Shares of Goldman Sachs Group Inc. dropped Monday, after the blue-chip bank again beat earnings expectations by a wide margin, but missed on revenue for the first time in two years.
Chief Executive Michael Solomon said on the post-earnings conference call with analysts that despite a rally in the stock market during the quarter, a “mixed” macroeconomic backdrop and strong year-ago results was to blame for the “challenging” market environment. He said “trading activity remained low,” as slowing global economic growth and dovish central bank rhetoric resulted in lower government bond yields, flattened yield curves in the U.S. and Europe and significant declines in market volatility.
In addition, there was a “significant slowdown” in initial public offering activity, as a direct result of the government shutdown. And uncertainty over the U.S.-China trade dispute and Brexit negotiations “weighed on sentiment and kept issuers and investors on the sidelines,” Solomon said, according to a transcript provided by FactSet.
Therefore, while equity and credit markets rebounded there was “lower client conviction,” although “client engagement” improved later in the quarter.
The stock GS, -3.82% dropped 3.3% in afternoon trade, enough to pace the Dow Jones Industrial Average’s DJIA, -0.10% decliners, and to pull back from a 5-month closing high on Friday.
The price decline of $6.84 was lopping about 46 points off the Dow’s price, which was down just 29 points.
Although Goldman has made a habit of beating both profit and revenue expectations, investors were more often than not left disappointed. Although the stock rose on the day the previous two earnings reports were released, it dropped on the day of the previous seven. And on the day of the past 20 quarterly reports, including Monday, the stock declined 14 times.
Goldman reported first-quarter net income that fell to $2.18