Wall Street’s main indexes were set to open lower on Tuesday after Goldman Sachs missed quarterly profit estimates, worsening sentiment already dented by downbeat economic data from China earlier in the day.
Goldman Sachs Group Inc (GS.N) fell 2.4% in premarket trading after the bank reported a bigger-than-expected 69% drop in quarterly profit due to heavy losses in its consumer business and a slump in dealmaking.
Morgan Stanley (MS.N) beat analysts’ estimates for fourth-quarter profit as the investment bank’s trading business got a boost from market volatility, offsetting a hit from sluggish dealmaking. Shares of the bank rose 1.4%.
“Widely expected to be awful, Goldman Sachs’ fourth quarter results were even more miserable than anticipated,” said Octavio Marenzi, chief executive officer at consultancy Opimas.
“Morgan Stanley, on the other hand, had results very much in line with expectations, with weakness in investment banking, but stable elsewhere.”
The earnings wrap up a mixed reporting season for big banks, with JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N) last week beating quarterly profit estimates.
Wells Fargo & Co (WFC.N) and Citigroup Inc (C.N), however, fell short of earnings expectations, as most big banks put aside rainy-day funds to prepare for a possible recession.
As focus turns to financial reports for clues on the strength of corporate America, analysts expect year-over-year earnings from S&P 500 companies to decline 2.2% for the quarter, according to Refinitiv data as of Friday.
Investors also await economic data including retail sales later in the week as well as comments from Fed officials for clues on the central bank’s monetary policy stance.
After steep falls in 2022, markets have had a positive start this year on expectations of less aggressive interest rate hikes from the U.S. Federal Reserve as inflationary pressures have begun to ease and there have been signs of a cooling labor market.
Money markets are currently expecting 90.6% odds of a 25 basis point interest rate hike from the Fed in February and see rates peaking at 4.94% in June.
U.S.-listed China stocks such as JD.Com Inc , Baidu Inc and Bilibili Inc fell between 2.4% and 2.6% after China reported economic growth in 2022 slumped to one of its worst levels in nearly half a century.
“I just think it’s a combination of some minor profit taking after a very strong rally last week and then, of course, the news out of China,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
The S&P 500 (.SPX) and the Nasdaq (.IXIC) indexes closed at one-month highs on Friday, with the former up 4.2% so far in 2023. The U.S. stock market was closed on Monday for the Martin Luther King Jr. Day holiday.
At 8:07 a.m. ET, Dow e-minis were down 141 points, or 0.41%, S&P 500 e-minis were down 13.75 points, or 0.34%, and Nasdaq 100 e-minis were down 56.75 points, or 0.49%.
Among other companies, United Airlines Holdings Inc (UAL.O) was set to report results after the bell.