U.S. Shares Slump as Inflation Hits 40-Year High; Brazil Bucks Negative Trend

Ten-year Treasury certificate yields surpass 2%, the highest level since 2019, while the two-year notes hit 1.58%, the highest in two years

A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S. Photographer: Michael Nagle/Bloomberg
February 10, 2022 | 06:44 PM
Reading time: 3 min.

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

🗽 On Wall Street:

U.S. stock markets reeled from the inflation data released Thursday morning that not only shattered investor expectations, but was the highest level since 1982.

The annual increase of 7.5% was higher than the 7.3% expected by analysts surveyed by Bloomberg. As inflation accelerates, fears are growing about more hawkish talk from the Federal Reserve, which could raise interest rates at its March meeting, with an increase that could be as much as half a percentage point.

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U.S. inflation was driven by the increases in prices for goods and services.dfd

The S&P 500 (SPX) fell 1.81%, while the Dow Jones Industrials (INDU) slipped 1.47%, while the Nasdaq Composite (CCMPDL) lost 2.10%.

“Technology stocks took the biggest hit as underlying inflationary pressures remain strong,” said Edward Moya, an analyst at Oanda.

🔑 Key Movements of the Day:

Yields on 10-year Treasury bonds rose above 2%, the highest since August 2019, while the rate on the two-year note reached 1.58%, the highest since January 2020.

The inflation data beat market expectations and gave even more ammunition to those who think the Fed should take a much more aggressive stance to control the rising cost of living.

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“Right now, investors aren’t just worried about what the Fed does on interest rates, but what impact it will have on growth,” Chris Gaffney, president of global markets at TIAA Bank, told Bloomberg.

Federal Reserve Bank of St. Louis President James Bullard said he supports raising benchmark rates by a full percentage point by early July in response to the highest inflation in four decades.

🥇 The Leader:

Brazil’s Ibovespa (IBOV), the leading index of the largest stock market by market capitalization in Latin America, escaped the losses in the U.S. and was the one that posted the highest gains in the region.

Via Varejo (VVAR3), Magazine Luiza (MGLU3) and 3R Petroleum Oleo e Gas (RRRP3) shares were among the best performers on Thursday.

The services sector recorded an increase of 10.9% in 2021, the highest annual growth since the beginning of the historical series in 2012. In 2020, the sector had fallen by 7.8%.

Chile’s main index, the Ipsa (IPSA) had the second best performance, in a session in which most of the region’s stock exchanges registered losses.

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Chile has benefited from the performance of copper. Citigroup raised its three-month price target for the metal to $11,000 per ton, from $8,800, due to easing in China, decarbonization and supply issues.

📉 A Bad Day:

The Colombian stock market closed with the worst performance in the region, the Colcap index (COLCAP) down 2.22%, making for three consecutive sessions of losses.

The OECD presented a study on the state of Colombia’s economy and expressed concern about fiscal sustainability, stating that, although the 2021 tax reform has helped somewhat, tax revenues must be increased.

The Mexican stock market closed as the Bank of Mexico increased interest rates to 6%, after finalizing its second 50-basis-point increase.

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“External factors, including high energy prices, are driving inflationary pressures, given the current signs of sluggish domestic demand,” Carlos Morales, director for Latin America at Fitch Ratings, said.

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🍝 For the Dinner Table Debate:

At a time when Latin America’s labor market is struggling to recover, unicorns are becoming a major driver of employment. The startups, which earn this name once they are valued at $1 billion, are helping to drive the creation of new high-skilled jobs in the region, according to a study.

The growth rate of hiring for positions such as software engineer and account executive in Latin America increased 286% in the second half of 2021, more than in any other region of the world.

The study, conducted by global recruitment and payroll firm Deel, revealed that most of the new hires are in Argentina, Brazil and Mexico, but competitive salaries are also causing companies to look more closely at Peru, Colombia and the Dominican Republic.