Once gain the markets were weaker in the US on Tuesday. As well as inflation fears and interest rate hike concerns, falls were triggered by an 8% slide in Goldman Sachs shares after Wall Street’s premier investment bank missed quarterly profit expectations, hampered by weaker trading revenues and rising expenses.
That share decline put Goldman on course for its worst single-day showing since June 2020, shedding about $10 billion off its market valuation since Friday’s close, although it recovered to trade down 6.5% towards the close.
This earnings miss triggered further selling in Wall Street banks. Morgan Stanley, which reports quarterly results on Wednesday, was down more nearly 5%, while JP Morgan added to losses from a week earlier, down more than 4%.
We are seeing a repeating story, with bank stocks reporting lower than expected earnings. Bank earnings in the fourth quarter have taken a hit from lower trading volumes as the Federal Reserve slowed the pace of its asset purchases after 18 months of pumping liquidity into capital markets to ease the impact of the COVID-19 pandemic.
The Fed’s intervention had fuelled trading activity as clients bought and sold more stocks and bonds, repositioning their portfolios to match the changing economic environment. But fourth-quarter earnings from large U.S. banks have showed the market backdrop returning to more normal levels.
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