Argentina Heads LatAm Stock Market Gains; NYSE Closes Lower

Only Chile’s stock market closed lower in Latin America, while US investors remain cautious and tech shares tumbled, pushing Wall Street lower

The New York Stock Exchange.
By Bloomberg Línea
February 06, 2023 | 09:46 PM

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A roundup of Monday’s stock market results from across the Americas

👑 Argentina’s Merval leads in Latin America:

The majority of Latin America’s stock markets closed higher on Monday, led by Argentina’s Merval index (MERVAL), which recovered from the losses in Friday’s session and climbed 1.77%, with shares of Ternium Argentina (TXAR), Sociedad Comercial del Plata (COME) and Transportadora Gas Norte (TGNO4) seeing the sharpest gains.

The Argentine government on Monday approved new electricity tariffs effective as from Feb. 1, so that residential users of the metropolitan area of Buenos Aires (AMBA) will face an increase of 17%, while for the public entities that provide public health and education services the adjustment will be 29%.

Non-residential users with demands of less than 800 kWh/month will not see any increase.


Mexico’s stock market remained closed for a public holiday on Monday.

📉 A bad day for Chile’s IPSA:

Chile’s IPSA index (IPSA) was the only one in Latin America to close lower on Monday, with the shares of Quinenco (QUINENC), Enel Chile (ENELCHIL) and Engie Energía Chile (ECL) seeing the sharpest declines.

Forest fires in Chile have already left at least 26 people dead, more than 3,276 people affected, 1,156 houses destroyed and more than 280,000 hectares consumed by fire.


Interior Minister Carolina Tohá said Monday that there are 275 active fires, fewer than on Sunday.

Of that total, 161 are under control, and 69 are still being fought. However, conditions are expected to worsen during the week.

🗽On Wall Street:

Stocks continued to give back some of this year’s gains, with traders waiting to see if Jerome Powell will dampen the bullish reaction to his recent remarks as the Federal Reserve keeps its firm grip on policy.

As equities came off overbought levels, Treasuries took a hit following the best start to a year for cross-asset returns since 1987. The Fed’s boss will have an opportunity in an interview Tuesday to remind Wall Street that bets on rate cuts in 2023 are probably misplaced at this stage.


The S&P 500 dropped 0.61%, the Nasdaq Composite (CCMPDL) 1% and the Dow Jones Industrial Average 0.10% on Monday.

“Fed Chair Powell remains a big wild card every time he speaks,” said Chris Senyek, chief investment strategist at Wolfe Research. “Investors will be looking to see if he ‘walks back’ his very dovish tone from last Wednesday, particularly with respect to financial conditions and the US ‘disinflationary process.’ We still believe that the Fed will be ‘higher for longer’.”

In just two days, the bond market has gone from doubting the Fed to falling perfectly in line with the central bank’s projection for a peak in rates north of 5% later this year — from the current level between 4.5% and 4.75%. Fed Bank of Atlanta President Raphael Bostic said January’s strong jobs report raises the possibility officials will need to lift rates to a higher peak than previously expected.


JPMorgan Chase & Co. strategist Marko Kolanovic reiterated Monday that investors should fade last week’s Fed-induced rally, arguing the economy’s disinflationary process could just be “transitory.”

In late trading, Pinterest Inc. tumbled on sales that missed estimates. Take-Two Interactive Software Inc., the video-game publisher known for the franchise Grand Theft Auto, cut its outlook for bookings in fiscal 2023 and gave a disappointing forecast for the current quarter. Activision Blizzard Inc. reported bookings that beat projections on the strength of a new Call of Duty release as well as several other big titles.

A rout in megacaps like Apple Inc. (AAPL), Amazon Inc. (AMZN) and Google’s parent Alphabet Inc. (GOOG), which reported results last week, also weighed on sentiment. The group’s reality check came after the Nasdaq 100 approached bull-market territory. Investors will continue to focus on earnings to figure out if the recent rally was a “bear trap” driven by “fear of missing out,” noted Chris Larkin at E*Trade from Morgan Stanley.

“The major averages have become overbought after their strong January rallies,” said Matt Maley, chief market strategist at Miller Tabak + Co. “We are not trying to say that any short-term pullback will be followed by another strong rally. In fact, we believe that a short-term pullback could — and probably will — turn into another leg lower in the bear market that began just over a year ago.”


The S&P 500 now accurately reflects signs of better-than-expected economic growth and a drop in bond yields, according to Goldman Sachs Group Inc. strategists led by David Kostin. At the same time, higher valuations, lackluster corporate earnings and elevated interest rates mean there’s little room for the rally to extend, they said, a view that was broadly echoed by their counterpart at Morgan Stanley, Michael Wilson.

To Solita Marcelli at UBS Global Wealth Management, the risk-reward trade-off for equities doesn’t look appealing. She continues to recommend that equity investors position defensively and be prepared for additional volatility ahead.

“We remain bearish equities,” said Eric Johnston at Cantor Fitzgerald. “There has been a dramatic change in sentiment and positioning which has gotten much more bullish, making this a tailwind for our bearish view. And while this dramatic change has happened, the outlook for earnings, the Fed, and multiples is unchanged. All of the stock being bought now will just create that much more supply on the way down.”


The divergence between the Nasdaq 100 and 10-year Treasury yields is becoming extreme, which has been a negative signal for the index during the past 18 months, according to cross-asset sales trader Gurmit Kapoor. The tech-heavy benchmark has been particularly sensitive to the bond market, and has seen strong corrections during the past four occurrences when it decoupled from rates.

That doesn’t mean it’s all gloom and doom for tech stocks. The share of investors willing to increase exposure to the industry over the next six months rose to 41% in the latest MLIV Pulse survey from 32% in September.

Geopolitical concerns continued to simmer on the background, with the US preparing to impose a 200% tariff on Russian-made aluminum and US-listed Chinese shares tumbling as Washington’s move to shoot down an alleged surveillance balloon from the Asian nation.


Elsewhere, the yen fell on the back of a Nikkei report that the Japanese government approached Bank of Japan Deputy Governor Masayoshi Amamiya about succeeding Haruhiko Kuroda at the helm of the central bank. A selloff in emerging markets deepened, with currencies having their biggest two-day decline since March 2020.

The Bloomberg Dollar Spot Index rose 0.6%, the euro fell 0.6% to $1.0730, the British pound fell 0.3% to $1.2024 and the Japanese yen fell 1.1% to 132.62 per dollar.

🔑 The day’s key events:

Oil prices rose after falling to intraday lows since early December. West Texas Intermediate achieved its first positive close in four sessions and ended the day up 0.47% to settle at $74.46 a barrel for March delivery in New York. On the other hand, Brent for April settlement rose by 1.31% to settle at $80.99 a barrel.


Among the factors supporting crude was a strong earthquake in Turkey that stopped the flow of oil to the Ceyhan export terminal, which ships more than 1 million barrels a day; as well as a technical failure at Norway’s giant Johan Sverdrup field that reduced production.

Prices suffered a turbulent January, with rises due to the end of Covid Zero policies in China and falls due to a build-up of inventories in the United States. Longer term, China is the most important point of analysis for investors, as the scale and speed of its reopening will be key, but other factors are also altering the near-term outlook.

“I can be maximally bullish based on a lot of prospective elements,” but then you have to factor in stockpiling, said Vikas Dwivedi, global oil and gas strategist at Macquarie. “That’s the tension right now,” he said.


🍝For the dinner table debate:

China said Monday that the surveillance balloon the Pentagon detected over Latin America had also veered off course, the same explanation it gave for the balloon the US detected over its territory and then shot down.

Washington has rejected Beijing’s explanation.

“It has made an unintentional entry into the airspace of Latin American countries,” Mao Ning, spokesman for the Foreign Ministry, told a news conference in Beijing on Monday. “It is for civilian purposes, affected by weather conditions and with limited self-steering capability.”

Mao said China abides by international law and “poses no threat to any country, and all countries say they understand that.”

The US Defense Department reported on Friday the detection of a balloon in Latin America. Local media reported that it flew over Costa Rica, Colombia and Venezuela without incident.

Leidys Becerra, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.