Equities Hit by Lower Big-Bank Earnings

Bonds mixed, equities fall as earnings season continues. Treasury yields were mixed across a steepening curve today, the 2-year yield falling just under 3 bps to 4.20% while the 10-year yield climbed ~4bps to 3.55%. Elsewhere, The Dow Jones Industrial Average took a hit (-1.14%) after large investment banks announced lower earnings that stemmed from slowing M&A activity, headlined by a 6.44% Goldman Sachs decline. While 25 of the 33 S&P 500 companies to post results have beaten analysts’ expectations, future earnings are expected to feature substantial downside, according to UBS Wealth Management.

ECB considering slower hiking pace.  Anonymous sources have said that ECB policymakers are beginning to consider slower hikes than communicated by President Lagarde back in December. A 50bp increase in February still seems likely, but a smaller, 25bp hike at the March meeting is gaining support. The officials also said that even if a slowdown in tightening occurs, it should not be viewed as the ECB going softer on its mandate to control inflation.  They also note that no final decisions have been made and a 50bp move in March could still happen.  This news comes alongside a press conference today with European Commission Vice President Dombrovskis where he said that inflation may have peaked in Europe.

Day ahead. PPI and retail sales data will kick the session off at 8:30 AM ET. There will be substantial Fed commentary, with Patrick Harker (neutral voter), Lorie Logan (hawkish voter), Raphael Bostic (neutral non-voter), and James Bullard (hawkish non-voter) set to speak throughout the remainder of the day.