A roundup of Monday’s stock market results from across the Americas
🌎 Brazil, Peru lead in LatAm:
Latin American stock markets showed a mixed performance after closing a positive week overall. The indices of Brazil, Peru and Chile ended with modest increases, while those of Argentina and Mexico registered declines. Colombia did not trade due to a holiday.
The Brazilian Ibovespa (IBOV) led the regional increases with a rise of 0.27%. The index was boosted by the information technology and consumer discretionary sectors, whose jump offset declines in the industrials and materials sectors. TOTVS SA (TOTS3) and Locaweb led the first sector in South America’s largest economy, while Vale (VALE) and Cia Siderurgica Nacional dragged down the country’s materials sector. The Peruvian stock exchange (SPBLPGPT) followed with a 0.15% rise, while the Chilean IPSA (IPSA) posted a modest 0.04% gain.
On the other side of the spectrum, Argentina’s Merval (MERVAL) saw a small decline, down 0.02%, while the Mexican bourse posted the largest decline of the major regional bourses in the session, down 0.43%.
Specifically, the Mexico’s main index (MEXBOL) was dragged down by the materials and communication services sectors. The former saw a decline of 2.26%, a figure mainly explained by a fall of more than 4% in Industrias Penoles SAB (PENOLES) and more than 3% in Grupo México SAB (GMEXICOB). América Móvil SAB (AMX) shares fell by more than 1%.
Mexico City’s mayor resigns to seek presidential candidacy
Mexico City’s mayor Claudia Sheinbaum announced Monday that she will leave office on June 16 to seek the candidacy for Mexico’s presidency in 2024 for the ruling Morena party.
The field has also been joined by the now former Foreign Minister Marcelo Ebrard and Interior Minister Adán Augusto López, as well as Ricardo Monreal, coordinator of the senators of Morena.
Also Gerardo Fernández Noroña, the deputy of the Workers’ Party (PT) and Manuel Velasco, senator of the Green Party (PVEM).
So far, the opposition that has gone under the ‘Va por México’ front, integrated by the PRI, PAN and PRD parties, will define the rules for the selection of a possible candidate on June 26, while the leaders of the Movimiento Ciudadano party have said the party will not join a coalition.
🗽On Wall Street:
The stock market kept its bullish momentum as traders geared up for a pause in one of the Federal Reserve’s most-aggressive tightening campaigns in decades.
Big tech led equity gains, with the Nasdaq 100 (CCMPDL) up almost 2% and the S&P 500 topping its closely watched 4,325 mark. Both gauges closed at the highest levels since April 2022. Tesla Inc. (TSLA) climbed for a 12th straight session — a record winning run — and Apple Inc. (AAPL) hit an all-time high.
KeyCorp and Citizens Financial Group Inc. led losses in banks after disappointing updates at an industry conference.
In late trading, Oracle Corp. gained as its sales beat estimates, signaling the software maker’s cloud business is benefiting from demand for artificial intelligence workloads.
Treasury two-year yields, which are more sensitive to imminent central bank moves, edged lower. The Bloomberg Dollar Spot Index was little changed. Another slide in oil reduced concern about inflation.
In the run-up to the US central bank decision, Tuesday’s consumer price index will be key for market sentiment. A likely “subdued print” would support bets on the Fed holding rates steady on Wednesday, said Anna Wong at Bloomberg Economics.
To David Kelly, chief global strategist at JP Morgan Asset Management, the Fed should weigh progress on inflation against the risk of recession in its June meeting.
“The numbers just won’t support any further tightening, and this will become clearer in the next few weeks,” Kelly said. “If so, the investment environment could support lower long-term interest rates, a lower dollar and further gains in stock prices.”
The Federal Open Market Committee will keep rates at the 5%-5.25% range in June — though officials face a closer call on what to do in July, according to economists surveyed by Bloomberg. Swaps show an almost quarter-point of additional tightening currently priced in by next month’s meeting.
‘Hawkish skip’
A “hawkish skip” would only buy the Fed a little bit of time, according to Neil Dutta at Renaissance Macro Research.
“If the Fed decides to skip the June meeting, as I anticipate, I don’t think they have a choice but to sound hawkish given their data-dependent pledge,” Dutta added.
Prospects for a pause in rate hikes helped the S&P 500 enter a bull market last week, with the gauge surging over 20% from its October low. Wall Street’s top strategists are split on the way forward.
Goldman Sachs Group Inc.’s David Kostin expects the gains to continue as other sectors catch up with the searing rally for technology shares. Morgan Stanley’s Michael Wilson, meanwhile, points instead to the bear market of the 1940s, when the S&P 500 rallied 24% before returning to a new low.
In other corporate news, Advanced Micro Devices Inc. rallied as multiple analysts raised their price targets on the chipmaker. Amazon.com Inc. gained after Bank of America Corp. cited an improved margin picture.
A trio of cruise-line operators jumped as BofA and JPMorgan Chase & Co. signaled increasing confidence in demand. Nasdaq Inc. tumbled after agreeing to buy financial-software maker Adenza from its private equity owners.
Elsewhere, oil fell amid persistent concerns around the demand outlook as Goldman Sachs cut its price forecast again. Bitcoin dropped as last week’s regulatory crackdown by the US Securities and Exchange Commission weighed on sentiment.
Regarding currencies, the Bloomberg Dollar Spot Index was little changed, the euro rose 0.1% to $1.0760, the British pound fell 0.5% to $1.2512 and the Japanese yen fell 0.1% to 139.55 per dollar.
🍝 For the dinner table debate:
According to Citigroup Inc. (C) strategist Raghav Datla, fixed-income traders are not accurately assessing the extent to which Tuesday’s consumer price index (CPI) report will indicate a drop in the inflation rate last month. Datla bases this assessment in part on a comparison of traders’ current positioning with that of January.
Despite experiencing two consecutive lower-than-expected CPI numbers, inflation expectations for the next few years are higher now than they were in early 2023, even with tighter financial conditions, lower year-over-year inflation, and rising unemployment and jobless claims.
In a report released Sunday, Datla argues that the market has not sufficiently factored in the downside risks associated with inflation prior to the release of the May data. It forecasts that a lower-than-expected CPI figure will lead to a decline in inflation expectations. In response, it suggests implementing an inflation swap to capitalize on this possible outcome.
The May CPI will be released on Tuesday, just one day before the Fed’s monetary policy decision. Traders speculate that officials will keep interest rates within a 5% to 5.25% range for the first time in 15 months. However, swaps indicate that an additional tightening of approximately 24 basis points is expected for the July meeting.
CPI has trended lower after exceeding 9% y-o-y in June. With the impact of commodity prices fading, the headline index is expected to decline to 4.1% in May from 4.9%, while the core index will fall to 5.2% from 5.5%.
Paola Villar S., a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this story.