S&P, Nasdaq look for direction as traders parse earnings; Goldman Sachs weighs on Dow

U.S. stocks on Tuesday struggled to gather much momentum, as investors digested earnings from some major names and parsed economic data on the manufacturing front.

The tech-heavy Nasdaq Composite (COMP.IND) and the benchmark S&P 500 (SP500) had opened lower and then reversed course shortly after. They have since given up their gains and have seesawed.

By late afternoon, the Nasdaq was up 0.04% to 11,084.11 points. The S&P 500 declined 0.19% to 3,991.34 points, having breached the key level of 4,000 points earlier.

The Dow (DJI) underperformed the other two averages, falling 1.05% to 33,943.24 points. The blue-chip index was weighed down by a slump in shares of Goldman Sachs (GS).

Of the 11 S&P sectors, six were trading in the green, led by Technology and Real Estate. Materials and Communication topped the losers.

Monday was a trading holiday on account of Martin Luther King day.

“Markets of late haven’t been either depressing or scary. However we took pause for breath yesterday, given the U.S. holiday, with nothing much happening,” Deutsche Bank’s Jim Reid said, noting that the main news was the overnight release of China’s GDP figures.

China reported Q4 GDP that topped expectations but still saw the impact of COVID. China’s population dropped for the first time in decades.

“GDP is about how many people a country has, and how hard they work (population growth and productivity growth),” UBS’ Paul Donovan wrote. “Falling populations make negative growth more likely, and that applies to China, Japan, Germany, and Italy today.”

Turning to the bond markets, rates were mixed. The 10-year Treasury yield (US10Y) was higher by 1 basis point to 3.53%. The 2-year yield (US2Y) fell 3 basis points to 4.21%.

Quarterly results took most of the spotlight on Tuesday. Goldman Sachs slid 7% after its fourth quarter earnings missed estimates by a wide margin. Conversely, Morgan Stanley (MS) advanced 8% despite reporting a fall in earnings.

On the economic front, business activity contracted sharply in January to -32.9, according to the Empire State Manufacturing Survey, versus an expected rise to -8.7. The data gave mixed signals, as on the one hand it takes a little pressure of the Federal Reserve on rate hikes, but on the other hand points to economic pain due due to the Fed’s aggression and challenges the soft landing narrative.

Among other active stocks, National Instruments (NATI) surged more than 12% after Emerson Electric (EMR) offered to buy the company in a $7.6B deal. Emerson shares slipped about 7% and were among the top percentage losers on the S&P 500 (SP500).

Investors will also be looking out for soundbites from Davos as meetings at the World Economic Forum begin.

“The World Economic Forum’s annual meeting at Davos opened last night, which will continue for the rest of the week. Numerous political and business leaders are gathering there, and today’s speakers include European Commission President Ursula Von der Leyen, Chinese Vice Premier Liu He, Spanish PM Pedro Sanchez and German finance minister Christian Lindner,” Deutsche Bank’s Reid said.