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Goldman Sachs, Bank of America, and the Fed — What you need to know in markets on Wednesday

Myles Udland
Markets Reporter

Tuesday was a wild start to the holiday-shortened trading week for markets.

After surging higher out of the gate, the stock market lost all of its gains and then some during a trading session that saw markets steadily lose ground throughout the day. The Dow, which was up 283 points at its high to break above 26,000 for the first time, finished the day down fractionally, losing 10 points, or 0.04%. .

The benchmark S&P 500 lost 9 points or 0.3%, while the tech-heavy Nasdaq led losses with a 37 point decline, good for a percentage loss of 0.5%.

Stocks had a huge pop at the open but faded throughout the trading day to close with losses. (Source: Yahoo Finance)

On Wednesday, the economics calendar will bring investors the December reading on industrial production from the Fed and the January reading on homebuilder sentiment from the National Association of Homebuilders in the morning. And in the afternoon, the latest Beige Book — a collection of economic anecdotes from each of the Fed’s 12 districts — will be released.

The earnings calendar will feature a few major financial names, with Bank of America (BAC) and Goldman Sachs (GS) both reporting earnings in the morning. Also reporting results will be Charles Schwab (SCHW) and Kinder Morgan (KMI).

Goldman Sachs Chairman and CEO Lloyd Blankfein.

On Tuesday, Citi (C) reported results that beat expectations while taking a $22 billion charge related to changes in the tax code.

This week, the financial sector will be in focus but as earnings season picks up steam next week and beyond, management commentary about the impacts of tax reform is likely to be as important as results in the fourth quarter.

Bank of America Merrill Lynch analysts wrote in a note to clients on Tuesday, “more important than results [in the fourth quarter] will be commentary on tax reform’s impact to EPS (how much will be retained), labor (where we’ve seen percolating signs of wage inflation, and expect tax reform to boost wages/hiring), and spending (whether corporates will increase capex, M&A, R&D or buybacks/dividends amid tax reform).”

So while a number of companies have already announced an increase in pay or worker bonuses as a result of tax reform, management commentary during corporate earnings calls will be a chance to elaborate on any firm or potential plans to change compensation, shareholder payouts, or investment decisions in the year ahead.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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