Shares of Goldman Sachs (GS) rose in early trading Tuesday after the venerable Wall Street firm reported quarterly earnings that surpassed Wall Street's low expectations.

Net income at the New York financial powerhouse plunged 11% to $962 million, or $1.78 per share, as revenue from investment banking, financial advisory and equity underwriting plummeted. Overall revenue slumped 9% to $6.63 billion. Wall Street expectations were for profit of $1.17 on revenue of $6.28 billion. The tough times for Goldman Sachs, which reportedly has been laying off workers to cut costs, and the rest of Wall Street are expected to continue.

"I would be surprised if we didn't hear about continued cost reductions," Manulife Financial analyst William Fitzgerald told Bloomberg News before the earnings were released.

Indeed, compensation costs slumped and will continue to fall. As Bloomberg notes, Goldman has slashed more than 3,000 jobs in the past 12 months. More job cuts are a given. If the economic recovery continues to falter, Goldman Sachs will face some tough times as will the rest of the financial services industry. Storm clouds are already appearing on Goldman's horizon. For instance, the pipeline for initial public offerings appears to be withering, as is the appetite for mergers and acquisitions.

Goldman Sachs, which ranks first in investment banking, was hurt in the quarter by worsening market conditions in Europe and elsewhere. Investment banking revenue tumbled 17% in the latest quarter to $1.2 billion, while sales at its financial advisory segment tumbled 26% to $469 million amid a decline in mergers and acquisitions. The results, however, were not entirely bleak.

The company posted a better-than-expected​ $203 million gain in its investing and lending business, reflecting a $194 million loss in its investment in shares of Industrial and Commercial Bank of China Ltd. Gains in commodities and mortgages boosted institutional client services revenue by 11% to $3.89 billion.

Wall Street sees better times ahead for Goldman Sachs. Analysts have an average 52-week price target of $122.68, nearly 25% higher than where it currently trades. Also, the stock is cheap on a valuation basis, trading a multiple of 14.4, below the sector average of 27.36, according to Reuters.

Unfortunately for most investors, the risks associated with Goldman Sachs outweigh its rewards. In fact, people should take a pass on the whole sector.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter@jdberr