S&P 500 Starts Week on Back Foot as Goldman Leads Rout in Financials

© Reuters.

By Yasin Ebrahim

AiVIF.com – The S&P 500 fell Tuesday, paced by a slump in Goldman Sachs that triggered a rout in financials after the investment bank’s quarterly results fell short of expectations.

The S&P 500 fell 1.6%, the Dow Jones Industrial Average slipped 1.4%, or 485 points, the Nasdaq lost 2.1%.

Goldman Sachs (NYSE:GS) continued the wave of mostly underwhelming quarterly results from major Wall Street banks after missing expectations on the bottom line as revenue declined and expenses rose. Its shares fell 7%.

This earnings miss triggered further selling in Wall Street banks. Morgan Stanley (NYSE:MS), which reports quarterly results on Wednesday, was down more than 4%, while JPMorgan (NYSE:JPM) added to losses from a week earlier, down about 4%.

A jump in Treasury yields, typically a tailwind for banks, failed to stem the selling, but market participants continue to bet that higher interest rates will ultimately support cyclical sectors of the market such as financials and energy.

“We also see more opportunities in select cyclical and growth sectors, driven by the tailwinds from continued economic growth, a higher interest rate environment, stronger commodity prices, and our preference for higher-quality companies amid many uncertainties in 2022,” Wells Fargo said in a note.

The selloff in tech stocks, meanwhile, showed no sign of abating, as Meta Platforms (NASDAQ:FB) and Alphabet (NASDAQ:GOOGL) led the sector to the downside.

Microsoft (NASDAQ:MSFT) was down about 2% after the technology giant revealed a $69 billion acquisition of struggling video game company Activision Blizzard (NASDAQ:ATVI), which soared 25%.

”Acquiring Activision will help jump start Microsoft’s broader gaming endeavors and ultimately its move into the metaverse with gaming the first monetization piece of the metaverse in our opinion,” Wedbush said in a note.

Alibaba (NYSE:BABA) slipped more than 1% as the White House is reportedly is looking into the Chinese tech firm’s cloud business practices, particularly the storage of data from U.S. clients, to establish if it poses a risk to U.S. national security.

The recent sea of red on Wall Street has been attributed to concerns that elevated inflation will pressure the Federal Reserve to raise rates and tighten monetary policy faster than expected.

“We are seeing broad-based de-risking once again this morning, as traders and investors remain focused on inflationary pressures and potential Fed action just ahead,” Janney Montgomery Scott said in a note. “The Street has priced in up to 4 rate hikes this year, but concern is growing that something must be done sooner than anticipated.”