Argentina Leads LatAm Market Gains; S&P 500 Tops 100-Day Average

Argentina’s Merval index climbed 2.21% on Friday, with all of Latin America’s markets closing higher, while US markets continued their rebound

A monitor displays a S&P 500 Index (SPX) chart on the floor of the New York Stock Exchange (NYSE) in New York, US.,Photographer: Michael Nagle/Bloomberg
By Bloomberg Línea and Bloomberg News
September 09, 2022 | 08:52 PM
Reading time: 5 min.

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

🥇 Argentina leads in Latin America:

Risk appetite boosted Latin American stock markets on Friday, which saw a day of gains on a par with the performance of the US markets.

Argentina’s Merval index (MERVAL) had the strongest gains, climbing more than 2%, with shares of Banco Macro (BMA), Cresud (CRES) and Banco Galicia (GGAL) posting the sharpest hikes.

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Brazil’s Ibovespa (IBOV) advanced thanks to the performance of the materials, consumer discretionary and health care sectors.

In addition to external optimism, the shares of Vale (VALE3) y Petrobras (PETR3; PETR4) drove the gains, in a session favorable to commodities such as oil and iron ore.

Mexico’s stock market also advanced with shares of Grupo México (GMEXICOB) and Volaris (VOLARA) posting strong gains, with the materials, finance and health care sectors recorded the largest increases during the day.

🗽 On Wall Street:

US stocks joined gains in riskier corners of the market, with the dollar slumping after a seemingly unstoppable surge that rattled global currencies and stoked fears of more headwinds for Corporate America.

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In a bullish signal, the S&P 500 topped its 100-day average and was set to snap a three-week losing streak. The Nasdaq 100 outperformed. Profitless tech firms, meme shares and Bitcoin all rallied. The greenback pushed away from a record, challenging skeptics who dubbed the drop a correction as calls for a stronger currency were still in place amid tighter Federal Reserve policy.

The S&P 500 closed the day 1.53% higher, the Dow Jones Industrial Average climbed 1.19% and the Nasdaq Composite (CCMPDL) 2.11%.

Traders defied hawkish Fed remarks and recession worries after a rout that drove equities to nearly oversold levels. Citigroup Inc. said the mood was so pessimistic it would indicate a rebound is afoot if there weren’t so many risks ahead. The Levkovich Index, a sentiment gauge, fell to -16 this week, a hair away from the -17 level that defines panic. And Bank of America Corp.’s bull-and-bear indicator slid to the “maximum bearish” level -- often seen as a contrarian buy signal.

“The tug of war between the bull and bear case for markets boils down to the ability of the Fed to tamp down inflation without crushing economic growth, and how much tightening of monetary policy has been effectively priced in,” wrote Art Hogan, chief market strategist at B. Riley.

Traders almost fully expected another jumbo-sized hike in September, following two 75-basis-point increases. Fed Bank of St. Louis President James Bullard said he was leaning “more strongly” toward a third straight boost of that magnitude. His Kansas City counterpart Esther George noted officials have a “clear-cut” case for continuing to remove monetary support. Fed Governor Christopher Waller said he favors “another significant” increase in rates.

To David Donabedian at CIBC Private Wealth US, this week’s market recovery has shown there is continued resilience in the economy. But he also pointed out that a sustainable bull market would hinge upon three factors falling into place: a belief that the Fed is about done with tightening, a convincing inflation downward trend, and more realistic expectations for corporate earnings.

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“Despite the idea that the Fed will kill the economy, we have not seen any signs of that,” said Donabedian. “We have not reached the bottom of the bear-market yet. Indeed, the journey to the next bull market will take time, and will be marked by a series of setbacks and recoveries.”

In fact, data show that investors might still be more likely to sell the dip than buy it. The S&P 500′s performance in 2022 following daily moves of at least 1% in either direction has resulted in the worst next-day performance on record, according to Bespoke Investment Group. This is a stark contrast to 2021, which delivered the best “buy the dip” year since 1963.

US stock funds had outflows of $10.9 billion in the week to Sept. 7, according to EPFR Global data cited by BofA strategists led by Michael Hartnett. They said an “appalling” mode fueled the biggest exodus in 11 weeks, which was led by tech stocks. Global equity funds had outflows of $14.5 billion, while $6.1 billion was poured into government and Treasury bonds.

Looking ahead, markets will be focused on the August consumer-price index report, the last before policy makers decide on rates. While an expected 8% rise in the CPI on the year would suggest inflation is cooling, the core measure that excludes food and fuel is seen accelerating.

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Meantime, Robinhood Markets Inc. is introducing an index offering a monthly snapshot of the top 100 shares that its users are holding with the most “conviction.” The list includes giants like Tesla Inc., Apple Inc. and Amazon Inc. as well as AMC Entertainment Holdings Inc., a meme stock whose volatility has been driven by retail investors.

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Elsewhere, Bitcoin rallied the most since July, breaking out of the narrowest trading range in about two years. West Texas Intermediate crude topped $86 a barrel.

🔑 Key events of the day:

Oil prices rose in the last session of the week helped by the weakness of the dollar, which makes commodities priced in that currency more attractive.

The market rebounded after touching six-month lows during the week amid concerns about an economic slowdown affecting oil demand and continued shutdowns against Covid-19 that are taking a toll on China’s growth.

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“Russian President Putin’s threat to cut off all energy supplies is a growing risk as Ukraine regains territory. The risk of some supply disruptions in the coming months remains elevated and that should help oil prices stay above US$90 a barrel,” added Edward Moya, analyst at Oanda.

In addition, investors are attentive to the measures that the US government may take to control high prices amid concerns about the impact of the beginning of the European Union sanctions against Russian oil supply at the end of the year.

During the day, the performance of bitcoin (XBT) stood out after the fall of the dollar renewed demand for risk assets. The largest cryptocurrency by market capitalization rose almost 10% by 16:40 New York time to over $21,000.

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🍝 For the dinner table debate

King Charles III delivered his first speech as Britain’s new monarch on Friday following Queen Elizabeth II’s death on Thursday at age 96, ending a seven-decade reign.

In his first public appearance, from Buckingham Palace, King Charles III promised “lifelong service” in a televised address in which he also paid tribute to his mother.

The king also acknowledged the changing times for the British and the Royal Family and suggested that, given his new responsibilities, his public speaking engagements would become a thing of the past.

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Charles III remarked that his heir, Prince William, would take on the role of “inspiring and leading” national conversations and took the opportunity to express his “love” to his other son, Harry, and his wife Meghan Markle “as they continue to build their lives abroad.”

-- Carlos Rodríguez Salcedo, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.

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