Wall Street continued to build on yesterday's gains as Goldman’s robust quarterly report bolstered confidence in the economy and the banking sector.
Goldman Sachs, which is facing a lawsuit from the Securities Exchange Commission, today reported a 91% surge in first-quarter earnings of $3.46 billion, or $5.59 a share, predominantly due to record revenues at its fixed-income division and strong income from its equity underwriting unit. Earnings beat the $4.01 per share average forecast shown in a survey of estimates by Thomson Reuters.
Group revenues rose 36% to $12.78 billion thanks to fixed-income revenues of $7.39 billion and a 44% increase in investment banking sales of $1.18 billion. Goldman's performance follows robust earnings from JPMorgan Chase, Bank of America and Citigroup.
Speaking about the SEC's lawsuit, Greg Palm, the bank's co-general counsel said the firm was 'very disappointed' about the charges and insisted that Goldman would 'never mislead anyone'. However, Goldman’s shares fell 1% to $161.62 this afternoon, countering earlier gains, after the UK's Financial Services Authority said it has formally started investigating Goldman Sachs International in relation to the SEC’s allegations.
The fear at the moment is that these regulatory probes will leave Goldman vulnerable to a barrage of lawsuits from clients, which would unequivocally damage the company's reputation. In the meantime, the bank's robust results continue to suggest that the US banking sector is still on a solid path to recovery.
Citigroup's shares climbed 1.3% to $4.95, after UBS raised its share-price target for the bank by 33% to $5. Meanwhile, Wells Fargo added 1.3% to $33.44 and Bank of America advanced 1.5% to $18.66.
A return in risk appetite broadly weakened the US dollar, helping bolster the appeal of commodities and mining stocks. Shares in Freeport-McMoRan Copper & Gold traded 1.2% higher at $81.79, while Newmont Mining rose 0.5% to $52.48. Barrick Gold climbed nearly 1% to $39.49.
Bucking the positive trend was Coca Cola, which fell 1.6% to $54.42 after unveiling first-quarter sales that fell short of consensus estimates. The world's largest soft-drink maker reported a 5% rise in first-quarter revenues of $7.53 billion, missing the $7.72 billion average analyst estimate shown in a Bloomberg survey.
The company's bottom line exceeded expectations, however, rising 20% to $1.61 billion, or 69 cents a share, following strong sales performance in Latin America. After excluding certain one-off items, its quarterly earnings came in at 80 cents a share, beating expectations of 74 cents a share.
Also in the red was bio tech company Human Genome Sciences, which plunged 10% to $28.131 after announcing that its lupus drug Benlysta failed to meet secondary goals.
Elsewhere, the International Monetary Fund today warned that Greece’s upheaval could mark the beginning of a 'new phase' in the global crisis. 'In spite of recent improvements in the outlook and the health of the global financial system, stability is not yet assured,' warned Jose Vinals, director of the IMF's monetary and capital markets department, at a press conference to discuss the semi-annual Global Financial Stability Report. 'If the legacy of the present crisis and emerging sovereign risks are not addressed, we run the real risk of undermining the recovery and extending the financial crisis to a new phase,' he said. The report called on governments to 'design credible medium-term fiscal consolidation plans in order to curb rising debt burdens and avoid taking the credit crisis into a new phase.'
Meanwhile, Greece is scheduled to meet with IMF and EU officials tomorrow to discuss a lending plan aimed at helping to shore up the country's finances and avoid default.
By 3.45pm (London time), the Dow Jones Industrial Average was up 15.04 points (+0.14%) to 11107.09, while the broader S&P 500 was 5.86 points (+0.49%) above its previous close at 1203.38. At the same time, the FTSE 100 Index was 56.54 points (+1%) higher at 5784.45, while the FTSE 250 stood at 10467.85,
