Argentina’s Merval Leads LatAm Gains; S&P 500 Hits 9-Month High as Debt Deal Nears

Only Peru’s stock market closed lower in Latin America on Thursday, while the NYSE continued its positive performance

By Bloomberg Línea
May 18, 2023 | 09:00 PM

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

🌎 Argentina’s Merval leads in Latin America:

The majority of the region’s markets closed higher Thursday, led by Argentina’s Merval (MERVAL), powered by the shares of Cablevisión Holding (CVH), up 6.20%, Ternium Argentina (TXAR), which climbed 3.26% and the shares of the stock exchange, Bolsas y Mercados Argentinos (BYMA)

Chile’s IPSA (IPSA) and Brazil’s Ibovespa (IBOV) also closed higher.

Chile’s economy showed a recovery in March, dispelling fears of a recession, with an 0.8% GDP increase during Q1.

Service Industries Drive Chile’s Economy as It Bounces Back

Meanwhile, the Argentine exchange market does not have such good news: tensions continue as the financial quotation of one of the parallel exchange rates, the MEP dollar, registered a strong advance of more than 7% to exceed 476 pesos to the dollar.

Once again, traders see no fundamentals behind this increase and it is presumed that the Central Bank of Argentina (BCRA) let the movement take place during the first hours of the day.

Why Argentina Faces a ‘Critical’ Situation as Foreign Reserves Continue to Decline

In contrast to the positive performance of the regional stock exchanges, the Lima Stock Exchange (SPBLPGPT) 0.72% at the end of the session, with the utilities, industrial and banking sectors leading the depreciation of the market.


Cesar Romero, head of Research at Renta4 SAB, pointed out that this Thursday that Peru’s statistics agency INEI stated that Peru’s economic activity registered a contraction of 0.43% in Q1 as a consequence of the social protests and weather phenomena observed in the first two months of the year.

Lima’s stock market was negatively affected by the poor performance of shares of Engie (ENGIEC1), which dropped 2.86%, as well as those of Southern Copper Corporation (SCCO) and Intercorp Financial Services (IFS).

🗽On Wall Street:

Stocks climbed on signals that US lawmakers are making progress on debt-ceiling talks and will be able to avert a first-ever default. Treasury yields rose on speculation the Federal Reserve will need to keep interest rates higher for longer as inflation remains elevated.

The S&P 500 hit a nine-month high — closing within a whisker of 4,200. Tech outperformed, with the Nasdaq 100 rallying almost 2% to the highest since April 2022. The Dow Jones Industrial Average trailed major benchmarks, with a gain of 0.3%. Wall Street’s fear gauge, the Cboe Volatility Index, tumbled.


The Nasdaq climbed 1.51%, the S&P 500 0.94% and the Dow Jones Industrial Average 0.34%.

House Speaker Kevin McCarthy and Senate Majority Leader Chuck Schumer are making plans for votes in the coming days on a bipartisan deal to avert a US debt default. Equities briefly pared gains Thursday after one key McCarthy ally, Financial Services Chairman Patrick McHenry, tempered expectations for a quick agreement, saying the two sides are “not close to being done.”

“We could see some volatility over the negotiations in the coming days,” said Dan Clifton at Strategas. “Negotiators are not only trying to get a deal quickly, but the effort is to get a complete deal so that only one debt ceiling increase is needed.”


The Treasury’s cash balance dropped to $68.3 billion as of May 17, according to data published Thursday. That’s down from from $94.6 billion a day earlier and $140 billion at the end of last week. The Treasury’s bank account has been under downward pressure recently because of measures being taken to avoid breaching the $31.4 trillion debt cap.

As the US cash flow position deteriorates, Strategas’ Clifton also highlighted the impact of larger liquidity injections.

“As tax revenues underperform, Treasury is spending down the Treasury General Account. This is leading to more liquidity and, not coincidentally, Nasdaq outperforming the S&P 500,” he added.

Treasury Secretary Janet Yellen told top bank executives that a failure to raise the debt ceiling would be “catastrophic” for the financial system, reiterating that the matter should be addressed without delay.


Fed rate bets

Meantime, traders amped up wagers on a June central bank hike to about 40% after Fed Bank of Dallas President Lorie Logan said the case for a pause next month is not clear. In contrasting remarks, central bank Governor Philip Jefferson outlined the dovish case for patience.

Treasuries sold off across the curve. The two-year bond yield, which is more sensitive to imminent Fed moves, approached 4.3%. The dollar closed at the highest since March, climbing against all of its developed-market peers.

The Fed is “in a really tough spot,” Katerina Simonetti at Morgan Stanley Private Wealth Management, told Bloomberg Television. “The big decision for them is the timing because once they announce that they’re done raising rates, markets are just going to assume that they’ve succeeded. And it might not necessarily be the case. Inflation so far is proving to be sticky.”


About $1.7 trillion of derivatives contracts tied to stocks and indexes are scheduled to expire Friday, according to data compiled by Goldman Sachs Group Inc. strategist John Marshall.

The monthly event, known as OpEx, typically obliges traders to either roll over existing positions or start new ones. That usually involves portfolio adjustments that lead to a spike in trading volume and sudden price swings.

The Bloomberg Dollar Spot Index rose 0.6%, the euro fell 0.6% to $1.0774, the British pound fell 0.6% to $1.2410 and the Japanese yen fell 0.7% to 138.69 per dollar.


🍝 For the dinner table debate:

The clashes between Disney and Florida governor Ron DeSantis continue. The company that turned a mouse into an empire announced Thursday its decision to abandon its plans to move 2,000 workers from California to the corporate campus it is building in the sunshine state, adding more controversy in the public fight that began several months ago.

“Given the considerable changes that have occurred since the announcement of this project, including new leadership and changing business conditions, we have decided not to move forward with construction of the campus,” parks chief Josh D’Amaro said in the note to Disney Co. (DIS) staff.

DeSantis, a potential candidate for US president in the 2024 elections, signed a law through which he took control of a board that oversees municipal services at Walt Disney World after the company publicly opposed a state law limiting discussion of gender issues in public schools. Under the leadership of its CEO, Bob Iger, Disney has filed a lawsuit against DeSantis and the state of Florida accusing the public officials of going against the company’s business and free speech.


In April of this year, Disney said the threat made by DeSantis through the rule passed to “void” public and agreed-upon contracts was “retaliatory, anti-business and unconstitutional.” The court must rule on the governor’s actions, which so far the company considers illegal.

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