Goldman Sachs, Morgan Stanley Profits Dented by Deal Slump
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Goldman Sachs Group Inc. and Morgan Stanley reported sharply lower fourth-quarter, hurt by a continued slowdown in corporate deal-making that had fueled record Wall Street earnings a year earlier. Goldman’s quarterly profit fell 66% from a year ago, and Morgan Stanley’s fell 40%. Both also reported lower revenue. Goldman missed analysts’ expectations for both profit and revenue. Its earnings amounted to $3.32 per share, compared with the $5.56 per share expected by analysts polled by FactSet. It was Goldman’s biggest earnings miss in years, according to FactSet. Investment bankers at both Goldman and Morgan Stanley saw big declines in the fees they earned from advising companies on mergers and from underwriting stock and bond offerings. Overall, Goldman turned out $1.33 billion in fourth-quarter profit, down from about $3.94 billion a year ago. Goldman’s fourth-quarter revenue was $10.59 billion, down 16% from a year ago. That missed the roughly $10.76 billion expected by analysts. Morgan Stanley’s fourth-quarter profit was $2.24 billion, down from $3.7 billion a year ago. That amounted to $1.26 per share, just topping the $1.25 that Wall Street expected. Thus, after missing Wall Street’s earnings estimate, Goldman saw its shares finish the day down $24.08, or 6.5%, to $349.92 - making the bank the biggest drag on the Dow. In contrast, Morgan Stanley stock rose $5.42, or 5.8%, to $97.08, following revenue and profit exceeding expectations.
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After a weak start and a subsequent long spell in negative territory, the Switzerland stock market briefly emerged above the flat line in the final hour on Tuesday, but faltered again and ended the session on a weak note. The benchmark SMI, which fell to a low of 11,376.31 around mid afternoon, climbed to 11,453.64 subsequently, but pared gains and settled at 11,401.99, netting a loss of 34 points or 0.3%. Richemont ended 1.4% down. Alcon, Zurich Insurance Group, Lonza Group, Novartis, Swiss Re, Geberit and Nestle lost 0.5 to 1%. Swiss Life Holding and ABB both ended higher by about 1.35%. Sika and UBS Group gained 0.74% and 0.54%, respectively. In the Mid Price Index, Belimo Holding plunged more than 6%. Tecan Group ended lower by about 2.1%. AMS, Schindler Ps, Zur Rose, Baloise Holding and Schindler Holding also ended notably lower. Swatch Group surged nearly 2.5%. SIG Combibloc gained nearly 2%, while Temenos Group and Lindt & Spruengli ended higher by about 1.3% and 1.1%, respectively.
Despite spending much of the day's session in negative territory, European stocks closed slightly higher on Tuesday thanks to brisk buying at several counters in the final hour. The Stoxx Europe 600 index gained 0.4% to 456.5 points. In Paris, the CAC 40 and the SBF 120 added 0.5% each. London's FTSE 100 gave up 0.1%, while the DAX 40 in Frankfurt edged 0.4% higher. Carmaker Renault (+1.9%) announced on Tuesday that global sales of its eponymous brand had fallen in 2022, amid supply difficulties. Apparently, Renault and Nissan have found common ground on the reorganisation of their alliance. Engie (-5.5% to 12.5 euros) is likely to be under pressure between now and the publication of its 2022 results on 21 February, particularly because of the recent fall in gas prices, warned analysts at UBS. The bank has maintained its "buy" recommendation on the stock, but has adjusted its target price to 15 euros, compared with 15.5 euros previously. Energy services group Technip Energies (+1.8%) revealed on Tuesday that it had won a joint venture contract for preconstruction services (PCSA) for the onshore infrastructure of the Hail & Ghasha gas development project in Abu Dhabi, United Arab Emirates. British spirits group Diageo (+1.8% in London) reported on Tuesday that it had reached an agreement to acquire Don Papa Rum, a dark rum produced in the Philippines, for up to €437.5m.
U.S. stock indexes wobbled Tuesday, following sharply lower earnings from two of the biggest investment banks and Chinese data that showed a near-historic slowdown in economic growth. The Dow Jones Industrial Average dropped 391.76 points, or 1.1%, to 33910.85, weighed down by declines in shares of Goldman Sachs Group and property-and-casualty insurer Travelers. The broad-based S&P 500 index fell 8.12 points, or 0.2%, to 3990.97. The tech-focused Nasdaq Composite edged up 15.96 points, or 0.1%, to 11095.11, rising for seven consecutive trading days, its best stretch since November 2021. Among other movers, Travelers shares dropped $8.92, or 4.6%, to $185, after the insurer unveiled an unexpectedly large estimate for its costs from winter storms, leaving investors concerned about disappointments at other property insurers. Silvergate Capital shares inched up 13 cents, or 1%, to $13.33, paring a morning gain of nearly 30%. The crypto bank disclosed it lost nearly two-thirds of its asset value in the quarter. Shares of Roblox jumped $3.91, or 12%, to $37.12, after the company—which operates a metaverse-like realm, or a virtual place where people play and make transactions—reported December metrics that showed a reacceleration in daily active users. Among riskier assets, bitcoin prices stabilized above the $20,000 mark for the first time since the collapse of crypto exchange FTX. The cryptocurrency is still off about 70% from its record high in late 2021.
Asian stocks were mixed. China’s benchmark Shanghai Composite edged up 0.1%, while Hong Kong’s Hang Seng added 0.1% and Japan’s Nikkei 225 index gained 2.5%. The Bank of Japan (BoJ) keeps its low interest rates unchanged and leaves the upper limit for ten-year government bonds at 0.5 per cent. Netease, one of China's biggest online game producers, are up 4.4 per cent after the company rejected a proposal to extend its long-standing partnership with US video game developer Activision Blizzard. In South Korea, the Kospi slips 0.6 per cent.
Treasury yields ended mostly higher on Tuesday as traders returned from a three-day holiday weekend weighing a batch of somewhat more upbeat global economic data and a disappointing reading on a key U.S. factory index. The 10-year Treasury note recovered 4 basis points to 3.548%. The 2-year Treasury note eased by 4 basis points to 4.203%.
Jefferies lowers Geberit target to CHF 341 (346) - Underperform
Citi raises Julius Baer target to CHF 67.50 (64.50) - Buy
JP Morgan lifts Temenos target to CHF 79 (70) - Overweight
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