3 GW a year ago. 

The average sales price in euros per megawatt of capacity soared to €0.89 million/MW  compared to €0.74 million/MW a year ago. 

Hugo Boss AG declined 2% to €59.44 after the luxury fashion designer said preliminary sales in the fourth quarter rose 18% to €1.07 billion from €905 million a year ago. 

Hays Plc increased 2.2% to 121.76 pence after the recruiting company reported an increase in its fiscal second quarter fees. 

Net fees in the December quarter increased 11% or rose 8% on a comparable basis, driven by a 25% jump in revenue in Germany. 

The recruitment agency reiterated its operating earnings estimate for the first-half between £95 million and £97 million. 

THG plc plunged 8.7% to 62.50 pence after the online retailer of cosmetics and dietary supplements reported weaker-than-expected full-year sales.

2022 revenue increased 4.1% to £2.25 billion after combined revenue in its beauty and nutrition divisions rose 9.4% from a year ago. 

"A dedicated focus on high-margin categories and relatively low maintenance capital expenditure supports the Group's expectation of being broadly free cash flow neutral in FY 2023, and significantly free cash flow positive in FY 2024," the company said in its trading statement. 

Ocado Group Plc declined 9.2% to 733.0 pence after the online retail platform in partnership with Marks & Spencer estimated sales growth "in mid-single-digits" in 2023. 

 

Japan Awaits Rate Decision

Stocks in Japan rebounded, after two days of heavy losses, ahead of the Bank of Japan's decision tomorrow after the conclusion of a two-day policy meeting.

The Nikkei 225 average advanced 1.2% to 26,138.68 and the yen traded near 128.70 against the U.S. dollar after the Japanese government bond yields rose above the upper limit set by the Bank of Japan for the third day in a row. 

 

China's GDP Growth Slows to Near 5-decade Low

Stocks in Shanghai traded nearly unchanged after the statistics bureau reported weakest economic growth in about 45 years. 

China's GDP growth in the fourth quarter 2022 slowed to 2.9% from 3.9% in the third quarter. 

For the full-year 2022, the economy expanded at 3%, the slowest pace since 1976 excluding 2.2% advance in 2020 during the onset of the coronavirus pandemic. 

Retail sales declined 1.8% from a year ago in December and fell 0.2% in full-year 2022. 

Industrial production increased 3.6% in full-year 2022 and advanced 1.3%. 

The Shanghai Composite index decreased 0.1% to 3,224.24 and the Hang Seng index fell 0.8% to 21,577.64. 

 

China Population Shrinks 

China's population shrank for the first time in decades and the working population ratio declined, adding pressure on policymakers to find ways to improve productivity and expand the safety net. 

The Chinese government said deaths outnumbered births in 2022 and the elderly population increased. 

Total number of births declined to 9.56 million in 2022 from 10.62 million in 2021 and deaths increased to 10.41 in 2022 from 10.1 million in 2021, the National Bureau of Statistics said in a report Tuesday. 

Total births declined for the sixth year in a row. 

China's elderly population, those 60 years of age and older, expanded by 13 million to 280 million or one fifth of its 1.4 billion population.  

 

India Stocks Rebound After Two Days of Losses 

The Sensex index advanced 0.9% to 60,655.72 and the rupee held at 81.57 against the U.S. dollar in international trading. 

Investors bid up stocks focused on the domestic economy in cautious trading after the international price of crude oil advanced, stoking fears of higher inflation.