Stocks are reeling as investors head into earnings season

U.S. stocks struggled for direction at the open on Tuesday as a shortened but busy week packed with corporate earnings kicked off on Wall Street.

The S&P 500 (^GSPC) rose 0.1%, while the Dow Jones Industrial Average (^DJI) fell 50 points, or 0.2%. The tech-heavy Nasdaq Composite (^IKSIC) was slightly above break-even.

The rest of the results from the financial sector will emerge in the coming days, with all eyes on megabanks Goldman Sachs ( GS ) and Morgan Stanley ( MS ) to report before the bell on Tuesday, following a lackluster round of quarterly updates from peers late last week.

Goldman Sachs posted a bigger-than-expected 69% drop in profit in the fourth quarter, hit by a significant drop in deal-making revenue and higher provisions for loan losses. Shares fell 2.3% in early trading.

Morgan Stanley, meanwhile, reported a smaller-than-expected drop in profit. Like its Wall Street peers, the bank saw a decline in investment banking revenue, but higher net interest income and a record quarter for its asset management business helped soften the overall number. Shares rose 4%.

Earnings reports from other sectors will also pick up in the coming days, with Thursday’s data from Netflix ( NFLX ) in focus. The update is likely to serve as a potential sign of things to come for tech sector results, which begin in earnest next week.

The S&P 500 is expected to report a 3.9% year-over-year earnings decline in the fourth quarter, according to data from FactSet Research. This would mark the first year-over-year decline in earnings since a 5.7% drop in the third quarter of 2020.

“We expect earnings to be in the spotlight going forward, with earnings reactions picking up, while inflation/FOMC reactions declining,” Bank of America’s Savita Subramanian and Ohsung Kwon wrote on Friday.

Traders work on the stock market at the New York Stock Exchange (NISE) in New York, U.S., January 5, 2023. REUTERS/Andrew Kelly

Traders work on the stock market at the New York Stock Exchange (NISE) in New York, U.S., January 5, 2023. REUTERS/Andrew Kelly

Global business leaders are gathering this week in the mountains of Davos, Switzerland for the World Economic Forum. The prospect of a global recession, post-pandemic challenges, climate change and the crisis in Eastern Europe are set to be at the top of the agenda for the politicians, CEOs and billionaires in attendance. The President of the European Central Bank, Christine Lagarde, is among those present.

The week ahead will also be a busy one with the Fedspeak, with several members of the US central bank making remarks in speeches across the country in the coming days.

U.S. Treasury yields edged higher on Tuesday morning, with the benchmark 10-year note up roughly 5 basis points to a high of 3.55%.

Oil futures rose slightly. West Texas Intermediate (VTI) crude futures were trading around $80 a barrel as of 6:55 a.m. ET.

Tuesday’s moves followed a long weekend during which U.S. stock and bond markets were closed on Monday, Jan. 16, for Martin Luther King Jr. Day. On Friday, all three major averages completed their second consecutive winning week.

The tech-heavy Nasdaq Composite posted a whopping 4.8% gain for the week, while the S&P 500 and Dow Jones Industrial Average posted their best performances since November, posting weekly gains of 2.7% and 2%, respectively.

Aleksandra Semenova is a Yahoo Finance reporter. Follow her on Twitter @alekandraandnic

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