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Wall St dips after Goldman profit miss, China concerns weigh

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Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 5, 2023. REUTERS/Andrew Kelly

Wall Street’s main indexes slipped on Tuesday as Goldman Sachs missed quarterly profit estimates, worsening sentiment already dented by concerns of a slowdown in China’s economic growth.

Goldman Sachs Group Inc (GS.N) fell 3.5% after the bank reported a bigger-than-expected drop in quarterly profit, weighing the most on the Dow Jones Industrial Average (.DJI).

Morgan Stanley (MS.N) jumped 4.4% as it beat analysts’ estimates for fourth-quarter profit as its trading business got a boost from market volatility.

“Widely expected to be awful, Goldman Sachs’ quarterly results were even more miserable than anticipated,” said Octavio Marenzi, chief executive at consultancy Opimas.

Shares of Microsoft Corp (MSFT.O) were a drag on the Nasdaq (.IXIC), falling 0.4%, after Guggenheim downgraded them to “sell” from “neutral”, cautioning of a likely disappointing full-year outlook.

Other Big Tech and growth stocks such as Inc (AMZN.O) and Apple Inc (AAPL.O) were mixed, while Tesla (TSLA.O) shares were up 4%, keeping the pressure off the benchmark S&P 500 (.SPX).

The S&P 500 energy (.SPNY) and consumer staples (.SPLRCS) sectors were up about 0.6% each, while financial stocks (.SPSY) fell 0.6%.

Earnings from Goldman Sachs and Morgan Stanley wrap up a mixed reporting season for big banks, most of which have put aside rainy-day funds to prepare for a looming recession.

Analysts expect year-over-year earnings from S&P 500 companies to decline 2.4% for the quarter, according to Refinitiv data.

Investors will keep an eye out for economic data, including retail sales, later in the week, as well as comments from Federal Reserve officials for clues on the central bank’s rate hike trajectory.

Markets have started 2023 on a strong footing on hopes that a moderation in inflationary pressures and some signs of cooling in the labor market could give the Fed cover to dial down the size of its interest rate hikes.

Money market participants are currently expecting a 25-basis point interest rate hike from the Fed in February and see rates peaking at 4.94% in June.

U.S.-listed stocks of Chinese companies such as JD.Com Inc , Baidu Inc and Bilibili Inc fell between 4.9% and 6.4% after China’s economic growth in 2022 slumped to one of its worst levels in nearly half a century.

“I think it’s a combination of some minor profit taking after a very strong rally last week and the news out of China,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

At 9:42 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 147.35 points, or 0.43%, at 34,155.26, the S&P 500 (.SPX) was down 2.24 points, or 0.06%, at 3,996.85, and the Nasdaq Composite (.IXIC) was down 24.64 points, or 0.22%, at 11,054.51.

Insurer Travelers Cos Inc (TRV.N) fell 3%, among other drags on the Dow, after forecasting fourth-quarter earnings below estimates.

Advancing issues outnumbered decliners for a 1.17-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.18-to-1 ratio on the Nasdaq.

The S&P index recorded seven new 52-week highs and no new low, while the Nasdaq recorded 46 new highs and six new lows.