Argentina’s Merval Advances Again; NYSE Tumbles With No End In Sight to Rate Hikes

Latin American markets closed mixed Friday, with the Merval index again leading the gains, climbing 2.63%, while Wall Street closed lower as investors remain anxious of further rate hikes by the Federal Reserve

Wall Street in New York City. Photographer: Michael Nagle/Bloomberg
By Bloomberg Línea
May 12, 2023 | 09:12 PM

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

🌎 Latin American markets close mixed:

Lima’s stock market (BVL) saw the sharpest losses on a mixed day for Latin American markets, while Argentina’s Merval index (MERVAL) led the gains again, climbing 2.63%,and Colombia’s Colcap index (COLCAP) recovered from its slump to climb 1.37% at closing.

The Merval was buoyed by the shares of Loma Negra Cia Industrial (LOMA), Transportadora de Gas del Sur (TGSU2) and Pampa Energía SA (PAMP).

Although not all is good news for Argentina: inflation in this country continues to record highs and the increase in consumer prices in April registered a positive variation of 8.4%; thus, the Latin American country maintains its place as the third nation in the world with the highest 12-month inflation, standing at a rise of 108.8%.

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On the other hand, the Central Bank of the Argentine Republic (BCRA) sent to the Argentine Ministry of Economy a total of 150 billion pesos ($659.6 million) on May 9, as transitory advances, breaking the limit of monetary issuance for direct assistance that the International Monetary Fund (IMF) had imposed on the nation.

The Lima Stock Exchange registered a 0.83% drop after the finance sector fell sharply, registering a variation of -2.7%, with the sharpest declines by Credicorp (BAP) shares.

🗽On Wall Street:

Stocks and bonds floundered after Wall Street lost faith that a pause in the Federal Reserve’s interest-rate hiking cycle was a given.

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Swaps traders are now pricing in a one-in-10 chance there will be another interest rate hike at the next Fed meeting in June, after odds had been tilted in favor a pause earlier in the week.

The S&P 500 ended the week down 0.3% while the Nasdaq 100 eked out a 0.6% advance. Early in the session gains were stamped out Friday after a preliminary University of Michigan sentiment survey showed consumers expect prices to rise at a 3.2% annual rate over the next five to 10 years, a 12-year high. Bank stocks were weak with PacWest Bancorp dropping 3.0% and JPMorgan Chase & Co. sliding 1.4%.

The Nasdaq (CCMPDL) dropped 0.35% and the Dow Jones Industrial Average 0.03%.

A renewed call to raise the debt limit from Treasury Secretary Janet Yellen added to investor consternation Friday. “If Congress fails to do that, it really impairs our credit rating,” she said in a Bloomberg Television interview. “We have to default on some obligation, whether it’s Treasuries or payments to Social Security recipients.”

The debt-ceiling standoff and hawkish comments from Fed officials kept stocks in a tight range this week as investors await a signal the Fed’s rate hiking cycle is at an end. US data Thursday showed initial jobless claims reached the highest since October 2021 while producer prices rose less than economists expected, raising hopes policy may finally be having an effect.

“This market has been flat because we’re in this world where we know the risk of recession is high, but we’re not seeing the whites of the eyes of it in hard data, and that’s why we continue to have this sideways chop,” Cameron Dawson, chief investment officer at Newedge Wealth, said Friday on Bloomberg Television.

Wall Street has been eying 4,200 as a key resistance level for the S&P 500. The risk is that the market moves higher, according to Dawson. “The technicals, the sentiment positioning could get us above that and really make it a very big pain trade,” he said.

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Inflation is still too high, Chicago Fed President Austan Goolsbee said in PBS interview. “You don’t want to land the plane nose down. So we’re trying to balance off — can we slow the inflation without sending it into a recession.”

Goolsbee’s comments followed those of Fed Governor Michelle Bowman who said the central bank will likely need to raise interest rates further if price pressures don’t cool.

Yields on the policy-sensitive two-year climbed to 3.99% while the 10-year rose to 3.46% Friday.

Solar stocks outperformed with First Solar Inc. leading a rally after new guidance on a clean energy tax credit increase.

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The dollar notched its biggest weekly gain since February as investors embraced its safe haven status while Bitcoin dropped below $27,000.

In emerging markets, attention is turning to Turkey’s elections Sunday. Banking stocks rallied in Istanbul, notching their best weekly performance since 2002, when incumbent President Recep Tayyip Erdogan’s Ak Party rose to power. Some investors expect the opposition to restore more orthodox monetary policy should it gain power.

The Bloomberg Dollar Spot Index rose 0.5%, the euro fell 0.6% to $1.0852, the British pound fell 0.5% to $1.2451 and the Japanese yen fell 0.9% to 135.69 per dollar.

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🍝 For the dinner table debate:

US President Joe Biden has nominated Adriana Kugler, 53, an economist who, if selected, could become the first Latina woman to occupy this position in the 109-year history of the US monetary institution.

VIEW +Who Is Adriana Kugler, the First Latina to Be Nominated as Federal Reserve Governor?

Although Kugler was born in the United States, the economist comes from a family of Colombian parents and part of her academic training took place in Bogotá, capital of Colombia, when she was a child. Kluger comes from a family of economists and academics: her father worked at the World Bank and her brother, Maurice Kluger, currently teaches Public Policy at George Mason University.

Actualmente, se desempeña como directora ejecutiva del Grupo del Banco Mundial para los Estados Unidos desde mayo de 2022.dfd

The economist is currently the World Bank Group’s executive director for the United States. She would assume the position of governor following Biden’s nomination after Lael Brainard’s departure from the Fed’s vice presidency. It was also learned that Biden is contemplating nominating Philip Jefferson, the current governor of the US central bank, as vice chairman of the Fed.

Paola Villar S., a content producer at Bloomberg Línea, and Peyton Forte of Bloomberg News, contributed to this story.