Argentina’s Merval Index Plummets; S&P 500 Bounces Back

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

👑 Chile’s IPSA sees sharpest climb:

Latin America’s markets closed mixed again on Thursday, with Chile’s IPSA (IPSA) leading the gains, up 0.59% at closing thanks to the strength of the communications services, non-basic consumer goods and industrial sectors.

Shares of Empresa Nacional de Telecomunicaciones (ENTEL), Quinenco (QUINENC) and Compañía de Cervecerías Unidas (CCU) led the gains.

Inflation in Chile could continue to decline, even dropping significantly before the end of the first half of 2023.

According to Finance Minister Mario Marcel, government projections indicate that the consumer price index should see a 10% interannual drop in April or, “at the latest, in May”.

In an interview with radio station Universo, Marcel said “the moment is not very far away” when inflation will return to below two digits.

Marcel said that, during a large part of 2023, economic activity will recover.

📉 Argentina’s Merval slumps:

Argentina’s Merval index (MERVAL) sank 2.74% as the shares of Cresud (CRES), Transportadora Gas Norte (TGNO4) and Grupo Financiero Galicia (GGAL) weighed on the index.

The Argentine government said Thursday that the fire that left almost half of Argentina without electricity could have been sabotage. More than 20 million people were without power for hours Wednesday night after a high-voltage transmission line outside the Buenos Aires metropolitan area caught fire, disrupting services to several areas of the grid.

Burn patterns at the site indicate that saboteurs set fire to the earth below the power line, according to a senior government official.

🗽On Wall Street:

US stocks closed Thursday’s session higher, reversing course after Federal Reserve Bank of Atlanta President Raphael Bostic said the central bank could be in a position to pause rate hikes sometime this summer. Treasuries dropped, with yields across the curve piercing 4%.

Traders ditched their low-conviction moves toward the middle of the trading day, pushing the S&P 500 to jump the most in more than two weeks. The Nasdaq 100 also climbed as investors considered Bostic’s comments somewhat dovish. Both indexes shrugged off the losses they suffered earlier after data signaled continued resilience in the labor market, supporting the case for the Fed to keep raising rates.

The S&P 500 climbed 0.76%, the Nasdaq Composite (CCMPDL) advanced 0.73% and the Dow Jones Industrial Average 1.05%.

The policy-sensitive two-year rate climbed for a third straight day, its longest rising streak in two weeks. A dollar index clung onto gains.

While Bostic’s remarks boosted sentiment on Thursday, other central-bank officials in recent days have reinforced their hawkish rhetoric. Bostic too pledged to let the incoming economic data guide him, a stance shared by Boston Fed’s Susan Collins. Fed Governor Christopher Waller also said that he’ll support raising rates even more than his current outlook if payroll and inflation data don’t cool as expected.

The focus now is on how much higher interest rates might go in the US and Europe, with swaps markets pricing a peak Fed policy rate of 5.5% in September, and some traders even betting that the benchmark interest rate could rise to 6%.

“Markets are now appropriately pricing in higher inflation and the impact higher interest rates will have on the economy,” said David Spika, president and chief investment officer of GuideStone Capital Management. “So what we saw in January and really going back to October was the markets were incorrectly interpreting a pivot, lower inflation, the Fed was going to stop raising rates, a soft landing — all of that was misguided and now the market is accurately pricing in, alright, the Fed is going to have to keep raising rates.”

Earnings continued to trickle in on Thursday. Hewlett Packard Enterprise Co. rose in late trading after giving a strong forecast for the current quarter. One of the world’s biggest chipmakers, Broadcom Inc., presented a robust forecast while Nordstrom Inc. boosted its outlook for annual profit. Silvergate Capital Corp. ended Thursday’s session at a record low as it raised questions about its own survival.

The Bloomberg Dollar Spot Index rose 0.4%, the euro fell 0.6% to $1.0599, the British pound fell 0.7% to $1.1950 and the Japanese yen fell 0.4% to 136.74 per dollar.

Fed officials have said they’re keeping a close eye on key economic indicators. But investors should expect data to continue to be mixed even as inflation comes down, according to Chris Harvey, Wells Fargo’s head of equity strategy.

“We’re in a good situation where the economy has not cracked,” he said on Bloomberg Television. “Ultimately we are going to get to a lower level of inflation, but 2% I think is more aspirational than anything else.”

Sarah Hunt of Alpine Woods Capital Investors also said that some of the impact of the Fed’s persistent rate hikes may not be seen just yet.

“I do think that there are parts of the economy for which those changes don’t happen so quickly,” she said on Bloomberg Television. “Wall Street is so used to focusing on the quarters that we lose sight of the fact that wage negotiations don’t happen every time the Fed changes rates, it happens once a year or once every couple of years depending on the industry.”

🍝For the dinner table debate:

Tesla will begin construction of its latest Gigafactory in Monterrey, in Mexico’s Nuevo León state this month, with an investment of $6 billion, according to the state’s governor Samuel García.

The electric vehicle manufacturer plans to accelerate the construction time of the Mexican plant with a view to start operations towards the end of 2023, García said in an interview on Thursday with Radio Fórmula.

“It’s going to be the largest plant in the world, not just Tesla’s,” García said.

The official announcement of the project will be made in the coming weeks in the state of Nuevo León.

On March 1, Tesla CEO Elon Musk confirmed the construction of the factory, where it will develop a next-generation vehicle. Tesla is preparing a more cost-efficient vehicle, which would be more affordable for consumers.

“We are excited to announce that we are going to build a Gigafactory in Mexico (...) Tesla’s next Gigafactory will be in Mexico near Monterrey,” Musk said.

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