Stock Market Today Mid-Morning Updates

On Tuesday, the Dow Jones Industrial Average is down by 500 points after Goldman Sachs (NYSE: GS) reported disappointing earnings and as government bond yields hit coronavirus-era highs. This comes after the markets were closed on Monday for Martin Luther King Jr. Day. Also, U.S. and international oil prices hit a seven-year high on Tuesday as possible supply disruption came into play after attacks in the Mideast Gulf added to an already tight supply outlook. The United Arab Emirates vowed to retaliate against Yemen’s Iran-aligned Houthi group for Monday’s deadly attack on its capital Abu Dhabi.

Brent and WTI jump over $1/barrel to the highest since October 2014. Goldman Sachs analysts say that they expect oil inventories in OECD countries to fall to their lowest since 2000 by the summer, with Brent oil prices rising to $100 later this year. Oil producers like Exxon Mobil (NYSE: XOM) and ConocoPhillips (NYSE: COP) are up 1.24% and 1.30% respectively today.

Among the Dow Jones leaders, shares of Apple (NASDAQ: AAPL) are down by 0.70% today while Microsoft (NASDAQ: MSFT) is also down by 1.39%. Home Depot (NYSE: HD) and Nike (NYSE: NKE) are down 2.68% and 1.36% respectively on Tuesday. Also, among the Dow 30, financial leaders like Visa (NYSE: V) and JPMorgan Chase (NYSE: JPM) are trading mixed.

Shares of electric vehicle (EV) leader Tesla (NASDAQ: TSLA) are down 2.56% on Tuesday. Rival EV companies like Rivian (NASDAQ: RIVN) and Lucid Group (NASDAQ: LCID) are also down by 5.71% and 6.21% today. Chinese EV leaders like Li Auto (NASDAQ: LI) and Xpeng Motors (NYSE: XPEV) are trading higher at 0.85% and 3.82% respectively.

Dow Jones Today: Treasury Yields Hit Pandemic-era Highs

Following the stock market opening on Tuesday, the S&P 500, Dow Jones and Nasdaq are trading 1.40%, 1.49%, and 1.92% lower. Among exchange-traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (NASDAQ: QQQ) opened lower at 1.63% Tuesday, while the SPDR S&P 500 ETF (NYSEARCA: SPY) is down by 1.31%.

Today, the yield on the benchmark 10-year Treasury note was trading at 1.825%, coming off intraday highs of over 1.85%. Also, the 2-year rate which reflects short-term interest rate expectations topped 1% for the first time since February 2020. Notably, this is a month before the coronavirus pandemic sent the U.S. economy into a recession.

This rise comes as investors are preparing for potentially more aggressive policy by the Federal Reserve to control rising inflation. Furthermore, Federal Reserve Chair Jerome Powell told the U.S. Senate last week that he expects to see a series of interest rate hikes this year, along with the easing of other pandemic economic support measures. Some analysts expect that the Feds could hike rates as many as seven times this year. Could the reality be that the market is still adjusting to the Fed’s hawkish statements, given how the markets have started off to a bumpy year so far?

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Homebuilder Confidence Drops For the First Time In Four Months

According to the National Association of Home Builders (NAHB), builder confidence fell one point to 83 in January. Builders in the single-family housing market are facing growing expenses, which is causing a turnaround in sentiment to the start of the year. This comes as higher material costs and lack of availability are adding weeks to typical single-family construction times. For instance, the price of softwood lumber alone has jumped by over 80% in the past three months. Coupled with labor shortages and higher mortgage rates could point to declines in housing affordability in 2022.

Microsoft Set To Acquire Activision Via $68.7 Billion All-Cash Agreement

Among the latest gargantuan deals in the consumer tech space today would be the one between Microsoft (NASDAQ: MSFT) and Activision Blizzard (NASDAQ: ATVI). Notably, Microsoft is acquiring Activision for a whopping $68.7 billion in cash. Through this agreement, Microsoft would be buying one of, if not the most famous game franchise globally, Call of Duty. As a result of this immense play between the two gaming industry titans, ATVI stock is now surging by 29% as of today’s opening bell. Regardless, the real question now is how this move benefits Microsoft in the long run.

In detail, Activision will be reporting to Microsoft’s Xbox head Phil Spencer once the acquisition is done. By Microsoft’s estimates, the current deal could close by its fiscal 2023 year. If anything, the acquisition serves to significantly grow Microsoft’s already booming gaming division. In fact, it will emerge as the third-largest gaming company by revenue after completing the purchase. After considering Microsoft’s push in the gaming space over the past few years, this is not all that surprising. Its two largest buys before this would be Minecraft maker Mojang for $2.5 billion back in 2014 and Bethesda for $7.5 billion last year. As such, the $68.7 billion buy would overshadow show that Microsoft means business on this front.

Commenting on all this is Microsoft CEO Satya Nadella. Namely, Nadella highlights the flexibility of the gaming industry as it spans across platforms of entertainment today. Additionally, he also notes that the acquisition “will play a key role in the development of metaverse platforms.” While MSFT stock may be trading lower by 1.04%, some investors could see long-term growth potential from this deal.

ATVI stock
Source: TD Ameritrade TOS

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Goldman Sachs Shares Dive On Quarterly Profit Miss

Elsewhere, Goldman Sachs is singing a similar tune to its banking industry peers on the earnings front. Diving right in, the firm posted an earnings per share of $10.81, missing estimates of $11.76. Also, Goldman Sachs raked in a total revenue of $12.64 billion for the quarter, above consensus forecasts of $12.08 billion. By and large, a key metric investors are likely focusing on is the company’s equities desk revenue. The likes of which came in at $300 million below the $2.43 billion estimate.

Providing insight into the bank’s full-year performance is CEO David Soloman. He says, “2021 was a record year for Goldman Sachs. The firm’s extraordinary performance is a testament to the strength of our client franchise and people. Moving forward, our leadership team remains committed to growing Goldman Sachs, diversifying our businesses and delivering strong returns for shareholders.” Despite all this, GS stock is currently down by 8.22% on today’s opening bell. With the upcoming interest rate hikes in mind, GS stock could be appealing to some looking to buy on the current dips in the broader market.

GS stock chart
Source: TD Ameritrade TOS

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