Tag: Sachs

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Oil prices have tanked so hard traders are assuming planes won’t fly for 3 months: Goldman Sachs

Oil prices have come down way too fast on Omicron variant concerns, says Goldman Sachs oil strategist Damien Courvalin.

In fact, the price correction is borderline comical, per Courvalin’s calculations. 

“The lack of discretionary buying activity in the face of an uncertain new COVID variant has therefore left prices in free-fall and pricing in a dire demand outlook. We estimate based on our pricing model, that the market has now priced in a mammoth c.7 mb/d [millions of barrels per day] negative demand hit over the next three months, with no offsetting OPEC+ response,” pointed out Courvalin in a new research note on Wednesday. 

Courvalin added, “To put this into context, this would represent any of these extreme outcomes: (1) not a single plane flying around the world for three months, or (2) half as intense as the 2Q20 global lockdown, or (3) a world even worst-off than before vaccinations: the combination of global jet demand falling to last winter’s level (-1 mb/d), a twice as large hit to EU demand as the Alpha variant last winter (-2 mb/d) and twice as large a hit to Chinese demand as the Delta variant this summer (-1 mb/d). The relatively parallel nature of the sell-off, with back-end prices down $7/bbl, could also be interpreted as the market pricing in a shallower but longer demand hit: a c.4 mb/d hit over 3 months with c.3mb/d of this a permanent impact offset by higher OPEC+ spare capacity.”

WTI crude oil prices have plunged 12{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} since Nov. 24 on worries the new variant will stunt global demand. As Yahoo Finance’s Jared Blikre notes, oil prices are now down about 23{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} from their recent high.

Shares of oil majors Exxon and BP have shed 7.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} and 9.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, respectively, in the last five sessions, according to Yahoo Finance Plus data.

The sell-off in oil comes amid a violent broader market pullback this past week, which continued on Tuesday. 

The Dow Jones Industrial Average plunged 652 points in Tuesday trading, while the Nasdaq Composite and S&P 500 were also deeply in the red. All 30 Dow components were in the red for the session, except for Apple and Merck.

Courvalin believes the steep pullback in oil prices is looking overdone.

“We view the move lower in prices as excessive but understandable in the context of low year-end liquidity and risk appetite. Given the large uncertainties at this time, we await further news on the variant’s development and additional restrictions imposed before refreshing our supply and demand balances and oil price forecasts, although again reiterate our view that the market has far overshot the likely impact of the latest variant on oil demand with the structural repricing higher due to the dramatic change in the oil supply reaction function still ahead of us,” Courvalin noted.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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Why these are the worst stocks to own right now: Goldman Sachs

Not every sector of the market is a longer-term buy even with stocks continuing to be on autopilot, warn strategists at Goldman Sachs. 

Some of the worst stocks to own in a U.S. economy trying to claw back from the COVID-19 pandemic are those with high exposure to tight labor markets, which runs the risk of pressuring profit margins as wages are hiked.

“Labor market tightness will remain a challenge during the next few years. Investors should avoid stocks with high labor costs relative to EBIT [earnings before interest and taxes],” says David Kostin, Goldman Sachs chief U.S. equity strategist, in a new research note to clients. 

Several of the companies that fall under this category, per Goldman’s analysis includes IBM (IBM), Raytheon (RTX), HCA Healthcare (HCA), FedEx (FDX) and Dollar General (DG).

On the other hand, Kostin and his team think reopening stocks with cyclical exposure are the better bet at the moment. 

Explains Kostin, “While virus counts are now rising and weighing on reopening stocks, as the winter wave passes, declining virus and inflation headwinds should provide a near-term boost to corporate revenues and margins for the businesses most exposed to these challenges.”

Companies such as Best Buy (BBY), Home Depot (HD), Lowe’s (LOW), D.R. Horton (DHI), KB Home (KBH) and Lennar (LEN) appear positioned for a cyclical upswing, points out Kostin.

In the near-term, however, both high labor exposure stocks and reopening stocks may work well for investors as markets digest recent Federal Reserve news.

Monday morning, President Biden renominated Powell as Fed chief, ending weeks of speculation on the topic. Biden also nominated Lael Brainard to the position of vice chair. Both are seen as monetary policy doves by market participants, hinting the Fed may be inclined to push off interest rate hikes in 2022 even with inflation remaining elevated.

In turn, that would be good for valuation multiples.

Stock markets soared on the news, with the Dow Jones Industrial Average rising by more than 300 points at one point early in Monday’s session.

“With the Fed on hold until mid-year 2022 and bond yields below 2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, equities will remain the asset of choice for both institutional and retail investors,” contends Kostin. 

The closely watched strategist sees the S&P 500 hitting 5,100 by the of 2022, up about 10{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} from current levels.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

Read the latest financial and business news from Yahoo Finance

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Goldman Sachs cashes in on M&A wave to cap stellar quarter for U.S. banks

Oct 15 (Reuters) – Goldman Sachs Team Inc (GS.N) on Friday claimed a 66{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} surge in third-quarter profit that smashed anticipations, as Wall Street’s greatest expense lender rode a history wave of M&A activity and initial general public choices.

The bank posted gains of $5.28 billion up from $3.23 billion a 12 months in the past, capping a stellar quarter for Wall Street lenders which have benefited from a rebounding U.S. economic climate, unstable fairness markets and a world deal-earning bonanza.

Shares of Goldman Sachs were being up 2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in mid-morning trading.

World-wide M&A volumes have shattered all-time documents, with offers truly worth in excess of $1.5 trillion inked by the world’s most significant investment banks in the third quarter, in accordance to Refinitiv knowledge.

Goldman comfortably held its leading rating on the league tables for around the globe M&A advisory, in accordance to the Refinitivdata whichranks economic expert services firms on the total of M&A charges they make.

Those surging M&A service fees drove Goldman Sachs’ total money advisory profits up 225{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $1.65 billion, whilst underwriting profits, which has been boosted by a rush of non-public companies looking to go public, surged 33{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $1.90 billion.

All advised, Goldman’s investment financial institution boasted its second-best quarter at any time, with overall earnings of $3.70 billion, and executives mentioned they assume revenues to continue on to be strong.

“I continue being optimistic about (possibilities),” Goldman Sachs Chief Govt Officer David Solomon stated on a call with analysts. “Exercise stages keep on being large specifically in expense banking.”

Earnings for each share were $14.93 from $8.98 a yr before, outstripping the $10.18 for every share analysts experienced predicted, according to the IBES estimate from Refinitiv.

Goldman’s worldwide markets company, which now homes the buying and selling organization and accounts for roughly 41{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of general revenue, described profits of $5.61 billion, up 23{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.

Together with its rivals, Goldman also cashed in as organizations rushed to refinance debt and promote new inventory, although volatility in world-wide equities marketplaces, pushed by worries above central lender policy tightening, retained buying and selling desks hectic all through the quarter.

A see of the Goldman Sachs stall on the floor of the New York Stock Exchange July 16, 2013. REUTERS/Brendan McDermid

The bank’s fairness buying and selling profits much more than doubled from past yr to $3.1 billion. That was better than rival Morgan Stanley, which described trading revenue of $2.87 billion and is normally number one in this line of company.

Rival Morgan Stanley (MS.N) reported on Thursday that its 3rd-quarter gain rose 38{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, even though JPMorgan Chase & Co (JPM.N) described a 24{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} rise. go through extra Citigroup Inc. (C.N) and Financial institution of The usa Corp (BAC.N), which have been likewise buoyed by offer costs and equities buying and selling, increased gains by 48{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} and 64{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, respectively. All the banking institutions handily conquer estimates.

Contrary to JPMorgan, Citigroup and Bank of America, which have sizable buyer banking companies, Goldman is seriously reliant on its buying and selling organization and investment decision financial institution.

Consumer Enterprise

Goldman’s customer company, while compact, has been important to its diversification strategy.

As component of Main Govt David Solomon’s method to create substitute revenue streams, Goldman is now doubling down on Marcus, its customer financial institution.

Considering that having above from Lloyd Blankfein in 2018, Solomon has appeared to diversify revenue, with a lot more emphasis on buyer banking, mass-current market prosperity administration and cash administration.

Web earnings in Goldman’s shopper banking device rose 17{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $382 million, reflecting increased credit card and deposit balances.

Full financial loans increased 28{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $143 billion in the quarter from a 12 months previously, a powerful consequence in a blended quarter for bank loan expansion across Wall Road.

JPMorgan stated on Wednesday that financial loans were up 5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} across the lender compared with very last yr, when Citi was broadly flat. go through extra

Financial institution of The us (BAC.N) and Wells Fargo (WFC.N) described declines in bank loan growth year-on-12 months.

Total revenue surged 26{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $13.61 billion in the quarter, handily beating estimates.

Reporting by Noor Zainab Hussain and Anirban Sen in Bengaluru, Elizabeth Dilts and Matt Scuffham in New York Enhancing by Arun Koyyur and Nick Zieminski

Our Requirements: The Thomson Reuters Have confidence in Rules.