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Goldman Sachs shares rise on earnings beat

 

Wednesday, January 17, 2024

Today’s headlines

What’s happening: Shares of The Goldman Sachs Group edged higher on Tuesday, after the company released earnings for its fourth quarter.

What happened: The Wall Street giant reported better-than-expected earnings for its fourth quarter amid a surge in revenues from asset and wealth management.

However, Goldman Sachs posted a double-digit decline in net income for fiscal 2023, with the figure being the lowest since 2019.

How were the results: The New York-based bank reported a single-digit increase in sales for the fourth quarter.

  • Revenues grew by 7% year-over-year to $11.32 billion, topping market expectations of $9.85 billion.
  • GAAP earnings surged to $5.48 per share, from $3.32 per share in the year-ago quarter, and came in higher than the consensus estimates of $3.43 per share.

Why it matters: Over the course of 2023, Goldman Sachs laid off thousands of employees. At the end of December, the bank had 45,300 employees, 1% below the third quarter and around 7% below the year-ago period.

Goldman Sachs reported record revenues in equity financing last year, with optimism around the US economy avoiding a recession.

The bank reported year-over-year growth in sales driven by higher revenues in Asset & Wealth Management and Platform Solutions, which were partially offset by a decline in revenues from Global Banking & Markets.

Net revenues in Global Banking & Markets fell 3% year-over-year to $6.35 billion in the fourth quarter, while net revenues in fixed income, currencies and commodities contracted by 24% year-over-year to $2.03 billion. Net revenues in Asset & Wealth Management jumped 23% to $4.39 billion in the fourth quarter, while equity trading revenues surged 26%.

Net income for fiscal 2023 fell 24% year-over-year to $8.52 billion, reaching the lowest level since 2019, while fourth-quarter net income jumped 51% to $2 billion.

How shares responded: Shares of Goldman Sachs rose 0.7% to close at $380.45 on Tuesday, following the release of quarterly results. The stock has gained around 16% over the past six months.

What to watch: Investors will continue monitoring the Federal Reserve’s monetary policy, which is expected to significantly impact the bank’s overall results ahead.

The markets today

The British pound will be in focus today ahead of a couple of major economic reports

Context: The GBP/USD forex pair moved lower on Tuesday, as investors monitored the latest economic data releases.

Details: Data released on Tuesday showed growth in UK wages slowing in the three months through November, which fuelled speculations of the Bank of England reducing interest rates sharply in 2024. Markets widely expect the Bank of England to cut rates by 25bps in May.

Regular pay growth, excluding bonus payment, fell to an annual rate of 6.6% in the September-to-November period. The total pay growth, including bonuses, also eased to 6.5%, the least in eight months, and came in lower than market expectations of 6.8%. The number of job vacancies declined for the 18th straight period.

The number of employees on payrolls in the UK fell by 24,000 to 30.2 million in December, compared to a 9,000 rise a month ago.

Strength in the US dollar also exerted pressure on the sterling on Tuesday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained over 0.9% to 103.36.

The GBP/USD forex pair fell around 0.7% to settle at 1.2637 on Tuesday. London’s FTSE 100 lost 0.48% to close at 7,558.34, hitting a one-month low, while the FTSE 250 slipped 0.04% to settle at 19,193.32.

What to watch: Investors await the release of economic data on inflation and producer prices from the UK today. The annual inflation rate in the UK, which slowed to 3.9% in November, is expected to ease further to 3.8% in December.

Analysts expect factory gate prices of goods produced by UK manufacturers to increase 0.1% year-over-year in December, following a 0.2% rise in November.

Other Markets: US trading indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.62%, 0.37% and 0.01%, respectively.

The news shaping the markets

At the World Economic Forum in Davos, Ukrainian President Volodymyr Zelenskyy urged investments from international partners to support the country’s economy. The news sent the RUB/USD pair lower in forex trading this morning.


China’s new home prices fell by 0.4% year-over-year in December, versus a 0.2% decline in the previous month, exerting pressure on the CNY/USD forex pair.


Singapore’s non-oil domestic exports declined 1.5% year-over-year in December, missing market estimates of a 3.3% increase, which sent the SGD/USD pair lower in forex trading this morning.


Japan’s Reuters Tankan sentiment index for manufacturers fell to 6 in January, from 12 in the prior month. This being the first decline in four months exerted pressure on the JPY/USD forex pair.


Canada’s housing starts surged by 18% to 249,255 units in December, exceeding market estimates of 243,000 units, which sent the CAD/USD pair higher in forex trading this morning.

What else to watch today

Indonesia’s loan growth and Bank of Indonesia’s interest rate decision, UK’s PPI input and retail price index, France’s government budget value, Eurozone’s inflation rate, South Africa’s retail sales, Brazil’s retail sales, Russia’s current account, Canada’s foreign investment in securities, industrial producer prices and raw materials price index, as well as US MBA mortgage applications, retail sales, export prices, import prices, industrial production, capacity utilization, manufacturing production, business inventories and NAHB/Wells Fargo housing market index.


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