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Stock Market Today: Biggest Winners and Losers
The stock market today rallied for a second session on hopes lawmakers in Washington will ink a fiscal cliff deal before year's end.
In afternoon trading Tuesday all three major index were sharply higher. The Dow Jones Industrial Average soared some 90 points by 2:30 p.m., the Standard & Poor's 500 Index climbed 11, and the Nasdaq jumped 33. That followed Monday's gains of 100.38 points, 16.78 points and 39.27 points, respectively.
With few economic releases scheduled for Tuesday, investors' focus was pinned on Washington. House Speaker John Boehner, R-OH, and U.S. President Barack Obama continued to haggle over a fiscal cliff deal, with the president making a counter offer late Monday.
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Goldman Sachs Stock (NYSE: GS) Won't Rebound on These Earnings
Goldman Sachs Group (NYSE: GS) handily beat second-quarter earnings and revenue when it reported numbers today (Tuesday) before market open - but that's not too hard to do since expectations had slipped drastically over the past couple months.
The investment banking giant's earnings per share came in at $1.78, blowing away analysts' estimates of $1.18. Revenue came in at $6.63 billion, better than the expected $6.28 billion.
A couple months ago these numbers would have actually disappointed.
In the last two months, expectations for the quarter had dwindled. The average earnings per share forecasts dropped to the current $1.18 per share from $2.16 in June and $2.87 in May. Looking back to the same quarter a year ago, earnings were $1.85 per share and revenue was $7.28 billion (8.9% better than the current quarter's revenue).
"During the second quarter, market conditions deteriorated and activity levels for both corporate and investing clients were lower given continued instability in Europe and concerns about global growth," Goldman Chairman and CEO Lloyd Blankfein said in a statement.
The weak economic environment will keep weighing on Goldman through the year.
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What the Moody's U.S. Bank Downgrades Mean for Investors
Moody's ratings agency issued five U.S. bank downgrades Thursday and a total of 15 cuts for global institutions, but markets shook off the news.
The ratings agency cited concerns about the stability of the global systems. Moody's said the banks are not as sound now as they were before the recent global financial woes and contagion.
"All of the banks affected by today's actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities," Greg Bauer, Moody's Global Managing Director, said in a statement Thursday.
Included in the ratings cuts were Citigroup (NYSE: C), Morgan Stanley (NYSE: MS), Goldman Sachs (NYSE: GS), Bank of America (NYSE: BAC) and JPMorgan Chase (NYSE: JPM).
Bank of America and Citi are now rated just two notches above junk status, while Morgan Stanley sits a hair higher at three notches above junk.
Moody's announcement came after the close Thursday, a rocky day for markets with the Dow Jones ending down 250 points and the Nasdaq lower by 71.
The cuts appeared to be a non-event in trading Friday. Shortly after the open, all three major indexes were modestly higher, with affected banks all in the green.
But Moody's U.S. bank downgrades could be a precursor to aggressive trading activity.
"It is a trading indicator that speaks to more volatility in the future for the banks as traders will be jumping all over earnings, derivatives moves, counterparty fears, correlation concerns, "negative watch" implications and regulatory impacts," said Money Morning Capital Waves Strategist Shah Gilani. "I expect the volume in financials to go higher as traders play them more and more."
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Why a Goldman Sachs (NYSE: GS) Report Says It's Time to Buy Stocks
A Goldman Sachs (NYSE: GS) report released today (Wednesday) forecast a "steady upward trajectory" for the stock market over the next few years, telling investors now is the time to buy stocks - and reject bonds.
"The prospects for future returns in equities relative to bonds are as good as they have been in a generation," Chief Global Equity Strategist Peter Oppenheimer wrote in the Goldman Sachs report, "The Long Good Buy; the Case for Equities." "Given current valuations, we think it's time to say a "long goodbye' to bonds, and embrace the "long good buy' for equities as we expect them to embark on an upward trend over the next few years."
The report's main focus is that when you compare the price and future returns of stocks to bonds, stocks are a much better deal. Inflation concerns are threatening the bull market in bonds, and a Treasury sell-off has pushed up yields.
The 10-year Treasury yield has risen more than 30 basis points (0.3 percentage point) in a week to close to 2.4%. The 10-year Treasury yield hit a record low of 1.67% in September last year.
"We would expect the early rises in bond yields to be positive for equity prices as they both become a reflection of rising growth and inflationary expectations, and could expect some equity re-rating in the initial stages of rising yields," Oppenheimer wrote in the report.
With Goldman Sachs' endorsement to buy stocks, investors following their call could push the market higher than the 12% gains netted already this year.
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"Jerry Maguire" Waves Goodbye to Goldman Sachs (NYSE: GS) and its Muppets
By now you've heard about Greg Smith.
He's the former executive director of Goldman Sachs (NYSE: GS) who pulled a Jerry Maguire on Wednesday while resigning from the illustrious Vampire Squid.
In his New York Times op-ed piece, otherwise known as the scorched-earth letter, Mr. Smith explained that he resigned from Goldman because he could no longer abide by the firm's culture of ripping-off clients to line their own pockets.
The blunt frontal assault on the firm he once revered was a career move. What kind of career move remains to be seen.
But before I get into what really goes on behind Wall Street's velvet ropes and what Mr. Smith's pronouncements about Goldman's culture says about Goldman, let me say this about his future employment prospects.
I'd come out of retirement and start a new hedge fund if Mr. Smith would come on board.
In fact, after hearing all the hoopla about how he has burned any and all bridges he might have had as a Goldman alum and how he'll never work on The Street again, I can't help but laugh.
And I'm not the only one.
Bill Singer, a noted New York securities attorney who's not shy about speaking his mind openly and honestly, said to me, "Seriously, if the guy has as little as a $10 million book of business there'll be people all over him to come on-board. Not only that, but there are a lot of firms that would want to throw this in Goldman's face by hiring the guy."
Greg Smith's Jerry Maguire-like moment might just be the best career move he's ever made.
And I'm serious; I think he'd be a great addition to my new hedge fund operation. What do you say Greg?
Nothing New About Goldman Sachs
One thing is for certain: as biting as Smith's commentary was on Goldman Sachs, there were no new revelations about how the firm operates.
The bottom line about Goldman, according to Smith's op-ed piece, is that "people [at Goldman] push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client's goals. Absolutely. Every day, in fact."
Like I said, Smith's not delivering any revelations. It's not an insight into just Goldman, either. This mantra is essentially the Street Creed.
Wall Street only needs clients to make money for itself.
If you don't understand that, you don't know how the game is played − or how it's won.
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Goldman Sachs Group Inc. (NYSE: GS) Earnings: How the Mighty Have Fallen…
The Goldman Sachs Group Inc. (NYSE: GS) earnings report released before the bell today (Wednesday) is one of the most dramatic examples of how U.S. banks are struggling to return to healthy profitability and revenue growth.
Goldman Sachs earnings came in at $1.84 a share, 58% lower than the same quarter last year. Revenue fell 30% to $6.05 billion.
Though dismal, the earnings beat analysts' estimates, which were as low as 70 cents a share - an 82% drop from last year's fourth quarter and a far cry from the whopping $8.20 a share in 2009.
"It looks like nothing's working right now," Jack Kaplan, portfolio manager at Carret Asset Management, told Reuters. "They were below expectations on virtually everything on the revenue side."
This was the second-lowest quarterly revenue for Goldman Sachs since the financial crisis, as U.S. banks' earnings continue getting squeezed from a weak global economy and increased regulation.
Another Disappointing Quarter for Goldman Sachs Earnings
This was the fourth consecutive quarter of declining revenue for Goldman Sachs.
The third quarter of 2011 was especially painful, with Goldman's revenue down 47.9% from 2010's third quarter. Goldman reported a loss of $428 million, compared to a $1.74 billion profit from the year before.
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The Goldman Rule: Don't Let This Puppet Master Pull Your Strings
Goldman Sachs Group Inc. (NYSE: GS) Chief Executive Officer Lloyd Blankfein was really on a roll speaking at an investment conference in New York last week.
Among other things, he said there's no way we can conclude that a slowdown in banking and trading businesses is "secular, rather than cyclical."
That alone was enough to make me laugh. But then he went on to address concerns about pending regulations that are coming as a result of the Dodd-Frank Financial Reform Act.
"In our conversations with clients, they have expressed several concerns on the impact to their businesses," Blankfein said, making it clear that his firm will make client interests a theme of its arguments against the regulations. "What Goldman Sachs does for our clients is even more relevant and important."
Now that should make you laugh - if, of course, you're not too afraid.
The truth is that Goldman Sachs and the rest of the big banks on Wall Street - in the inimitable words of author Michael Lewis from his seminal book Liar's Poker - invariably "blow up" customers to make money for themselves.
Not only do they run roughshod over their customers (trading partners) and clients (banking relationships), the big banks manipulate markets, industries, economies and countries to fatten their already gigantic bonus pools and personal fortunes.
Now, I'm not singling out Goldman Sachs because it's the biggest and baddest bully on the block, which it is. I'm not blasting Goldman because I once idolized the firm - its culture, its talent, its sheer money-making prowess - and have seen its vision blinded by greed since going public in 1999. I'm not saying Goldman is the only self-serving, greedy, and pretentious firm on Wall Street. And, I'm certainly not calling out Lloyd Blankfein, whose extraordinary accomplishments as a trader are legendary, but whose leadership of Goldman has been marred by what might generously be described as "PR gaffes."
What I am doing is using Goldman as proof positive that Wall Street banks are bad news.
In fact, rather than seeing them rebound we would all be better off seeing them unwound.
From Wall Street to K Street - And Back
Let me start with the nexus of power and money in this country. That nexus resides exactly where Wall Street and Washington intersect. Each serves the other and the middle-class be damned.
You see, the "revolving door" metaphor that's so often used to describe the relationship between Wall Street and Washington isn't exactly accurate.
The reality is that there is no revolving door. There are no doors at all. It is more like one giant corridor where all the water cooler talk is about paying for campaigns, paying lobbyists, and paying bonuses.
There's a reason why Goldman Sachs is derisively referred to as "Government Sachs." The flow of executives and operatives between Goldman and Washington, and even other world governments and central banks for that matter, is legendary.
I can't point out all the connections - there are simply too many. But I will point out a few that you may not be aware of.
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