U.S. stock futures retreated, following sharply lower earnings from two of the biggest names in investment banking, and after China released data that showed a near-historic slowdown in economic growth.
Futures tied to the S&P 500 declined 0.2% Tuesday, pointing to the broad-market index giving back some of its recent gains. U.S. stock and bond markets had been shut Monday to mark Martin Luther King Jr. Day.
Nasdaq-100 futures fell 0.3%, suggesting muted losses for technology stocks after the opening bell. Contracts tied to the Dow Jones Industrial Average pulled back 0.4%.
Stocks have started the year strongly as investors have positioned for easing inflation that could drive a shift in central-bank policy. The S&P 500 is up over 4%, and investors are looking for signs about whether this rally could continue.
and
both reported sharply lower fourth-quarter profits Tuesday, due to a substantial slowdown in dealmaking. Goldman’s shares fell 2.7% premarket after it missed Wall Street’s estimates on earnings. Morgan Stanley stock rose 3%, after revenue and profit beat expectations.
A series of other major banks including
reported Friday. Collectively, they have put aside billions of dollars in loan-loss provisions in anticipation of a recession.
Fahad Kamal, chief investment officer at Kleinwort Hambros, said commentary from banks about dealmaking and the business outlook was important for investors, since “these things tend to be at the very spear tip of leading indicators.”
Investors have grown more bullish on banks, believing higher interest rates will boost revenues through wider net-interest margins, said
Kiran Ganesh,
a multiasset strategist at UBS. “But with higher interest rates also comes the risk of higher loan losses,” he cautioned, saying that earnings offer a potential reality check.
U.S. indexes have gained to start 2023, with the S&P 500 up by more than 4% this year, as of Friday’s close.
Photo:
Michael M. Santiago/Getty Images
is among the other companies set to report results Tuesday, with its earnings due after the close.
The yield on the benchmark 10-year Treasury note edged up to 3.551% from 3.510% on Friday, extending a partial reversal of the recent rally in bonds. Yields rise when prices fall.
Chinese stock markets declined, as Beijing reported that annual economic growth slowed to 3% last year. Hong Kong’s Hang Seng Index fell 0.8% and the Shanghai Composite Index inched down 0.1%.
“China will obviously have a lot of choppiness, in terms of coming out of Covid for the first quarter,” Mr. Kamal at Kleinwort Hambros said. “But what’s also critical is that clearly the state is really focusing on removing the Covid restrictions.”
In Japan, the Nikkei 225 rose 1.2%, as the
began its two-day monetary policy meeting. This meeting is being closely watched by investors in the wake of a surprise tweak to the central bank’s yield-curve control policy last month. The yield on the country’s 10-year government bond rose above the BOJ’s 0.5% cap again on Tuesday.
The pan-continental Stoxx Europe 600 slipped 0.1%.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com
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