Investors have been nervous about the brewing crisis in the banking sector in recent days, and with several bank stocks included in the Dow Jones Industrial Average (^DJI 0.69%), it's no surprise that the venerable market benchmark has seen substantial declines in the past couple of weeks. However, the Dow got a reprieve early Monday, and the average climbed more than 300 points in the first hour of trading.
It also wasn't surprising to see Wall Street bank stock giant Goldman Sachs (GS 1.59%) playing a pivotal role in lifting the Dow, given its high share price and the price-weighted nature of how the Dow gets calculated. However, as much as Goldman's gains came as good news for its own shareholders, the broader Dow faces a bigger test when Nike (NKE -0.18%) reports its quarterly financial results late Tuesday.
Below, you'll learn more about what's been going on with Goldman and then get a preview about Nike's earnings.
Goldman flexes its muscles
Goldman Sachs shares were up more than 2% early Monday morning. That didn't make the investment bank the biggest percentage gainer, but the fact that its stock rose nearly $7 per share contributed about 50 points to the Dow's gains.
In a move that's worthy of its reputation, Goldman said that it would soon allow clients to trade bondholders' claims related to the purchase of ailing European bank Credit Suisse (CS) by UBS (UBS 1.50%). The UBS buyout will give Credit Suisse shareholders one share of UBS stock for every 22.48 Credit Suisse shares they own. However, in an unusual upending of the normal capital structure, bondholders in what are known as additional tier 1 capital notes (AT1s) will get no recovery.
The value of the AT1s moved close to zero, but some investors speculate that litigation could result in at least a minimal recovery for bondholders. The claims would be highly speculative, but the potential payout could be enormous if efforts to recover from UBS or others were successful.
This isn't the first time that Goldman has made markets in controversial areas, and its reputation for savvy and opportunistic thinking is clearly present here. Shareholders are generally comfortable with that, even if it does draw some adverse scrutiny from regulators from time to time.
What's in store for Nike?
Shares of Nike also rose, climbing about 1% by midmorning. The athletic apparel and footwear giant is set to report its fiscal third-quarter financial results late Tuesday, and investors are watching closely for signs about how well the consumer economy is holding up amid macroeconomic pressures.
Nike's previous financial report for the quarter that ended Nov. 30, 2022, was mixed. Revenue jumped 17% year over year despite 10 percentage points of headwinds from adverse foreign currency movements against the U.S. dollar.
However, falling margin levels limited Nike's ability to profit from those sales, as earnings per share rose just 2% year over year. Nevertheless, investors were pleased with Nike's performance.
Nike raised its full-year guidance in that report back in December, but that won't stop the company from continuing to see pressure on its bottom line. Despite expectations for a 5% to 6% rise in revenue, most Nike investors see earnings per share falling 37% year over year to $0.55 per share.
Nike has done well in promoting its global brand as a luxury item, but recent margin pressure suggests that strategy might be in jeopardy. Investors will watch closely to see whether Nike acknowledges further weakness from its customers, and if so, it could bring the recovery in its stock over the past six months to an abrupt halt.
