Goldman Sachs earnings fail to spark the markets

After starting higher on the Goldman Sachs (GS) earnings release, markets are slipping. Dow is down 11, decliners over advancers by 10% & NAZ fell 3. Banks are giving back some of yesterday's gains:

S&P 500 FINANCIALS INDEX

Value 157.38

Change -1.68

% Change -1.1%

MLPs pulled back a small fraction. The chart below shows how far they have come this year & in general, rebounding from better levels 2 years ago. The REIT index sold off 1½ while junk bonds were higher. The VIX, volatility index, is down to 26½, far from the peak reached earlier this year. Treasuries also sold off, with the 10 year Treasury yield up 7 basis points to 3.42%.

Alerian MLP Index --- 2 years




VIX ---- 2 years




Hopes for higher growth (& demand) are taking oil higher, back over 60.

CLQ09.NYM

...Crude Oil Aug 09

...60.51

... 0.82 .......(1.4%)

Goldman Sachs (GS) reported a 33% rise in quarterly earnings from strong trading results, continuing an extraordinary rebound from the near financial meltdown last fall. Results topped estimates, bolstered by improving markets & an upswing in advisory fees. EPS was $4.93 compared with $4.58 for the quarter ended May 30, 2008 (when the bank had a different reporting schedule). Analysts' average forecasts were around $3.50.

GS trading income jumped 93% from a year ago, while its equity underwriting business produced record revenue of $736M. However investment banking revenue of $1.4B was down 15% from a year ago (but up 75% from the prior quarter). The company set aside $6.6B for compensation in the quarter (of great interest to the politicians, especially Barney Frank). Below is their chart for the last 2 years, a decent performance all considered:

•Goldman Sachs Profit Beats Estimates on Record Trading, Stock Underwriting

Goldman Sachs --- 2 years





Fear is creeping back into the markets despite the VIX hitting new yearly lows. GS numbers were good, but politicians read the same stories & they are hungry for blood. Banks are expected to report lower earnings even though they can borrow money at virtually zero cost. Yesterday's enthusiasm in the markets has given way to nervousness again. The important 8K floor is 300 points below today's price.

Dow Jones Industrials --- 2 years