The stock market was having a generally negative day on Monday morning, fueled by increasing coronavirus fears after a new strain of the virus was discovered in the U.K. As of 11:30 a.m. EST, the S&P 500 was down by more than 1% and the Dow Jones Industrial Average was lower by about 200 points. Investment-banking giant Goldman Sachs (GS 1.01%) was moving in the other direction, though, with shares up by more than 6% for the day.
There are two main reasons Goldman Sachs is rising today, despite the dismal performance by the overall stock market.
First is the bank stress-test results, which were released after the end of the trading day Friday. In a nutshell, the tests found that banks were in sufficient shape to resume stock buybacks in 2021. And Goldman wasted no time: Shortly after the Federal Reserve announced the stress-test results, Goldman confirmed it would resume buybacks in the first quarter.
Second, Goldman's stock received several analyst upgrades on Monday, which is helping it outperform the overall financial sector. Investment-banking peer Morgan Stanley increased its price target on Goldman to $291 from $273, citing increased trading revenue and the stress-test results. And Wells Fargo is even more optimistic, giving Goldman a $320 price target and an "overweight" rating."
The stress-test results are certainly a huge win for banks, in general. Many (including Goldman) had been buying back stock aggressively before the pandemic, choosing it as their primary mechanism of returning capital to investors. And Goldman Sachs has the added benefit of a massive trading operation, as market volatility has propelled the company to some of its highest trading revenue figures in its history.