Argentina Leads LatAm Market Gains; US Stocks Continue Rally

Argentina’s Merval index closed with a gain of more than 4%, while the NYSE extended gains on the back of positive corporate results

A Wall Street street sign in front of the New York Stock Exchange (NYSE) in New York, US.
By Bloomberg Línea
December 21, 2022 | 11:10 PM

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

👑 Argentina’s Merval closed 4.26% higher:

The majority of Latin America’s markets closed higher on Wednesday, led by Argentina’s Merval (MERVAL), which gained 4.36%, and Colombia’s Colcap (COLCAP), which rose 1.81%. In Argentina, the shares of Banco BBVA Argentina (BBAR), Grupo Financiero Galicia (GGAL) and Banco Macro (BMA) led the gains, climbing 10.3%, 9.9% y 8.5% respectively.

In Colombia. the shares of Canacol Energy (CNEC), Banco de Bogotá (BOGOTA) and Interconexión Eléctrica (ISA) saw the sharpest gains.

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📉 A bad day for Chile’s IPSA:

Chile’s IPSA (IPSA) saw the region’s sharpest losses, with shares of Enel Américas (ENELAM), Sociedad Química y Minera de Chile (SQM/B) and Empresas CMPC (CMPC) posting the biggest losses during the day.

Peru’s S&P/BVL (SPBLPGPT) closed with a drop of 0.27%, with the shares of Intercorp Financial Services (IFS) and Credicorp (BAP) seeing the sharpest falls in value.

🗽On Wall Street:

US stocks rallied on Wednesday as an improvement in consumer confidence and better-than-expected earnings boosted sentiment. Treasuries were mixed after Tuesday’s selloff as the furore following the Bank of Japan’s unexpected increase in its yield trading band ebbed.

The S&P 500 rose for a second day while the Nasdaq 100 snapped a five-day drop. Both indexes climbed the most since late November. The policy-sensitive two-year Treasury yield dropped four basis points on the day, while the benchmark 10-year yield remained fairly steady for most of the session.

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The S&P 500 closed 1.49% higher, with more than 90% of its shares gaining, while the Nasdaq Composite (CCMPDL) rose 1.54% and the Dow Jones Industrial Average 1.60%

FedEx Corp. and Nike Inc.’s earnings exceeding Wall Street’s estimates provided a reprieve for US stocks that had been pummeled since the Federal Reserve’s hawkish turn last week. Investors did not hear from Fed speakers this week, which also helped fuel the so-called ‘Santa rally’ in stocks. The central bank’s policy makers are expected to become incrementally more dovish in 2023, with a new roster of senior officials.

Read More: Hounded Stock Bulls Catch Rare Break in Worst December Since ‘18

Traders also parsed fresh US data on Wednesday indicating the Fed’s persistent rate hikes are serving their purpose by slowing the economy, but a recession may still be at bay. While sales of previously owned US homes fell for a 10th-straight month in November, US consumer confidence rose by more than forecast to the highest since April as inflation eased.

“Investors are excited by the prospects of buying improving fundamentals at a cheaper price, following the past week’s selloff on Fed concerns,” said Mike Bailey, director of research at FBB Capital Partners. “In terms of macro data, improving consumer confidence is also adding to the favorable move in investor sentiment. However, I think inflation, the job market and earnings are top of mind for most investors at the moment.”

Micron Technology Inc., the largest US maker of memory chips, reported earnings after the markets closed on Wednesday. The company gave a lackluster revenue outlook for the current period and said it will reduce its workforce by about 10% over the next year.

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Traders will continue to contend with additional data this week. Real gross domestic product for the third quarter is likely to be revised down in Thursday’s release, and could be flat in the fourth quarter, said Bill Adams, chief economist for Comerica Bank. Data on Friday, meanwhile, will give investors more insight on consumer spending.

“We will be watching if spending and income hold up against inflation,” said David Donabedian, chief investment officer of CIBC Private Wealth US. “However, expectations are for a soft reading of the personal consumption expenditures component, a key economic indicator and a focus of the Fed.”

Dust is also starting to settle on Japan’s decision to raise the upper limit of its 10-year bond yield, though the move has set in motion wagers the BoJ will join its peers next year in raising interest rates.

The yen fell against the dollar, after posting its biggest daily rally since 1998 on Tuesday. The dollar wavered after falling for two days against a basket of currencies.

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Elsewhere, oil price gains extended into a third day after a report showed a drop in US crude inventories.

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Regarding currencies, the Bloomberg Dollar Spot Index was little changed, the euro fell 0.1% to $1.0611, the British pound fell 0.8% to $1.2086 and the Japanese yen fell 0.5% to 132.34 per dollar.

🔑 The day’s key events:

Oil rose to its highest level since early December as US crude inventories fell more than expected. West Texas Intermediate futures for February delivery rose above $78 a barrel; while Brent for February settlement settled near $82.

On Wednesday, US crude stockpiles fell 5.90 million barrels last week, according to a report from the Energy Information Administration. Trading volumes plunged to the lowest level since May.

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Crude remains on track for the first consecutive quarterly decline since 2019 as further tightening by major central banks risks pushing the U.S. and European Union into an economic recession. Traders are also weighing the impact of China’s easing of severe restrictions against Covid-19.

🍝For the dinner table debate:

The investor caution seen in 2022 as a result of macroeconomic uncertainty and technology companies’ stock market declines is far from over, which will continue to create a challenging investment landscape for the venture capital industry in 2023, say investors.

“Next year it will be more difficult and more meritocratic to access financing, although good projects that really add value, that transform, will be able to get capital,” predicts the co-founder and managing partner of the Argentine fund Newtopia, Mariano Mayer.

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The macro outlook generates challenges related to the decrease in consumption, budget management, fundraising, increased informality and reduced foreign investment, according to Laura Carrión, an associate at AMPLO Inversión de Impacto, a venture capital fund in Colombia.

“The market is cooling and has not yet bottomed out,” says co-founder and general partner at Mexican fund Wollef Ventures, Cristóbal Perdomo, who agrees that the trend will continue through the first half of 2023.

Leidys Becerra, a content producer at Bloomberg Línea, and Vildana Hajric and Peyton Forte of Bloomberg News, contributed to this report.