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Stocks fall after Goldman Sachs' rare earnings miss; North Korea, French election eyed

CNBC logo CNBC 4/18/2017 Fred Imbert
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U.S. equities fell on Tuesday after Goldman Sachs shocked Wall Street by missing estimates. Investors also remained vigilant amid U.S.-North Korea tensions and the nearing of the French presidential election.

The Dow Jones industrial average kicked off the session falling more than 100 before holding about 75 points lower, with Goldman shaving off 60 points. The S&P 500 dropped 0.15 percent with health care leading decliners. The Nasdaq composite fell around 0.1 percent.

Goldman Sachs reported weaker-than-expected first-quarter results across the board, with trading revenue disappointing analysts.

"I'm a little surprised that they missed because the market did so well in the first quarter," said Bruce Bittles, chief investment strategist at Baird. The S&P 500 and the Dow Jones industrial average rose 5.53 percent and 4.56 percent last quarter, respectively.

Last quarter marked the first time since 2015 that Goldman's earnings per share missed analysts' expectations and the first time since the first quarter of last year that sales came below estimates.

Bank of America, meanwhile, reported strong first-quarter results with almost every single metric meeting or topping analyst expectations.

The three major indexes snapped a three-day losing streak on Monday, with the Dow rising more than 180 points, albeit during the lightest trading volume day of the year following the Easter holiday.

"I think this market is trapped in a range and I still think there's some unfinished business to the downside," said Baird's Bittles.

Investors also remained cautious as U.S.-North Korea tensions lingered. Vice President Mike Pence reassured Japan of American commitment to reining in North Korea's nuclear and missile ambitions on Tuesday, after warning that U.S. strikes in Syria and Afghanistan showed the strength of its resolve.

Pence arrived in Tokyo from South Korea, where he assured leaders of an "iron-clad" alliance with the United States in the face of the reclusive North, which has conducted a series of missile and nuclear tests in defiance of U.N. sanctions.

U.S. Treasury prices rose, sending the benchmark 10-year note yield down to about 2.20 percent while the short-term two-year note yield slipped to 1.177 percent. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 14.6.

Investors also kept an eye on France, as campaigning ramped up ahead of the first round of the presidential election. Left-wing candidate Jean-Luc Melenchon's surge in polls added to investors' worries as it becomes unclear who will win the contest.

"Marine Le Pen is certainly the real problem because she believes in fundamentally altering the state of the euro. Jean-Luc Melenchon would be a socialist/communist disaster for the French economy but what else is new? He is just a bit more economically extreme than Hollande," said Peter Boockvar, chief market analyst at The Lindsey Group, in a note.

European equities fell broadly after UK Prime Minister Theresa May called for a snap election in June. The announcement also sent the British pound for a loop. The currency rose more than 1 percent to $1.272 after briefly falling more than 1 percent.

"No one was expecting this. Not least because the government itself ruled an election before 2020 out barely four weeks ago. But Theresa May has clearly smelt an opportunity to consolidate her mandate ahead of the Brexit negotiations," said Luke Bartholomew, investment manager at Aberdeen Asset Management.

In economic news, housing starts fell 6.8 percent last month, more than the expected 3.9 percent decline. Industrial production rose 0.5 percent last month, in line with expectations.

—CNBC's Juan Aruego and Reuters contributed to this report.

On tap this week:

Tuesday

Earnings: Yahoo, GNC Holdings, Intuitive Surgical

Wednesday

Earnings: BlackRock, Morgan Stanley, American Express, eBay, Morgan Stanley, US Bancorp, TD Ameritrade, Textron, CSX, Canadian Pacific Railway, Qualcomm, Abbott Labs, Steel Dynamics, SLM

2:00 p.m. Beige book

Thursday

Earnings: Travelers, Verizon, Blackstone, Philip Morris, ABB, Bank of NY Mellon, Alliance Data, PPG Industries, Imax, MGIC Investment, KeyCorp, Nucor, Janus, Visa, Sonoco Products, Sherwin-Williams, Mattel, NCR, Danaher

8:30 a.m. Weekly claims

8:30 a.m. Philadelphia Fed

Friday

Earnings: General Electric, Honeywell, NextEra Energy, Kansas City Southern, Schlumberger, Rockwell Collins, Stanley Black and Decker, SunTrust, Morningstar, Steve Madden

9:45 a.m. Manufacturing PMI

10:00 a.m. Existing home sales

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