By Sue Chang and Chris Matthews, MarketWatch
Banks' muted trading activity weighs on revenue
U.S. stocks closed lower Monday, though not far off records for
indexes, as results from Goldman and Citigroup failed to thrill
investors, who are looking to an early slate of earnings from banks
to get a sense of the health of the broader economy.
How did the benchmarks fare?
The Dow Jones Industrial Average fell 27.53 points, or 0.1%, to
26,384.77 and the S&P 500 dropped 1.83 points to 2,905.58. The
Nasdaq Composite Index shed 8.15 points, or 0.1%, to 7,976.01.
What drove the market?
GoldmanSachs Group Inc.(GS) and Citigroup Inc.(C) reported
quarterly results as earnings season gets under way, though the
week will be shortened by the Easter holiday
(http://www.marketwatch.com/story/which-markets-are-closed-on-good-friday-2019-04-15).
Both banks showed sharp declines in earnings, compared with the
first-quarter of last year, but were able to surpass analysts' low
expectations for quarterly profits. On the revenue front, Goldman
fell short of estimates while Citigroup matched, underscoring muted
trading and mergers-and-acquisition activity on Wall Street in the
first quarter. Blue-chip Goldman shares were down 2.3% Monday,
weighing heavily on the Dow
(http://www.marketwatch.com/story/goldmans-stock-fall-to-chop-about-26-points-off-the-dows-price-2019-04-15),
while Citi shares rose 0.1%
Analysts expect first-quarter earnings numbers for the S&P
500 to suffer the first year-over-year decline in nearly three
years
(http://www.marketwatch.com/story/risk-of-an-earnings-recession-rises-as-sp-500-profits-to-fall-for-first-time-in-3-years-2019-04-11)
as macroeconomic headwinds continue to pull down estimates from
analysts.
U.S. Treasury Secretary Steven Mnuchin told reporters over the
weekend that the U.S. and China were moving closer to an agreement
on trade, with phone discussions between the two countries last
week. But he wasn't sure if more face-to-face meetings would be
needed. On Sunday, Reuters reported that the U.S. was watering down
demands
(https://www.reuters.com/article/us-usa-trade-china-exclusive/exclusive-u-s-waters-down-demand-china-ax-subsidies-in-push-for-trade-deal-sources-idUSKCN1RR02X)
that China cut down on industrial subsidies as a condition for a
deal after encountering strong Chinese opposition.
Read:Here's how Mnuchin interprets signs from the yield curve
(http://www.marketwatch.com/story/heres-how-mnuchin-interprets-the-signs-from-the-yield-curve-2019-04-15)
President Donald Trump renewed his attacks
(http://www.marketwatch.com/story/donald-trump-the-stock-market-should-be-as-much-as-10000-points-higher-2019-04-14)
on the central bank Sunday. He criticized rate increases enacted
during the first two years of his administration as well as the
bank's balance-sheet reduction program, known as qualitative
tightening, which is set to end in September.
(https://twitter.com/realDonaldTrump/status/1117428291227533312)
Read:Economy gives Trump 'narrow advantage' in 2020 election --
but it has little to do with stock market, says Goldman
(http://www.marketwatch.com/story/economy-gives-trump-narrow-advantage-in-2020-election-but-it-has-little-to-do-with-stock-market-says-goldman-2019-04-15)
Federal Reserve Chairman Jerome Powell has repeatedly asserted
(http://www.marketwatch.com/story/powell-downplays-recession-fears-in-2019-03-10)
the central bank's independence from political influence, while
pledging to serve out his four-year term, ending in early 2021.
Chicago Fed President Charles Evans told CNBC on Monday morning
(http://www.marketwatch.com/story/feds-evans-says-low-inflation-may-freeze-interest-rates-through-most-of-2020-2019-04-15)
that "I can see the funds rate being flat and unchanged into the
fall of 2020. For me, that is to help support the inflation outlook
and make sure it's sustainable."
Factory production in New York state picked up in April versus
March
(http://www.marketwatch.com/story/empire-state-manufacturing-index-rebounds-in-april-but-growth-still-fairly-subdued-2019-04-15),
with the Empire State business conditions index rising from a
reading of 10.1 from the previous months' two-year low of 3.7.
What were strategists saying?
Corporate earnings reports have yielded few surprises so far,
said Tom Martin, senior portfolio manager at Globalt Investments.
"In the absence of any macro news or surprising corporate
announcements, markets are trading mostly flat," he added.
"The alpha to begin earnings season bodes well for active
managers including hedge funds. The stocks of banks with good
earnings are going up and with poor earnings are going down," said
Ian Winer, an advisory board member of Drexel Hamilton.
"Despite an ambitious strategy to diversify the bank's revenue
streams from its core investment banking activities -- such as the
launch of Marcus, its online banking service -- Goldman's revenue
structure remains quite static, with trading activities still
accounting for 41% of the bank's revenue, while investment
management, with strategic growth opportunities, only accounts for
17%, mirroring last year's results," said Axel Pierron, managing
director of capital markets management consulting firm Opimas, in
an email.
What stocks were in focus?
Shares of Walt Disney Co.(DIS) rose 1.5% after Richard
Greenfield, an analyst at BTIG and a longtime skeptic, upgraded the
stock to neutral from sell
(http://www.marketwatch.com/story/disneys-most-outspoken-bear-reluctantly-upgrades-the-stock-2019-04-15).
Shares of Advanced Disposal Services Inc.(ADSW) surged 18% after
Waste Management Inc.(WM) said it entered into an agreement to buy
the rival waste company in a $4.9 billion deal. Waste Management
will pay $33.15 a share in cash for Advanced Disposal stock, a
22.1% premium to its Friday closing price. Waste Management shares
were up 2.4%.
Shares of Canadian legal cannabis maker Aphria Inc.(APHA.T)
slumped 15% after the Canada-based cannabis company swung to a wide
third-quarter loss
(http://www.marketwatch.com/story/aphrias-stock-tumbles-after-swinging-to-wide-loss-while-revenue-increases-2019-04-15)
in the most recent quarter.
Alliance Data Systems Corp. (ADS) shares sank 9.3% following
news that French firm Publicis Groupe SA (PUB.FR) would acquire its
consumer data unit Epsilon
(http://www.marketwatch.com/story/publicis-rises-on-epsilon-acquisition-revenue-2019-04-15).
The stock was also downgraded to market perform from outperform at
BMO Capital.
How were other markets trading?
Stock markets in Asia closed on a mixed note
(http://www.marketwatch.com/story/asian-markets-race-to-gains-on-renewed-trade-deal-hopes-2019-04-14),
with Shanghai's Composite index and Hong Kong's Hang Seng Index
each losing 0.3% on the day. Japan's Nikkei 225 , meanwhile, rose
1.4%. European markets traded slightly higher
(http://www.marketwatch.com/story/europe-stocks-edge-higher-supported-by-banks-2019-04-15),
with the Stoxx Europe 600 up 0.2%.
In commodities markets, crude-oil futures
(http://www.marketwatch.com/story/oil-retreats-from-5-month-high-as-russian-official-talks-of-potential-bid-for-greater-crude-share-2019-04-15)
retreated, while gold settled lower
(http://www.marketwatch.com/story/gold-edges-lower-as-investors-turn-away-from-haven-assets-2019-04-15)
and the U.S. dollar traded mostly unchanged.
--Barbara Kollmeyer contributed to this article
(END) Dow Jones Newswires
April 15, 2019 16:31 ET (20:31 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.