The markets headed lower on Thursday after Morgan Stanley missed on earnings with a profit of 80 cents per share, falling below the 89 cent average estimate of analysts surveyed by Refinitiv.
In addition, Morgan Stanley reported that revenue declined 10 percent to $8.55 billion as opposed to the $9.3 billion estimate.
“This is not Morgan Stanley’s finest hour,” said Octavio Marenzi, CEO of capital markets consultancy Opimas. “In wealth management, Morgan Stanley’s revenues were down 6%, while competing firms were able to eke out single-digit growth. In equities trading, Morgan Stanley was even further behind the competition, with flat revenues where other investment banks were able to benefit from market volatility and show double-digit growth.”
The Dow Jones Industrial Average fell as much as 80 points, while the S&P 500 declined 0.27 percent and the Nasdaq Composite fell 0.4 percent to start the trading session.
Solid Showing for Banks
Despite Morgan Stanley missing profit expectations, it’s been a solid week for the big names in the financial sector.
Goldman Sachs generated $6.04 per share in profit for the fourth quarter of 2018, versus the $4.45 per share estimate of analysts surveyed by data company Refinitiv. The investment bank also posted revenue of $8.08 billion, beating estimates of $7.55 billion.
Bank of America’s earnings came in at 73 cents per share, beating the 63 cents expected. Revenue was $22.7 billion versus initial estimates of $22.397 billion.
Citigroup, one of the other large banks reporting earnings this week, kicked off calendar fourth-quarter earnings season by reporting stronger-than-expected earnings. Citigroup reported $1.61 in profit per share, besting Wall Street expectations of $1.55 per share.
Wells Fargo & Co. finished 2018 by posting a net income of nearly $6.1 billion, or $1.21 in diluted earnings per share.
2018 Year-End Market Turmoil to Continue?
Thus far in January, the markets have rebounded off a December’s doldrums, but some analysts question whether it’s sustainable moving forward. U.S.-China trade negotiations that are ongoing, the government shutdown and concerns over global growth remain headwinds for the markets.
“Upside should now prove limited for global indices, with S&P likely to start to weaken and pullback and any strength would face strong overhead resistance between 2630-40,” said Mark Newton, managing member at Newton Advisors, in a note.
“Indices have moved between 10-15% in the last 15 trading days since Christmas Eve, and have finally reached the 50% retracement levels (or fractionally below) from the decline from September/October,” Newton added. “Structurally this area remains difficult as several lows were made at this area and now offer resistance on this rally.”
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