U.S. Markets Continue Upward Streak; Mexico Bucks LatAm’s Downward Trend

Mexico’s stock exchange closes with a 0.49% advance as Latin America’s other markets post losses

Traders work in the trading gallery of Bolsa Mexicana de Valores (BMV), Mexico's stock exchange, in Mexico City, Mexico. Photographer: Susana Gonzalez/Bloomberg
February 02, 2022 | 06:55 PM

A roundup of Wednesday’s stock market results from across the region

🗽 On Wall Street:

U.S. stock markets continued their upward trend on Wednesday, after the turbulence caused by the Federal Reserve’s change in discourse, which points to an increase in interest rates in March, affected stocks in the first month of the year.

With bearish buyers on the lookout and companies’ quarterly results beating market expectations, the three major stock indexes notched up four consecutive sessions with gains.

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The S&P 500 (SPX) gained 0.94%, while the Dow Jones Industrials (INDU) advanced 0.63%. The Nasdaq Composite (CCMPDL), supported by technology stocks, rose 0.50%.

“Investors are focusing on what has been a mostly positive earnings season, and have also ignored a negative private payroll report that was clearly impacted by the Omicron variant spread in January,” according to Edward Moya, senior market analyst at Oanda.

Alphabet’s (GOOGL) results, reported Tuesday afternoon and which showed strong advertising revenue growth and record net earnings, helped the day’s performance.

🔑 Key Moments of the Day:

Oil continues at seven-year highs, skirting $90 in its Brent benchmark, after the Organization of Petroleum Exporting Countries and its allies (OPEC+) agreed to a production increase of 400,000 barrels per day in March, maintaining the pace of supply recovery that was cut at the height of the pandemic.

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“The oil market remains caught in a period of nervousness. Oil prices around $90 per barrel are a sign of bullish mood and supply fears. The fundamental basis for this nervousness is low inventory levels after last year’s rapid economic rebound overwhelmed the energy business in ramping up production in time,” according to Norbert Rücker, head of economics and next generation research at Julius Baer.

The OPEC+ decision gave a further boost to prices, which rose 55% last year, and which have benefited from the economic upturn, lower inventories and supply disruptions. In addition, at the beginning of 2022, the crisis between the West, Russia and Ukraine has also helped to underpin prices.

🥇 The Leader:

The Mexican stock market was the only one in Latin America to close with gains, with an advance of 0.49%. Non-basic consumer products, staples and industrials sectors were the best performers during the session.

Shares of the Mexican Stock Exchange (BOLSAA), Femsa (FEMSAUBD) and Grupo Aeroportuario del Centro (OMAB) were among the best performers.

During the day, President Andrés Manuel López Obrador denied that the economy is in recession after it was reported that the country contracted for two consecutive quarters in 2021. The president said the economy is growing, despite the pandemic, forecasting that GDP will grow by 5% in the next three years.

📉 🥇 A Bad Day:

Argentina’s stock exchange (MERVAL) closed with the region’s sharpest losses, down 1.92%, its sharpest losses since January 24 and following six consecutive days of gains amid uncertainty over the roadmap for the agreement between the government and the International Monetary Fund.

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However, after the optimism generated by the initial announcement, investors are attentive to the development of the negotiations. Fernández suffered a drop in the Chamber of Deputies, after Máximo Kirchner, Vice-President Cristina Fernández’s son, resigned from the presidency of the ruling Frente de Todos bloc.

The Argentine government hopes to reach an agreement on a new program with the IMF in the next three to four weeks before sending it to Congress for approval, amid criticism within the ruling party.

Brazil’s Ibovespa (IBOV), the largest stock exchange by market capitalization, also had a bad day and closed with losses, in expectation of the central bank’s decision on interest rates. Market bets indicated that benchmark rates were set to rise to 10.75%, the highest level since May 2017.

🍝 For the Dinner Table Debate:

Alphabet (GOOGL) will increase its outstanding shares by a 20-to-1 ratio to attract the many small investors who have flocked to the stock in the pandemic. The stock split would reduce the price of Class A shares to about $138 based on Tuesday’s closing price of $2,752.88. A share of the company’s stock hasn’t been this cheap since 2005.

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“The reason for the split is that it makes our stock more affordable,” Ruth Porat, Alphabet’s chief financial officer, said on a conference call with television anchors. “We thought it made sense to do it.”

Another motivation for the spin-off could be to gain entry into the Dow Jones Industrial Average, whose price-weighted index has been a barrier for years for companies such as Alphabet and also Amazon (AMZN), whose shares are priced in four figures, according to Michael O’Rourke, chief market strategist at Jonestrading.