:quality(75)/cloudfront-us-east-1.images.arcpublishing.com/bloomberglinea/2QIFV47DHVCLFOKPPLU2XTAEKA.jpg "Visitors view the electronic board displaying stock activity at the Brasil Bolsa Bacao (B3) stock exchange. Photographer: Patricia Monteiro/Bloomberg")
A roundup of Wednesday’s stock market results from across the region
📉 A bad day for Latin America’s stock markets:
Latin American stock markets followed Wall Street’s trend and also closed lower. Brazil’s Ibovespa (IBOV) was the region’s index with the largest loss among its peers in the region. The stock market closed with a drop of 1.85%, dragged down by the performance of the non-basic consumer products, information technology and industrials sectors.
Vale (VALE3) and Petrobras (PETR4) shares were among the main negative weights in the index on Wednesday. The new economic package of President Lula’s government, with the revision of the income tax table and the new minimum wage are on investors’ radar. The expectation is that the disclosure will be later this week.
Argentina’s Merval (MERVAL) was the second lowest in the region after dropping 1.71%. The shares of Telecom Argentina (TECO2), Empresa Distribuidora and Comercializadora Norte (EDN) y Central Puerto (CEPU)led the day’s falls.
Argentine exports plummeted 11.7% year-on-year and the trade balance in January was once again in deficit. This was revealed by the latest Argentine Trade Exchange (ICA) report, published this Wednesday by the Indec. According to the document, during the first month of the year, exports totaled $4,900 million, while imports grew 2.5% to $5.38 billion.
Thus, Argentina’s trade balance interrupted four consecutive months of positive results and was in deficit by $484 million, the worst monthly record since July 2018.
🗽On Wall Street:
The stock market got little encouragement to sustain its rebound after the Federal Reserve signaled that interest rates will continue moving higher amid ongoing inflation concerns.
It’s not like the minutes from the latest Fed gathering brought a great deal of new information, but they reinforced the idea that nothing will prevent officials from keeping rates higher for longer should economic resilience pose a threat to their goals. Now one thing to highlight is that while Chair Jerome Powell hasn’t been pushing back against easier financial conditions, the statement indicated they could warrant a “tighter stance.”
That all suggests the Fed will be in no rush to cut rates.
And that perception continued to be reflected in the swap market. The rate on the overnight index contract linked to the June gathering rose as high as 5.33%, around 75 basis points above the current effective fed funds rate. With meetings in March, May and June, that could equate to a quarter-point move up at each gathering. The market also priced in a higher peak policy rate, with the July contract nearly reaching 5.4%.
After a series of twists and turns, the S&P 500 fell 0.2% — its fourth straight decline and the longest losing streak since December. The gauge has now erased more than half of this year’s rally. Treasury two-year yields, which are more sensitive to imminent rate moves, significantly pared declines after the Fed minutes. The dollar rose. In late trading, Nvidia Corp. surged on a bullish revenue outlook.
The Nasdaq Composite (CCMPDL) was the only index to close higher.
‘Bottom line’
A number of officials said that an “insufficiently restrictive” policy stance could stall recent progress on moderating inflation pressures, according to the statement, suggesting they are prepared to move rates up further than their December forecast of 5.1%. The minutes also said “almost all” officials agreed it was appropriate to raise interest rates by 25 basis points at the meeting, while “a few” favored or could have supported a bigger 50 basis-point hike.
“Bottom line is that many market headwinds aren’t going away and investors should expect volatility to stay as they parse over the impact rates being higher for longer will have,” said Mike Loewengart at Morgan Stanley Global Investment Office.
In fact, another thing traders are taking note is the recent flare-up in equity volatility. And the reason is that after a lengthy subdued period, that may put the S&P 500′s rally to the test. The so-called VIX halted a two-day surge Wednesday — but held near its highest level of 2023.
“There was some huge upside call buying activity on the VIX in February as traders turned bearish on the resilience of the equity market,” said Aurel’s Gurmit Kapoor.
Short selling
That’s a stark contrast to data at the end of last month that showed very few were betting against the rally. Shares out on loan, an indication of short-selling interest, stood just below 1% of the S&P 500′s median free float as of Jan. 31, according to figures compiled by S&P Global Market Intelligence.
Traders pinned hopes on the earnings season to push the S&P 500 somewhere out of a trading range it’s been stuck in for months.
Between JPMorgan Chase & Co.’s results that kicked off the announcement season and Walmart Inc.’s report Tuesday, the S&P 500 added 0.4%. This ties for the smallest earnings-season reaction in either direction since 2018, data compiled by Bloomberg show.
“After a strong start to the year driven by absolute and relative short covering by institutional investors, skepticism over the sustainability of the rally remains elevated, and bears are beginning to wrestle control from the bulls,” said Mark Hackett, chief of investment research at Nationwide. “While institutional investors have been net buyers this year, they remain conservatively positioned and quick to sell, while retail investors continue to aggressively buy equities.”
“This is a similar trend to what we saw through the second half of 2022,” he added.
As the Fed’s most-ambitious policy tightening in decades tests investors’ resolve toward equities, US companies are increasingly relying on buybacks to boost their market valuation.
Companies in the S&P 500 bought back at least $936 billion of shares in 2022, compared with the $565 billion they paid out as dividends, according to estimates by Howard Silverblatt at S&P Dow Jones Indices. That’s the highest amount of buybacks since the turn of the millennium.
Geopolitical tensions also simmered in the background.
US President Joe Biden said Russian President Vladimir Putin made a “big mistake” in suspending participation in the New START nuclear treaty, his first direct response to the announcement. Meantime, Putin said he’s waiting for his Chinese counterpart Xi Jinping to visit Russia as he hailed deepening ties with Beijing at talks with China’s top diplomat.
The US has warned China about providing Russia with weapons and other lethal aid for the invasion of Ukraine and is watching closely to ensure Beijing’s diplomatic and economic support to Moscow doesn’t go any further, State Department spokesman Ned Price said Wednesday.
On the currency markets, the Bloomberg Dollar Spot Index rose 0.3%, the euro fell 0.4% to $1.0603, the British pound fell 0.6% to $1.2043, and the Japanese yen was little changed at 134.95 per dollar.
🍝 For the dinner table debate:
Apple Inc. is working on a project that has been elusive since the Steve Jobs era: a way to monitor blood glucose continuously and non-invasively.
The goal of this secret project, known as E5, is to measure blood glucose without drawing blood. After achieving several milestones, the company believes it could eventually bring the functionality to market, according to people familiar with the matter.
If indeed achieved, it would imply a strong benefit for diabetics and reinforce Apple’s position as a major player in the health industry. Adding the system to the Apple Watch, the ultimate goal, would make the device essential for millions of diabetics globally.
There are still years of work ahead, but the move could turn a multibillion-dollar industry upside down. About one in 10 Americans has diabetes, and they typically rely on a device that is inserted into the skin to obtain a blood sample. There are also patches from Dexcom Inc. and Abbott Laboratories that are inserted into the skin but must be changed every two weeks.
Apple is taking a different approach, using a chip technology known as silicon photonics and a measurement process called optical absorption spectroscopy.
Sebastián Osorio Idárraga, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News contributed to this report.
