A roundup of Tuesday’s stock market results from across the Americas
🌎 Argentina’s Merval loses 3.71%:
Latin America’s stock markets fell on Tuesday, with Argentina’s Merval (MERVAL) plummeting 3.71%, in a session of corrections, after the accumulated gains of the last few days.
Shares of Edenor S.A. (EDN), which had climbed in recent days, lost 10.3% on Tuesday.
“The 433,000 points seem to be the new barrier to overcome in the short term, a value tested both yesterday and today, where the market accumulated a gain of more than 100% so far this year,” wrote Mauro Natalucci, account executive at Rava Bursátil.
Colombia’s Colcap (COLCAP) also fell 0.79%, with shares in the energy sector contributing to the decline.
These results in the Colombian stock market come even though business confidence in May stood at 21.5%, which represented an increase of 10.4% over the previous month (ICCO April 2023: 11.1%). The increase in business confidence was explained by the favorable perception of the economy for the next semester, which increased by 20.1 percentage points.
Meanwhile, Brazil’s Ibovespa (IBOV) fell 0.61%, the S&P/BVL Peru (SPBLPGPT) declined 0.48% and Chile’s Ipsa (IPSA) fell a slight 0.36%, in its first operation of the week, after Monday’s national holiday.
Mexico’s S&P/BMV IPC (MEXBOL) was the only index in the region to close higher on Tuesday, rising 1.11%, with shares of Gentera SAB de CV (GENTERA*) gaining 3.28% and Grupo Televisa S.A. (TLEVICPO) rising 3.15%.
🗽On Wall Street:
The stock market welcomed the latest data underscoring economic resilience even if that means the potential for still tight Federal Reserve policy.
Tech megacaps led the rebound in equities, with the Nasdaq 100 up almost 2% and the S&P 500 halting a two-day drop. Tesla Inc. rallied after a 6% plunge, Snowflake Inc. jumped on an artificial intelligence-related partnership with Nvidia Corp. and Facebook’s parent Meta Platforms Inc. gained as Citigroup Inc. lifted its target. Alphabet Inc. underperformed with an analyst saying Google’s owner was moving “too fast” in AI.
For the first time since early 2022, the consumer confidence report showed that a larger percentage of people expected higher stock prices relative to lower equity values, according to Bespoke Investment Group. While the return of bullish sentiment could be a contrarian indication of a negative reversal, the research firm noted that hasn’t been the case historically.
Since 1987, there have only been three other periods showing net negative readings in bullish sentiment of at least nine months, Bespoke said. In the year after two of those negative streaks, the S&P 500 rallied 10.9% and 19%, respectively — and after a record 18-month run, the equity gauge climbed even more.
“Stocks are bouncing back after some strong US economic data gave a boost to consumer discretionary stocks and as investors piled back into AI trades,” said Edward Moya, senior market analyst at Oanda. “The strong consumer confidence report will likely suggest expectations are not for the labor market to deteriorate quickly, which should confirm expectations that a recession will not happen this year, but most likely next.”
For Kara Murphy at Kestra Investment Management, it’s also important to consider that while consumers are continuing to spend, a lot of that confidence is indeed driven by strength in the jobs market.
“Are there inflationary expectations still built into the labor market that the Fed really needs to worry about?” Murphy added.
In fact, Treasury yields climbed as the strong data fueled speculation that the Fed will resume raising interest rates after this month’s pause.
Fed’s stress test
In the run-up to the results of the Fed’s stress test, a nearly $3 billion exchange-traded fund tracking regional lenders was up over 1.5%.
Analysts largely expect banks to sail through the tests even as regulators explore more stringent requirements in the aftermath of a few collapses in the financial industry. Several executives have recently been trying to temper shareholder expectations regarding dividend increases and stock buybacks — which had been the focus of investors in previous years.
Tuesday’s rebound in stocks extended the S&P 500′s rally in June, with the gauge heading toward its fourth consecutive month of gains — the longest winning streak since August 2021.
The equity market made a pivotal shift this month, exiting a phase typically associated with the worst return prospects and powering into a stage that’s tied to a more favorable outlook.
Market model
A Bloomberg Intelligence model known as the Market Regime Index — which clusters periods into three phases dubbed accelerated growth (green), moderate growth (yellow) and decline (red) — has flipped out of the cautious red zone that it’s been stuck in for 15 straight months and into yellow. That signals brighter times ahead for stocks, according to BI’s Gina Martin Adams and Gillian Wolff.
In other corporate news, American Equity Investment Life Holding Co. surged to a record on a $4.3 billion Brookfield bid. Carnival Corp. rallied as several analysts increased their targets for the cruise line operator. Delta Air Lines Inc. rose after boosting its earnings expectations.
Meanwhile, Walgreens Boots Alliance Inc. sank after the drugstore chain slashed its profit forecast, while Lordstown Motors Corp. plummeted after the electric-vehicle maker filed for bankruptcy.
The Bloomberg Dollar Spot Index fell 0.2%, the euro rose 0.5% to $1.0963, the British pound rose 0.3% to $1.2752 and the Japanese yen fell 0.3% to 144.01 per dollar.
🍝 For the dinner table debate:
America Movil SAB is helping Latin America close its busiest month of bond sales since January as issuers take advantage of improved market conditions ahead of the summer break.
The telecoms giant owned by billionaire Carlos Slim will sell bonds on Tuesday, June 27, bringing to eight the number of companies and governments in the region that have tapped global markets this month.
The rally follows months of weak issuance amid adverse conditions for borrowers, such as rising interest rates and global banking crises, after a solid start in January, when 14 debt sales took place. Now, after the Federal Reserve left interest rates unchanged at its June meeting, the market is getting a boost on expectations that U.S. rates will soon peak.
América Móvil will sell approximately US$1 billion of Mexican peso-denominated bonds with a seven-year maturity. The company’s CFO, Carlos García Moreno, said that the trend in Mexico would generate significant demand for peso financing.
Sebastián Osorio Idárraga, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.
