Dow Jones Futures Rebound; Salesforce.com Rises On Earnings

Global Stock Markets

Dow Jones futures rebounded early Wednesday along with the S&P 500 and Nasdaq 100 after major stock indexes marked a distribution day Tuesday.

Dow components JPMorgan Chase (JPM) and Goldman Sachs (GS) rebounded after sharp declines Tuesday. Exxon Mobil (XOM) was also indicated higher as oil prices inched up. U.S. crude oil futures for July delivery added 0.5% to around $67.10 a barrel.
Dow Jones Futures Rise

Dow Jones futures, S&P 500 futures and Nasdaq 100 futures were indicated higher by 0.6% to 0.7% in premarket trading.

The bond market saw big inflows Tuesday as the 10-year Treasury yield hit a low of around 2.76%, down 18 basis points. Early Wednesday, the 10-year yield was trading around 2.87%.

Nasdaq 100 component and Leaderboard name Amazon.com (AMZN) rose in line with index futures ahead of its annual shareholder meeting. It's been hugging the 1,600 level after a breakout from a cup-with-handle base with a 1,568.62 entry.

Buyers were in Micron Technology (MU) again after shares jumped 2% Tuesday. Shares were trading around 63.60 early Wednesday as it tries to break out with conviction from a cup-shaped base with a 63.52 entry. The caveat is that it's a later-stage base after a big price run already.

Elsewhere, PagSeguro Digital (PAGS) was indicated higher after reporting earnings late Tuesday. Shares crashed 10% Tuesday ahead of the results. PagSeguro was weak along with other Brazilian stocks due to an ongoing truckers strike.

Meanwhile, shares of cloud software pioneer Salesforce.com (CRM) were up nearly 5% in premarket trading. Earnings and sales topped expectations late Tuesday. Shares were trading around 133, still in buy range from a 128.97 entry. Salesforce was featured as a call-option trade in the latest Earnings Preview column.

Watchmaker Movado (MOV) rose sharply early Wednesday on strong earnings. Michael Kors (KORS) and DSW (DSW) (IBD) also reported earnings, but shares fell sharply in premarket trading.

Euro climbs after Italy eurosceptic parties' attempt to form government fails

European Stock Markets

The euro climbed up on Monday and was set for its biggest one-day rise against the Swiss franc as a relief rally swept through currency markets after Italy’s anti-establishment 5-Star and League parties abandoned plans to form a government. 

President Sergio Mattarella is expected to ask a former International Monetary Fund official on Monday to head a stopgap government amidst political and constitutional turmoil, with early elections looking inevitable.

Markets were relieved at not having to immediately deal with the likelihood of a eurosceptic government. But market strategists doubted the rally in the euro would be sustained.

The euro initially rallied 0.6 percent to $1.1728, pulling itself above 6 1/2-month lows. It trimmed some gains to stand 0.4 percent up on the day at $1.1696.

The euro also strengthened by 0.8 percent against the Swiss franc, rebounding from near three-month lows, and was trading at 1.1629.

The euro has been weakened by the dollar’s rally and by widening bond spreads between Italian and German debt, as markets grappled with the prospects of a spendthrift coalition government in Rome comprising the two parties.

Goldman Sachs strategists said political uncertainty will remain elevated, because the prospect of new elections would remain a drag on the economy.

The euro’s surge meant that the dollar pulled back from a six-month peak of 94.30 hit against a basket of rivals on Friday. It was trading 0.2 percent lower on the day at 94.03.

Elsewhere, the dollar was flat against the Japanese yen at 109.42 yen. Risk aversion receded after U.S. President Donald Trump said on Sunday a U.S. team had arrived in North Korea to prepare for a summit between him and North Korean leader Kim Jong Un.

Trump had pulled out of the summit last week, which had sapped investor risk appetite and helped push the dollar to a two-week trough of 108.955 yen on Thursday.

The Australian dollar, which is sensitive to shifts in risk sentiment, gained 0.25 percent to $0.7569 after shedding 0.4 percent on Friday.

Trading volumes overall were set to drop with Britain and the United States, the two main financial centres for foreign exchange trading, both closed for holidays.

Ex-Trump Advisor Predicts 'Global Cryptocurrency'

Global Stock Markets

Gary Cohn, the former Goldman Sachs executive who led Donald Trump's National Economic Council until last month, weighed in on bitcoin and blockchain technology on Tuesday.

I'm not a big believer in bitcoin, I am a believer in blockchain technology, says Cohn

He then made a bold prediction about the future of the tech, telling the network:

Cohn clarified that this global cryptocurrency would not be "based on mining costs and costs of electricity and things like that," a reference to the power-hungry mechanism that bitcoin and other blockchains utilize.

It will be a more easily understood cryptocurrency that will probably have some blockchain technology behind it, but it will be much more easily understood how it's created and how it moves and how people can use it, he remarked.

Cohn was prompted by a question about Goldman Sachs' decision, revealed last week, to launch a bitcoin futures trading desk.

Cohn became Goldman Sachs' president and chief operating officer in 2006. He remained in the post through the aftermath of the financial crisis, which his firm was widely seen as contributing to through its mortgage-backed securities business.

When Trump took office in January 2017, Cohn left Goldman to serve as director of the National Economic Council. In March 2018 it was reported that he would resign, a decision that likely reflected his opposition to the Trump administration's proposed tariffs. Cohn left the post on April 2.

Chinese startup company Nio hires eight banks for up to $2 billion U.S. IPO

Asian Stock Markets

Chinese electric vehicle startup Nio has hired eight banks including Morgan Stanley (MS.N) and Goldman Sachs (GS.N) to work on a planned U.S. stock market listing this year worth up to $2 billion.

Other banks are Bank of America Merrill Lynch (BAC.N), Credit Suisse (CSGN.S), Citigroup (C.N), Deutsche Bank (DBKGn.DE), JPMorgan (JPM.N) and UBS (UBSG.S), said the people, declining to be identified as the deal details are not public.

Nio’s proposed IPO of $1 billion-$2 billion comes as the firm, founded by Chinese internet entrepreneur William Li in 2014, seeks fresh capital to finance its expansion and investments in areas including autonomous driving and battery technologies, one of them said.

At the top end of the potential offering size, Nio’s IPO would become the biggest Chinese listing in America since the $25 billion public float of e-commerce giant Alibaba Group Holding Ltd (BABA.N) in 2014.

In October 2016, Chinese logistics company ZTO Express raised $1.41 billion from an IPO in New York.

Nio declined to comment on its IPO plans. UBS, Citigroup and Goldman declined comment while the other banks did not immediately respond to Reuters emailed request for comment.

Shanghai-based Nio, formerly known as NextEV, is among the first of a raft of Chinese electric vehicle firms to launch a production vehicle, with many so far only showing concept cars.

It launched sales of its first mass production car - the ES8 pure-electric, seven-seat sport-utility vehicle in December, at about half the price of American peer Tesla’s Model X.

It has also vowed to bring an autonomous electric car to the U.S. market by 2020.

Nio counts Asian tech behemoth Tencent Holdings Ltd (0700.HK) as its main backer alongside investment firms Hillhouse Capital Group and Sequoia Capital.

Last November, the firm raised more than $1 billion in its latest fundraising round, led by existing investor Tencent, valuing the firm at about $5 billion.

Morgan Stanley Takes on Goldman, Buffett With Bullish Bond Call

Global Stock Markets

Morgan Stanley says it’s time to get bullish on bonds -- even as Goldman Sachs Group Inc. and Warren Buffett issue warnings.

The sell-off in Treasuries, that began in earnest in September and ramped up in January, is ending, according to Morgan Stanley strategists.

Not so for Goldman Sachs Group Inc., which is running its models through a scenario in which yields on 10-year notes hit 4.5 percent -- though it expects that number to be closer to 3.25 percent by the end of this year.

Warren Buffett cautioned over the weekend that bonds can lift risk levels in portfolios as inflation eats away at returns.


There’s a lot at stake following the six-month rout in the $14 trillion U.S. government bond market that helped trigger jitters in global equities after years of gains.

While record levels of short positioning in Treasury futures may augur the next leg down as the risk premium for holding longer-dated notes climbs, it’s far from a given that tighter U.S. monetary policy will drive ever higher yields after an almost 1 percentage point jump in the 10-year yield.

After U.S. economic growth picked up last year and the Fed looking more determined to stick to its tightening path now, comments from Chair Jerome Powell during his first public speeches since taking over from Janet Yellen will be closely scrutinized this week.

Bond-market veteran Bill Gross has said a mild bear market in bonds was confirmed last month and Ray Dalio, manager of the world’s largest hedge fund, says the bull run seen over the past 30 years is over.

The value for Morgan Stanley is buying bonds at the long end of the Treasury curve. Hornbach’s team advised maintaining an existing bet that the gap between two-year notes and 30-year Treasuries will narrow from its current level of about 92 basis points, according to the report on Saturday.

Hornbach called 2016 the year of the bull for bonds and was vindicated when yields fell to record lows four months later. Yet, 10-year yields failed to push as low as his forecast for 1 percent.

Goldman Sachs Raises $2.5 Billion to Buy Stakes in Private-Equity Firms

Global Stock Markets

Group will follow the permanent capital approach of Warren Buffett’s Berkshire Hathaway by not setting exit dates for investments

Goldman Sachs Group Inc. GS -0.56% raised $2.5 billion to buy minority stakes in private-equity firms, betting on an industry that is commanding increasing influence as more businesses choose to stay private longer.

Petershill, a group within Goldman’s asset-management arm, gathered more than the $2 billion it targeted. An announcement is expected as soon as Thursday.

Goldman is zeroing on an industry that has secured a record amount of dollars from pensions and endowments in recent years to buy and lend money to businesses. U.S. private-equity firms in 2017 raised the most money in a year since 2007.

These firms can be attractive targets for investors who want to hold long-term stakes, as the firms’ funds typically lock up the money of major institutions for at least a decade, earning fees and a cut of profits along the way. The investment pool Goldman raised for the strategy, which includes Petershill Private Equity LP and other related funds, channels the approach of Warren Buffett’s Berkshire Hathaway Inc., in that it doesn’t set deadlines to exit its bets.

Over time, Goldman could cash in on the positions by selling stakes to investment managers and other buyers. It also could take a portion of the portfolio public, making it available for retail investors and mutual funds to invest in. There is no guarantee Petershill will make these moves.

If Goldman does list a pool of manager stakes, it would further open up a market that has largely been out of the reach of mom-and-pop investors. The majority of private-equity firms don’t list their shares publicly—and their funds typically don’t accept checks from small investors. This means that only large institutions, such as pensions and endowments, as well as the ultrarich have broad exposure to the asset class.

Goldman has already put a chunk of its new fund to work, acquiring minority stakes in private-equity firms. The fund generally will buy passive stakes in midsize firms with assets of $5 billion to $20 billion that Goldman believes have potential to expand.

The latest Petershill pool has taken stakes in technology-focused firm Accel-KKR, energy-infrastructure investor ArcLight Capital Partners and oil-and-gas manager Riverstone Holdings.

These sorts of transactions set a price tag for private-equity firms, allowing founders to put a dollar figure on the wealth they have created and paving the way for some of them to transfer ownership to other executives. Firms that sell a minority stake can use the new cash to fund expansion efforts. The Petershill unit also can act as a sounding board for the firms it backs.

China Construction Bank Seen as Pick for BlackRock, Goldman

If you think things will keep getting better for China’s biggest banks, look no further than China Construction Bank Corp.

Goldman Sachs Group Inc. and Morgan Stanley are among at least 16 brokerages that have raised their target prices for China’s second-largest bank this year. Institutional investors including BlackRock Inc. and Invesco Ltd. have recently increased their CCB holdings, data compiled by Bloomberg show.

Shares of China’s four biggest banks have rebounded since late 2017 as economic growth accelerated and investors bet they will cope betterthan their smaller rivals with the government’s crackdown on excessive debt. CCB’s financials are “trending the best,” thanks to its strong deposit franchise, widening loan spreads, conservative handling of bad debts and higher capital ratios, according to Morgan Stanley.

All except one of the 30 analysts tracked by Bloomberg who follow CCB recommend buying the stock and none say sell, giving the lender a consensus rating of 4.87 out of 5. By contrast, only 22 of 29 recommendbuying Industrial & Commercial Bank of China Ltd., the nation’s largest lender.

Shares of CCB may rise 19 percent in the next 12 months to HK$10.03 in Hong Kong, according to a consensus price target compiled by Bloomberg. CCB and ICBC are currently trading slightly above the value of their net assets, while Bank of China Ltd. and Agricultural Bank of China Ltd. remain below book.

CCB trades at 6.5 times estimated forward earnings per share, more than the 5.5 times two-year historical average, according to data compiled by Bloomberg.

The bank’s return on equity was 16.5 percent as of last September, the highest among the top four banks. Its net interest margin may expand 12 basis points by the end of next year, more than the estimated 8-point increase by ICBC, Morgan Stanley analysts including Richard Xu wrote in a report last month.

CCB has been setting aside more money for soured debts than required, giving it further room for earnings growth. The bank’s allowances rose to about 163 percent of nonperforming loans in the third quarter, higher than the official 150 percent requirement. Its bad-loan ratio was 1.5 percent as of September, lower than the industry average of 1.74 percent.

Shares of CCB rose 21 percent in Hong Kong last year, less than the 35 percent increase at ICBC. CCB shares trading in Hong Kong are about 29 percent cheaper than those in Shanghai -- a bigger discount than the 24 percent at its largest rival.

This Stock Soared 8,000% in Past Decade. Now It’s Hit a Sweet Spot, Says Goldman

Asian Stock Markets

Shares of Eicher Motors Ltd., which have soared almost 8,000 percent in the past decade, have hit a sweet spot, says Goldman Sachs Group Inc.

The stock is down 16 percent from its Sept. 8 record of 33,483.95 rupees even as the broad market posted a fresh record.


Eicher’s retreat has pushed down the valuation to below its five-year average and presents a buying opportunity, according to analyst Pramod Kumar.

While the street took Eicher’s sequentially flattish third-quarter sales as signs of demand saturation for Royal Enfield -- a British wartime motorcycle brand -- the moderation was mainly due to plant rejig and model year change, Kumar wrote in a Jan. 18 note.

He added the stock to regional conviction list with a target price of 35,208 rupees, implying a 26 percent gain from Friday’s close, when it had a market value of about $12 billion dollars.

Network expansion and new models will lead to Eicher’s revenue and operating profit compounding at 25 percent and 30 percent respectively, over the fiscal 2017-2020 period, according to the note.

Eicher Motors is the best-performing company on the NSE Nifty 50 Index over the past 10 years, and one of the gauge’s two members with a five-digit price tag on its shares.

Wall Street traders brace for meager paychecks as bonus season approaches

Some traders at the largest Wall Street banks are about to get big, fat zeroes for bonuses while they watch markets thrive.

Trading revenue was down significantly across the industry during the fourth quarter, wrapping up a year in which clients around the globe sat idle as market volatility hovered near historic lows.

The big five Wall Street banks – JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N), Bank of America Corp (BAC.N), Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N) – reported an average revenue decline of 32 percent for the fourth quarter, and 12 percent for the full year. Even though stock markets hit new highs and bond markets moved little, executives said it was hard to generate income from inactive customers.

As a result, bonuses could be 10 percent to 20 percent lower than the prior year, and traders who sit on desks that posted losses could get nothing at all, consultants and recruiters said in interviews.

Goldman posts first quarterly loss in 6 years on tax hit; trading slumps

Goldman Sachs Inc on Wednesday posted its first quarterly loss in six years on a huge tax charge but adjusted profit trumped analysts’ estimates, as strength in the investment banking business cushioned the blow from a slump in trading.

Goldman and rivals have faced weaker trading markets but the bank has suffered the most because its fixed income, commodities and currency unit (FICC) continues to weigh on results. The unit had a 50 percent drop in revenue - its worst quarter since the financial crisis.

FICC revenue was hurt by lower net revenue from currency, credit and interest rate products and commodities.

The bank booked a charge of $4.40 billion from the sweeping tax code changes enacted by President Donald Trump, pushing it to a loss of $2.14 billion or $5.51 per share in the fourth quarter ended Dec. 31. A year-ago, the bank earned $2.15 billion or $5.08 per share.

Shares were down about 1 percent at $255.75 in premarket trading.

Real estate investing startup Cadre partners with Goldman Sachs

New York-based real estate investment company Cadre has partnered with Goldman Sachs Group Inc (GS.N) to allow the bank’s private wealth management clients to invest through the startup’s platform. 

Goldman Sachs clients have committed to investing $250 million in properties through Cadre’s platform so far, the companies said on Wednesday.

The startup takes advantage of technology to make it easier and less costly for accredited individual investors - who must meet U.S. securities regulations for annual income of at least $200,000 or a net worth topping $1 million - and institutions to buy small stakes in U.S. commercial real estate online. Cadre says it offers a better alternative to real estate funds.

Cadre was co-founded in 2014 by its chief executive, Ryan Williams, along with brothers Joshua and Jared Kushner, part of a well known New York real estate family. Jared Kushner is a senior adviser and son-in-law of U.S. President Donald Trump, while Joshua Kushner is a venture capitalist.

The company said it has closed more than $1 billion in total transaction value since launching.
Through the partnership, Goldman Sachs clients will be able to use Cadre’s platform to pick investments identified by Cadre’s team.

JPMorgan, Goldman Sachs come top of banker pay league in Britain

JPMorgan (JPM.N) and Goldman Sachs (GS.N) paid their top bankers in Britain an average of $1.5 million each in 2016, compared with $1 million for local rivals HSBC (HSBA.L) and Barclays (BARC.L), data released by the banks last year shows. 

Data compiled by Reuters from 13 banks’ filings, some of which were released only late last month, shows they paid an average of $1.06 million to such staff in 2016, down from $2 million for the year ended Dec. 31, 2013 when new European Union rules aimed at curbing banker bonuses took effect.

The Wall Street banks’ higher pay packages show how they have bounced back more quickly from the financial crisis than their peers in Britain, some of which have faced hefty post-crisis costs that have limited banker pay.

The data also shows that EU rules to rein in banker bonuses, blamed for driving excessive risk-taking in the run up to the 2008 crisis, are having an impact.

JPMorgan paid 672 staff in senior or risk-taking positions a total of $1.02 billion in 2016 for an average of $1.52 million each, while 724 Goldman bankers took home an average of $1.48 million each, according to Reuters’ calculations from the filings. 

Goldman expects $5 billion hit to quarterly earnings due to new tax law

Goldman Sachs Group Inc (GS.N) said on Friday it expects fourth-quarter earnings to decrease by about $5 billion due to the new U.S. tax law signed by President Donald Trump last week.

Around two-thirds of the $5 billion decrease is due to repatriation tax, Goldman said in a statement with the U.S. Securities and Exchange Commission.

Congress last week approved a U.S. tax overhaul, the biggest in 30 years, which includes steep tax cuts for corporations and wealthy taxpayers.

The new law significantly lowers the income tax rate for U.S. companies - to 21 percent from 35 percent - allowing them to repatriate cash from overseas, and modifies numerous deductions, among other changes.

The tax overhaul will allow Apple Inc (AAPL.O) to bring back its $252.3 billion foreign cash pile without a major tax hit - a long-standing company goal.

Drugmaker Amgen Inc (AMGN.O) last Friday also said it expects to incur tax expenses of $6 billion to $6.5 billion over time as it repatriates cash it has accumulated around the world because of the new law.

Goldman eschews bitcoin but wants to help clients crypto-trade

Goldman Sachs Group Inc is trying to figure out how to cater to investors who want to trade bitcoin even though the digital currency remains too volatile for the Wall Street bank to trade itself, according to comments by a representative and its chief executive officer on Thursday. 

At an event, CEO Lloyd Blankfein said there was no imminent need for Goldman Sachs to develop a strategy around bitcoin, which rose to an all-time high of $11,395 (8,435 pounds) on Wednesday only to lose one-fifth of its value on Thursday.

“Something that moves up and down 20 percent in a day doesn’t feel like a currency, doesn’t feel like a store of value,” Blankfein said at an event hosted by Bloomberg to promote Goldman’s 10,000 Small Businesses endeavour.

The bank will trade in bitcoin if it becomes more established, trades in a less volatile manner and has more liquidity, he said. 

Even so, Goldman has been looking at ways to facilitate bitcoin trades for customers. It is still doing so, spokeswoman Tiffany Galvin told Reuters in a statement.

Meanwhile, Citigroup Inc CEO Michael Corbat predicted governments will issue digital currencies of their own, something a U.S. Federal Reserve official said the central bank is considering at an event on Wednesday. The following day, another Fed official called bitcoin a threat to the financial system.

Bitcoin Hurtles Past $8,000

Global Stock Markets

Cryptocurrency’s value is up more than 700 percent this year. Three slumps of more than 25% have all given way to rallies 

Bitcoin’s relentless and volatile rally shows no sign of abating, with the world’s largest cryptocurrency defying growing bubble fears to hit yet another milestone.

Bitcoin rose 4.5 percent to $8,045.45 as of 11:34 a.m. in London after climbing as much as 5.2 percent during Asian hours. It’s been a tumultuous year for the virtual currency, with three separate slumps of more than 25 percent all giving way to subsequent rallies.


Even as many skeptics call the asset a bubble waiting to pop, it’s becoming too big for many on Wall Street to ignore. CME Group Inc., the world’s biggest exchange, will start offering futures trading on bitcoin next month, while senior executives at Goldman Sachs Group Inc. and Citigroup Inc. have said they are researching cryptocurrencies and the blockchain technology that underlies them.

Recent volatility has stemmed from a pickup in people switching to alternative virtual currencies, notably bitcoin cash.

That’s gaining popularity due to lower transaction costs and faster speed.

New cryptocurrency iterations are springing up as disagreements over bitcoin’s design persist and opportunities for making a quick buck prove hard to pass up.

Bitcoin cash advanced 2 percent on Monday to trade at $1,194.88, down from a high of $1, 388 on Nov. 12, Coinmarketcap.com prices show. Bitcoin has advanced more than 700 percent this year and now boasts a market value of more than $130 billion.

Wall Street bonuses may jump 10 percent this year

Global Stock Markets

Wall Street bonuses may climb as much as 10 percent this year, in the first meaningful jump for the industry since 2013.

Bankers who advise companies on issuing stock or bonds could see an even bigger pay jump, as much as 20 percent, compensation firm Johnson Associates Inc said on Sunday. 

A reduced emphasis on financial regulation under U.S. President Donald Trump has boosted shares of banks to peak levels on hopes higher interest rates, lower taxes and faster economic growth under the Trump administration would lift profits.

The KBW Nasdaq Bank Index, which measures the largest U.S. banks, has risen 34 percent since the election, compared with the benchmark S&P 500 index’s 24 percent gain over the same period.

But looser banking regulations haven’t translated yet into better trading results amid low market volatility and tepid client activity. Wall Street firms’ bond trading revenue has fallen for about seven years amid new rules on trading and capital.

Banks, including Goldman Sachs Group Inc and Morgan Stanley, that once relied heavily on trading, are now leaning more heavily on businesses like private equity and wealth management.

As a result, fixed income traders are likely to see their bonuses fall as much as 10 percent, the report said.

Oil steady on OPEC-led supply cuts, tight U.S. market

Oil prices steadied on Thursday as supply cuts by OPEC and other major exporters tightened the market despite higher production in the United States.

Benchmark Brent crude LCOc1 was unchanged at $60.49 a barrel by 1005 GMT. On Wednesday, Brent reached $61.70, its highest intraday level since July 2015. The contract is up more than a third since its 2017-lows in June

.

U.S. light crude CLc1 was 10 cents higher at $54.40, almost 30 percent above its 2017-low in June.

Confidence has been fueled by an effort this year lead by the Organization of the Petroleum Exporting Countries and Russia to hold back about 1.8 million barrels per day (bpd) in oil production to tighten markets. 

Saudi Arabian Energy Minister Khalid al-Falih said on Thursday supply and demand balances were tightening and oil inventories falling, while compliance with the OPEC-led pact to curb supplies had been “excellent”.

Russian oil output edged up to 10.93 million bpd in October from 10.91 million bpd in September, official data showed on Thursday, but the country remains in compliance with the deal to curb output. 

Overall, oil markets have been slightly undersupplied this year, resulting in inventory drawdowns.

The pact to withhold supplies runs to March 2018, but there is growing consensus to extend the deal to cover all of next year. 

Oil was also supported by falling U.S. commercial crude inventories despite rising output. 

Goldman Sachs said it expected year-on-year U.S. oil production growth of 0.8 million to 0.9 million bpd at year-end 2017. That would put end-2017 output at 9.6-9.7 million bpd, only slightly above current levels. 

The EIA said a record 2.1 million bpd of U.S. crude was exported in the latest week.
Traders said this was due to U.S. crude trading at a wide discount to Brent, making exports attractive. CL-LCO1=R

Wall Street flat at open

Wall Street opened flat on Tuesday as upbeat earnings from big investment banks Goldman Sachs and Morgan Stanley failed to fuel the optimism that has led the major indexes to record highs. 

The Dow Jones Industrial Average .DJI rose 15.01 points, or 0.07 percent, to 22,971.97. The S&P 500 .SPX lost 0.5 points, or 0.01 percent, to 2,557.14. The Nasdaq Composite .IXIC dropped 3.44 points, or 0.05 percent, to 6,620.57. 

Wall Street hits fresh record on financial, tech gains

Apple (AAPL.O) gained 1.05 percent, providing the biggest boost to the Nasdaq and the S&P after KeyBanc upgraded the stock to “overweight”.

Financial stocks gained for the first time in four days, led by bank stocks. Reactions to bank results last week were muted on concerns about credit card losses at JPMorgan (JPM.N) and Citigroup (C.N) and weak trading activity across the sector. 

Investment banks Goldman Sachs (GS.N) and Morgan Stanley (MS.N) report before markets open on Tuesday. Insurer Travelers (TRV.N) jumped 2 percent, providing the biggest boost to the Dow. 

Video-streaming pioneer Netflix (NFLX.O) reports third-quarter results after market.

Of the S&P 500 companies, 55 are expected to report this week. Out of the 32 that have reported so far, 84.4 percent beat earnings expectations, according to Thomson Reuters data. 

World stocks and commodities got a boost from upbeat Chinese data on Monday, while U.S. oil futures jumped to a near six-month high as escalating tensions between the Iraqi government and Kurdish forces threatened supply. [MKTS/GLOB] 

At 9:46 a.m. ET, the Dow Jones Industrial Average .DJI was up 66.88 points, or 0.29 percent, at 22,938.6, the S&P 500 .SPX was up 5.72 points, or 0.22 percent, at 2,558.89 and the Nasdaq Composite .IXIC was up 20.73 points, or 0.31 percent, at 6,626.54. 

Ten of the 11 major S&P sectors were higher, led by gains in the energy index .SPNY as oil prices jumped nearly 2 percent. 

Oil majors Chevron (CVX.N) gained 1.4 percent and Exxon (XOM.N) rose half a percent.

Adobe (ADBE.O) slipped 1.58 percent after Deutsche Bank cut rating on the Photoshop maker’s stock to “hold”. 

Groupon (GRPN.O) rose 4.5 percent after brokerage Cowen and Co upgraded the daily deals website operator’s stock to “market perform”. 

Freeport-McMoran (FCX.N) gained 4.7 percent as copper prices broke through the $7,000-a-tonne mark for the first time in three years, helped by Chinese data.

Advancing issues outnumbered decliners on the NYSE by 1,571 to 992. On the Nasdaq, 1,518 issues rose and 973 fell.

Goldman's rotten trading quarter is a familiar smell on Wall Street

Big Wall Street banks have spent billions of dollars and untold man-hours in recent years transforming their trading desks from hedge-fund like operations trading on their own account into market-making businesses offering a price based on what customers want to buy or sell. 

But the shift in business model, prompted by reforms following the 2008 financial crisis, has done little to shield banks from suffering big losses when markets move against them, traders and risk managers told Reuters this week. 

Goldman Sachs Group Inc’s (GS.N) second-quarter results, which saw earnings rise to $3.95 per share from $3.72 in the same quarter last year, also included the worst commodities trading quarter in its history as a public company, prompting a 2.8 percent fall in the bank's stock in the last two days. 

Bad inventory positions based on wrong expectations of customer demand were partly to blame, Chief Financial Officer Marty Chavez said.

Goldman is not alone. In recent years, banks including JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N), Barclays PLC (BARC.L) and Deutsche Bank AG (DBKGn.DE) have all suffered losses from currency moves, interest rate positions, or misguided bond market bets. 

Under the so-called the Volcker rule, which was intended to limit proprietary trading, banks are now required to prove they are only holding enough inventory to meet "reasonably expected near-term demand." 

The rule was implemented in response to the 2008 financial crisis, when Wall Street banks fueled problems in the mortgage market by making speculative bets with their own money. 

But one of the Volcker rule's unintended consequences has been to drain liquidity in certain markets, which has made it more expensive and difficult for banks to source inventory for clients or manage their own risks. 

New rules defining the amounts of capital banks must hold have made it more expensive for them to hold certain types of assets, while a long period of low volatility in some markets has made it trickier to gauge when trading activity will suddenly rise.