Goldman Sachs shares fell 7 percent as Treasury yields soared and U.S. stock sell-off continued.

Text/Sergei Klebnikov

Summary of the incident

On Tuesday, Goldman Sachs posted disappointing quarterly earnings, continuing the sluggish trend in banks, while soaring government bond yields hit a two-year high and stocks tumbled.

Key facts

The Dow Jones Industrial Average fell about 550 points, or 1.5 percent, the S&P 500 fell 1.8 percent, and the technology-based Nasdaq Composite fell 2.6 percent.

After Goldman Sachs reported disappointing fourth-quarter earnings, its stock plunged around 7 percent. The bank reported lower-than-expected profits, down 13 percent from a year earlier.

Like its rivals JPMorgan Chase and Citigroup, Goldman Sachs also reported rising spending hurting their profits. Goldman Sachs' operating expenses soared 23 percent as employee compensation "rose sharply."

Meanwhile, U.S. government bond yields continued to rise strongly, with two-year Treasury yields breaking through 1 percent for the first time since before the pandemic plunged the economy into recession in February 2020.

The yield on the benchmark 10-year Treasury note also reached 1.85%, the highest level since January 2020.

Tech stocks continued to be under pressure on Tuesday as interest rates rose, continuing the bad trend since 2022: Amazon shares fell nearly 3 percent, while The Meta platform (formerly Facebook) fell 3.5 percent.

Unexpected Facts:

After Microsoft announced the acquisition, the stock price of Activision Blizzard, the game production company behind the Call of Duty series of games, surged more than 25 percent. Once the $68.7 billion acquisition is completed, Microsoft will become the third-largest gaming company by revenue.

Notes:

More banks, including Bank of America and Morgan Stanley, will report earnings on Wednesday. Markets have so far reacted mixedly to Wall Street's biggest banks. Shares of JPMorgan Chase and Citigroup fell on Friday as investors panicked over rising spending, though both companies reported better-than-expected profits. Despite strong overall data, these quarterly reports have largely failed investors with warnings from businesses that increased spending and "inflationary pressures" could affect future profits.

Key remarks:

Adam Crisafulli, founder of market analyst firm Vital Knowledge, said: "Stocks across the broader market are under selling pressure, including cyclical and growth stocks. He added: "This is the second time in a few trading days that the market has been shaken by disappointing earnings and growing concerns about the outlook for corporate profit margins." ”

Key Background:

So far in 2022, the stock market has struggled. The Dow Jones fell more than 3 percent in January, the S&P 500 fell more than 4 percent, and the technology-focused Nasdaq fell more than 7 percent. Investors' persistent concerns about soaring inflation and the Fed's tightening of monetary policy are weighing on stocks.

Translated by Vivian School Li Yongqiang