:quality(75)/cloudfront-us-east-1.images.arcpublishing.com/bloomberglinea/DXRZHC7KR5GYFIUOFBLSAQGYMA.jpg "Signage for Wall Street and Broad Street in New York City. Photographer: Nina Westervelt/Bloomberg")
A roundup of Thursday’s stock market results from across the Americas
🥇 Peru leads in Latin America:
Peru’s stock market posted the highest gains in the region on Thursday, the S&P/BVL Perú (SPBLPGPT) buoyed by the basic consumer, industrial and public service sectors, with shares of Aenza (AENZAC1), Alicorp (ALICORC1) and Southern Copper Corp (SCCO) climbing the highest.
During the session, investors digested the July GDP data, published by the country’s statistics agency, which showed a drop in the mining and hydrocarbons sectors, their GDP contribution down 5.80% amid the impact of social conflicts that prevented the operation of some mining activities.
The Mexican stock market, meanwhile, struggled to find a direction and until the last minutes of trading managed to reverse the losses it had shown during the day. The finance, communication services and health sectors helped the S&P/BMV IPC (MEXBOL) to recover after two consecutive sessions of losses.
📉 Chile’s IPSA sees sharpest fall:
Chile’s IPSA (IPSA) saw the sharpest fall of the day in Latin America, dragged down by losses for shares of SQM/B (SQM/B), which has the most weight on the index, Enel Chile (ENELCHIL) and Engie Energía (ECL).
The market closed earlier than usual due to the Independence Day holiday.
Moody’s downgraded Chile’s long-term external debt rating from A1 to A2, driven by fiscal and economic trends that have gradually but persistently weakened Chile’s credit profile, bringing it in line with its A2-rated peers, according to a statement.
Brazil’s Ibovespa (IBOV) extended its losses and accumulated three consecutive negative sessions in a week in which risk aversion hit the region’s stock markets after US inflation data was published.
🗽 On Wall Street:
US stocks sank to session lows, while Treasury yields stayed higher after the latest batch of economic data did little to dial back expectations for the Federal Reserve’s next move.
The S&P 500 broke down through 3,900, a level the benchmark had approached three different times Thursday before holding its ground. The tech-heavy Nasdaq 100 underperformed major indexes, with growth related stocks under pressure. Adobe Inc. tumbled after agreeing to buy software design startup Figma Inc. in a deal valued at about $20 billion.
The S&P 500 sank 1.13% to its lowest level since July 18, the Dow Jones Industrial Average dropped 0.56% and the Nasdaq Composite (CCMPDL) 1.43%.
Treasury yields rose across the board, with the policy-sensitive two-year rate up as much as eight basis points at 3.87%, the highest since 2007 after the latest data painted a mixed picture for the economy.
Swaps traders are currently pricing in a 75 basis-point hike when the Fed meets next week, with some wagers appearing for a full-point move. Bets ratcheted higher after a hot consumer inflation reading Tuesday, which also sparked the biggest selloff in stocks in two years.
“Data in hand mean the Fed is most likely to raise the fed funds target three-quarters of a percent at its decision next week,” said Bill Adams, chief economist at Comerica Bank. “A hike of a full percentage point is the month’s dark horse candidate.”
Traders expect the Fed fund rate to peak at close to 4.5% next year, from the current range of 2.25% and 2.5% and Ray Dalio said a rise to about that level could sink stock prices around 20% based on the present value discount effect.
The continued rise in rate-sensitive Treasuries deepened the curve inversion, a harbinger for a looming recession. The curve from five to 30 years inverted by as much as 20 basis points in US trading Thursday, a day after the two- to 30-year spread also became the most negative in more than two decades. Mortgage rates in the US topped 6% for the first time in nearly 14 years.
Demand for workers remains healthy
Data Thursday showed applications for US unemployment insurance fell for a fifth straight week, suggesting demand for workers remains healthy. Retail sales indicated spending on goods is moderating. Other data showed factory production rose slightly in August while total industrial production, including mining and utilities, fell.
“This is a market waiting for the next catalyst,” Fiona Cincotta, senior financial markets analyst at City Index, said by phone. “What we saw in the selloff on Tuesday is the repricing of expectations of the Fed. Until we really hear from the Fed we are not going to get a very clear direction.”
The offshore yuan weakened past 7 per dollar for the first time since July 2020. The yen traded around 143.4 per dollar, away from just under the closely-watched 145 level Wednesday on signs the Bank of Japan was preparing an intervention.
Oil fell after the Department of Energy said its plan to restock US emergency oil reserves doesn’t include a trigger price and deliveries likely won’t happen until after fiscal year 2023. Natural gas futures sold off in US trading after railroads and unions reached a tentative deal to avert a strike that threatened to disrupt domestic coal deliveries.
Gold fell to the lowest since April 2020 amid expectations of more aggressive interest-rate hikes by the Fed.
And on the currency markets, the Bloomberg Dollar Spot Index rose 0.2%, the euro was little changed at $0.9990, the British pound fell 0.7% to $1.1463 and the Japanese yen fell 0.3% to 143.53 per dollar.
:quality(75)/cloudfront-us-east-1.images.arcpublishing.com/bloomberglinea/DRSVR7PX554IFCJVZIVZYDLJRE.png)
🔑 Key events of the day:
Oil prices plunged after the U. government said it is not contemplating the idea of stocking up its energy reserves once the WTI benchmark falls below $80.
“Claims that we are currently considering buying oil once it falls below US$80 a barrel are inaccurate,” Charisma Troiano, a spokeswoman for the Energy Department, said in a statement.
“We anticipate that replenishment will not occur until well into the future, likely after fiscal year 2023″.
Also weighing on the market mood are projections delivered this week by the International Energy Agency. In its report, it not only estimated that China’s oil demand will see its biggest drop in three decades, but also that global consumption will rise by two million barrels per day this year, less than its previous forecast.
“Oil fundamentals remain mostly bearish as China’s demand outlook remains a big question mark and the inflation-fighting Fed appears poised to weaken the U.S. economy,” according to Ed Moya at Oanda.
🍝 For the dinner table debate:
The Ethereum network completed a key software update, known as ‘The Merge’, which had generated great expectation in the crypto world. The network is one of the most popular in the industry, hosting nearly 3,500 decentralized applications, from exchange platforms to games, and handling cryptocurrencies worth billions of dollars.
With the update, although the user experience does not change, the mechanism that used powerful machines to record transactions made on the network is a thing of the past. This task, known as mining, is one of the main criticisms of the industry due to its high energy expenditure.
Following the change, Ether (XET) put in a worse performance than the rest of the crypto ecosystem after the upgrade became a “sell the news” event in the markets.
“Now the excitement around the meltdown is over, and we don’t have a catalyst for ethereum in the near term,” Martha Reyes, head of research at BeQuant, told Bloomberg.
The second-largest cryptocurrency by market value fell as much as 8.9% to below $1,500 a unit.
-- Carlos Rodríguez Salcedo, a content producer at Bloomberg Línea, and Stephen Kirkland of Bloomberg News, contributed to this report.
