Today in the Market (1/17/2023)

Good Evening! Tuesday’s closing prices for U.S. equities were mixed as a shorter but busy week filled with corporate results began on Wall Street.

The Dow Jones dropped 1.14% after Goldman Sachs (GS) reported its worst profit shortfall in a decade. The S&P 500 ended the trading day 0.20% down, while the Nasdaq Composite gained 0.14%.

EARNINGS COME OUT ROUGH

Goldman Sachs Group Inc (GS) announced a larger-than-anticipated 69% decline in fourth-quarter earnings due to a decline in business deals, a decline in asset and wealth management income, and losses in its consumer division.

  • Revenue: $10.59 Billion vs. $10.91 Billion expected
  • Earnings Per Share: $3.32 per share vs. $5.48 per share expected  

What else to know? David Solomon, the chief executive officer of Goldman Sachs, is refocusing the bank’s resources on boosting its core operations, such as investment banking and trading. Solomon also stated that the bank was eliminating 6% of its workforce or around 3,200 employees, and implementing reforms to its consumer division in order to manage an uncertain forecast into 2023.

A NEW TEST, DID YOU STUDY?

There appears to have been a recurring trend about banks, and the following story is no exception! Let’s Jump Right In!

The Federal Reserve provided fresh information about how it would evaluate the resiliency of banks under various climate scenarios. The six largest U.S. banks (Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo) are responsible for assessing the impact of hurricanes, wildfires, heatwaves, and higher average temperatures on residential and commercial real estate loan portfolios over the next year.

There’s more! The Fed is also requesting that banks assess the effect of transition-related strains on corporate and commercial real estate loan portfolios over a 10-year timeframe. Banks will compute and submit to the Fed by July 31 each loan portfolio’s likelihood of default, internal risk rating grade, and loss given default.

Why is this different from Fed’s annual bank stress tests? The Feds want to learn about banks’ climate-related risk management strategies and enhance banks’ and regulators’ capacity to monitor and manage climate-related financial system risks.

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