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Earnings of Goldman Sachs and Citigroup disappointed Wall Street and pushed indexes into the red

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Wall Street indexes declined on Monday after investors focused on the earnings results of Goldman Sachs and Citigroup Banks.

The blue-chip index Dow Jones Industrial Average wiped out 27.53 points of its value, or 0.10%, to 26,384.77 points. The broader S&P 500 moved down by 0.14% to 2,903.28 points, while the technology Nasdaq Composite decreased by 0.1% to 7,976.01 points.

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Wall Street continues to keep track of the latest news from the trade front. Over the weekend, the US Treasury Secretary Steven Mnuchin said he hoped the talks would soon be over. Shares are generally on the upward trend since early 2019, against expectations that the two largest economies in the world will reach a trade deal in the near future, while the Federal Reserve has signaled that there is no expectation of an increase in interest rates by the end of the year.

While trade talks with China are progressing, the stock market may have a positive trend in the next four weeks, amid the earnings season.

President Donald Trump renewed his attacks 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.

“If the Fed had done its job properly, which it has not, the Stock Market would have been up 5000 to 10,000 additional points, and GDP would have been well over 4% instead of 3%…with almost no inflation. Quantitative tightening was a killer, should have done the exact opposite!”, wrote Donald Trump on Twitter.

Federal Reserve Chairman Jerome Powell has repeatedly asserted 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 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”.

Corporate stocks performance

The stocks of Goldman Sachs fell by 3.3% after the financial institution reported a better-than-expected profit for the first quarter of the year.

Meanwhile, the shares of Citigroup reported a decline of 0.4% after the bank announced that its total revenue was down 2% in the first three months of 2019.

The shares of M&T Bank were down by 2.4% after the Buffalo, New York-based bank reported mixed first-quarter results.

Waste Management climbed 2.4% after announcing it had agreed to acquire its smaller rival Advanced Disposal Services. Waste Management will pay 33.15 USD per share in cash for Advanced Disposal, which represents a 22.1% premium to Advanced Disposal’s closing price Friday of 27.14 USD. Including debt, the deal is worth 4.9 billion USD. The stocks of Advanced Disposal rose by 18%.

Shares of Walt Disney rose by 1.5% after Richard Greenfield, an analyst at BTIG and a longtime skeptic, upgraded the stock to neutral from sell.

Shares of Canadian legal cannabis maker Aphria Inc slumped 15% after the Canada-based cannabis company swung to a wide third-quarter loss in the most recent quarter.

The stocks of Alliance Data Systems sank by 9.3% following news that French firm Publicis Groupe SA would acquire its consumer data unit Epsilon. The stock was also downgraded to market perform from outperform at BMO Capital.

FAANG stocks were mostly into the green with Facebook, Amazon, Apple, and Google adding between 0.1% and 0.3%, while Netflix falling by 0.65%.

Corporate earnings reports

Despite the mixed results of large banks, the reporting season is stable. Of the companies that have announced their results, 85% have surpassed the earnings expectations according to FactSet.

Citigroup reported mixed first-quarter results on Monday, saying its earnings were boosted by share buybacks while revenues fell amid a sharp decline in equities trading. The bank reported earnings per share of 1.87 USD against expected 1.80 USD by the analysts. However, the revenue missed the forecasts and amounted to 18.576 billion USD. The bank saw a 2% year-over-year drop in revenue, but that was offset by a commensurate rise in net income, driven by cost-cutting and a boost from lower tax rates. Citigroup repurchased 4.06 billion USD in shares in the first quarter and returned 1.08 billion USD to shareholders through common stock dividends.

Investment banking giant Goldman Sachs just reported its first-quarter earnings, and the results are underwhelming. Not only did Goldman miss revenue expectations, but the company’s numbers don’t look too impressive throughout most of its business segments. The bank said Monday that revenue dropped 13% to 8.81 billion USD, below analyst’s 8.9 billion USD estimate. Meanwhile, the firm generated 2.25 billion USD of profit in the period, or 5.71 USD per share, exceeding the 4.89 USD estimate, the New York-based firm said in a release. That was largely from reining in compensation more than analysts had expected, according to a research note from Citigroup.