Dow futures drop 300 points as rates rise and Goldman's earnings miss expectations

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U.S. stock futures fell sharply Tuesday after Goldman Sachs reported disappointing earnings and as government bond yields hit Covid-era highs.

Futures tied to the Dow Jones Industrial Average slipped by 315 points, or 0.9%. S&P 500 futures fell 1.1%, and Nasdaq 100 futures declined 1.7%. U.S. markets were closed Monday due to the Martin Luther King holiday.

Goldman Sachs shares ticked nearly 4% lower in premarket trading on Tuesday after the bank missed analysts' expectations for its fourth quarter earnings. Goldman's operating expenses surged 23% on increased pay for Wall Street employees.

Elsewhere, Microsoft dipped 2.5% after announcing the software giant will buy video game company Activision Blizzard in an all-cash transaction valued at $68.7 billion. Shares of Activision Blizzard surged 37% in premarket trading.

The shortened trading week will feature quarterly reports from 35 companies in the S&P 500, including Bank of America, UnitedHealth and Netflix.

Major banks Wells Fargo, JPMorgan Chase and Citigroup kicked off the earnings season on Friday, with the three companies posting better-than-expected profits. However, the market's reaction to those results was mixed. Wells Fargo shares posted a gain on the back of those results, but JPMorgan Chase and Citigroup slid.

Overall, 26 S&P 500 companies have reported calendar fourth-quarter earnings thus far, according to Refinitiv. Of those companies, nearly 77% posted bottom-line results that beat analyst expectations.

Treasury yields posted strong gains. The closely watched 2-year yield broke above 1% for the first time since February 2020, the month before the pandemic declaration that sent the U.S. economy into recession. The 2-year Treasury is