The US stock market was in for a shock when one of the biggest financial firms Goldman Sachs missed the market expectations. As if it was not enough, the world’s largest healthcare products company Johnson & Johnson also posted weak quarterly results. Wall Street was hopeful of strong quarterly earnings this spring and the weak results posted by these companies frustrated the investors resulting in Dow going 110 points down.
The Dow Jones industrial average ended the day at 20,523.28 shedding 0.6 percent. In these 110 points, it was Goldman that shaved off 73 points and 26 points were taken out by Johnson & Johnson.
The Standard & Poor’s 500 Index also lost 0.3 percent to end the day at 2,342.19. The only index to suffer the least was the Nasdaq Composite, which fell 0.1 percent to close at 5,849.47.
The stocks of both the companies bear the brunt of weak results with Goldman Sachs shares losing 5% on a single day stooping to the lowest levels since November. Johnson & Johnson also suffered the biggest blow of the year.
The markets were already wary due to the rising North Korean tension and the upcoming French elections. Over and above this, the British government made a surprise announcement of early election next month. This led to investors running for safety, resulting in a rise in the bond prices while the indexes (both the US and the European) tumbled.
According to the S&P Global Markets Intelligence, the investors are expecting the earnings for S&P 500 companies in the first-quarter to rise by nearly 10 percent against their performance last year. If this happens, it would be the biggest jump in earnings since 2014. The results posted by Johnson & Johnson and Goldman Sachs yesterday dashed these hopes and the investors punished their stocks mercilessly.
An investment strategist Kate Warne for Edward Jones said, “The reason it’s so important is that the stronger growth is likely to support higher stock prices even in the absence of pro-growth policies from the Trump administration.”
On Monday, the stocks have made their biggest gains in the past six weeks, but then on Tuesday, they were again down. In the last few weeks, they are only drifting southwards and the bond yields have also fallen to five-month lows.
The chief investment officer Tom Cassidy at Univest Wealth Management Division said, “The market has been sideways recently and investors have been looking for a reason to sell off.” The political conditions coupled with the results provided them with the reason they were looking for.