NEW YORK, Dec 17 (Reuters) - Expectations are high for Goldman Sachs Group Inc (GS.N) to report another strong quarter on Tuesday, even as its peers face write-downs and other problems from the subprime mortgage crisis.
That’s worrying investors from all sides -- stocks, bonds and currencies -- who say that if the investment bank shows any holes in its results, it could mean the financial sector’s problems may be even worse than thought.
“Everyone has been so used to them beating expectations. The risk is that they don‘t. If that’s the case, it won’t be good for stocks and will be friendly for bonds,” said Lou Brien, market strategist at DRW Trading in Chicago.
The news can only be disappointing, with expectations so high for Goldman, said Jim Awad, chairman of W.P. Stewart Asset Management, in New York.
“If they meet expectations, people will focus on problems other companies have. If they disappoint, they will say, ‘Uh oh, we’ve got even Goldman.'”
The release of Goldman’s fourth-quarter results, expected before Tuesday’s opening bell, follows growing expectations of further deterioration in the financial sector’s profits.
Last week, Lehman Brothers Holdings Inc. LEH.N reported a decline in fourth-quarter earnings. It also recorded an $830 million net write-down during the quarter. For details, see [ID:nN13454406]
Morgan Stanley (MS.N) and Bear Stearns Co. Inc. BSC.N are also expected to report results this week.
But Goldman, which is expected to have made billions of dollars in gains from bets against the subprime mortgage market, is seen as somewhat immune to the troubles hitting the rest of its sector.
Analysts on average expected Goldman to report profit of $6.76 a share on $10.1 billion of revenue, according to Reuters Research. A year earlier, it reported a profit of $6.59 a share and revenue of $9.41 billion.
“They’ve weathered the storm better than most, and everybody expects them to do well,” said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC in Greenwich, Connecticut.
“If they don’t do well, if they surprise to the downside, that’ll put a shock through the system.” (Additional reporting by Richard Leong; Editing by Jan Paschal)