US stock averages slip as bank shares head lower

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Bank earnings propel US stocks higher

Commonwealth financial Network CIO Brad McMillan discusses how strong bank earnings have contributed to the market rally.

U.S. stocks slipped Monday as Wall Street investors focused on a key investment bank's first-quarter revenue missing analyst expectations.

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Goldman Sachs first-quarter revenue fell 12.6 percent to $8.8 billion, slightly less than analysts expected. Meanwhile, profits declined 20 percent to $2.2 billion, or $5.71 per share, higher than Wall Street predictions. Bolstered by record net interest income, earnings in its investing and lending division was $835 million.

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The decline in Goldman Sachs shares accounted for all of the decline in the blue-chip Dow Jones Industrial Average, which began Monday's session close to its record high of 26,828.39, a mark reached Oct. 3, 2018. Likewise, the broader S&P 500 began the session near its record high of 2,930.75.

By early afternoon the major averages were paring their losses after Chicago Fed President Charles Evans said, in prepared comments, that he supported a higher inflation target and that rate cuts might be necessary. Nevertheless, those averages closed fractionally lower.

TickerSecurityLastChange%Chg
GSGOLDMAN SACHS GROUP INC.194.40+3.57+1.87%
CCITIGROUP INC.67.72+1.18+1.77%
BACBANK OF AMERICA CORP.28.55+0.62+2.23%
JPMJP MORGAN CHASE & CO.110.89+1.67+1.53%

“Frankly, though, given how muted inflationary pressures appear today, a rise to 2-1/4 to 2-1/2 percent is not a big concern to me at the moment," Evans said. "In contrast, if activity softens more than expected or if inflation and inflation expectations run too low, then policy may have to be left on hold — or perhaps even loosened — to provide the appropriate accommodation to obtain our objectives. As we often say, policy will be data dependent.”

Citi reported a 24 percent decline in stock trading revenue, and total revenue was down 2 percent from a year earlier.

Waste Management agreed to pay approximately $4.9 billion to buy Advanced Disposal Services.

The yield on the 10-year Treasury jumped to more than 2.5 percent in an indication of investor optimism about stocks.

TickerSecurityLastChange%Chg
I:DJIDOW JONES AVERAGES26459.6+347.07+1.33%
SP500S&P 5002921.5+31.83+1.10%
I:COMPNASDAQ COMPOSITE INDEX7968.968603+123.94+1.58%

The price of West Texas Intermediate, the benchmark U.S. crude oil, fell 0.72 percent to $63.43.

Investors continued to monitor U.S.-China trade talks. Treasury Secretary Steven Mnuchin said over the weekend that Washington and Beijing were moving closer to a deal.

U.S. negotiators have lessened their demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing, according to Reuters.

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In Asia, China's Shanghai Composite closed down 0.34 percent, the Hang Seng fell 0.33 percent and Japan's Nikkei 225 jumped 1.37 percent.

In Europe, Britain's FTSE 100 was up fractionally, France's CAC 40 added 0.09 percent and Germany DAX added 0.21 percent.

The Associated Press contributed to this report.