Stocks closed lower after trading in a narrow range on low volume, as investors looked forward to earnings reports in coming weeks. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) fell slightly. Bank stocks led the market down and energy shares slumped, while the consumer and healthcare sectors made gains.
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Slump in trading hits Goldman Sachs
Goldman Sachs missed revenue estimates in the first quarter but beat profit expectations, and shares slumped 3.8%. Revenue fell 12.6% to $8.81 billion, compared with the analyst consensus of $9.04 billion. Earnings per share plunged 17.8% to $5.71 but came in well ahead of the $4.89 that Wall Street was estimating.
The decline was largely due to an 18% drop in revenue from institutional client services, where trading revenue is reported. Fixed-income trading fell 11% and equity trading revenue plummeted 24%. Goldman said the market drop in December put a damper on enthusiasm for equities, while lower market volatility also hurt results. The company also had a 34% decline in underwriting fees due to low initial public offering (IPO) activity in the quarter. Operating expenses fell 11%, thanks largely to a 20% decrease in compensation and benefits.
Goldman had reason for optimism looking forward, though, saying that institutional clients were becoming less cautious in March. The company is in the midst of a strategic review, which includes adding new, diversifying ventures such as partnering with Apple on the tech titan's new credit card.
Diversification and buybacks lift Citigroup's results
As with Goldman Sachs, Citigroup's first-quarter results were impacted by lower equity trading, but steady performance in other segments of its business mitigated the effect, and shares slipped only 0.1%. Revenue fell 1.6% to $18.58 billion, just missing the analyst consensus of $18.63 billion. Earnings per share increased 11.3% to $1.87, beating expectations for $1.80.
Revenue from equity trading fell 24%, but fixed-income trading managed a 0.8% increase, keeping the decline in markets and securities services to 5.6% to $4.7 billion. Citigroup's consumer banking business delivered flat revenue growth at $8.5 billion, while strong growth in institutional advisory fees lifted investment banking revenue 19.8% to $1.4 billion.
Citigroup's profit gains were helped by a lower tax rate and a significant reduction in share count. The company used $5 billion to buy back stock in the quarter, reducing the share count 9% compared with the period a year ago.