A roundup of Tuesday’s stock market results from across the region
👑 Chile’s IPSA leads in LatAm:
The Chilean stock market was the only one to escape the generalized falls in Latin America, amid risk aversion generated by a slowdown in economic growth and prospects of higher interest rates.
Chile’s IPSA (IPSA) advanced after gains in the information technology, communication services and real estate sectors. The stock index rebounded in the last hours of trading, as its performance was affected in the morning by data in the United States that opened the door to more interest rate increases.
ISPA’s seven consecutive sessions of gains keeps it at 2018 highs.
The local market is now projecting a victory of the ‘rejection’ vote in the September 4 plebiscite on the proposed new Constitution.
📉 A bad day for the rest of the region’s markets:
Other Latin American markets closed lower, with Argentina’s (MERVAL) falling back the sharpest after Monday’s gains. Shares of Transportadora de Gas del Sur (TGSU2), Cresud (CRES) and YPF (YPFD) fell the sharpest.
Brazil’s Ibovespa (IBOV) and Mexico’s S&P/BMV IPC (MEXBOL) also closed lower, dampened by the behavior of US markets, with iron ore and oil shares suffering the most.
🗽 On Wall Street:
US stocks fell for the third consecutive day as fresh data pointed to resilience in household and labor demand, affirming the Federal Reserve’s resolve to continue to be aggressive in its fight against inflation. Commodities from oil to copper sank as the dollar rose.
The S&P 500 and the tech-heavy Nasdaq 100 finished the session at their lowest levels in a month. Treasuries ended Tuesday mixed after an unexpected rebound in August consumer confidence pushed swap rates toward pricing in another three-quarter percentage point hike for the Fed’s September meeting.
The S&P 500 dropped 1.10%, the Dow Jones Industrial Average 0.96% and the Nasdaq Composite (CCMPDL) 1.12%.
Three regional Fed presidents, in separate remarks on Tuesday, reiterated Chair Jerome Powell’s intention to bring down inflation. A reading on job openings Tuesday added to signs that the labor market remains tight and wage pressures persist. Jobless claims will air Thursday before Friday’s August payrolls report.
“The repercussions from Friday are going to make us extra sensitive to a lot of the incoming data, especially around employment,” said Shawn Cruz, head trading strategist at TD Ameritrade. “It’s not surprising that getting that consumer sentiment data today and the JOLTS data had a pretty strong reaction in markets. That’s probably what you should expect from now until the September Fed meeting, in particular anything around employment.”
Analysts remain mixed on what recent remarks by Fed officials and upcoming data could mean for stocks. While Credit Suisse Group AG recommended investors go underweight global equities following the Jackson Hole symposium, JPMorgan Chase & Co. strategists say that a reading on the US labor market that spells bad news for the economy is actually a bullish signal for stocks.
Meanwhile, bonds are sliding toward the first bear market in a generation, burning investors who erred in bets that central banks would pivot away from rapid interest-rate hikes.
The Fed this week is also set to step up the unwinding of its near-$9 trillion balance sheet. The impact of quantitative tightening is going to be relatively benign for the first six to 12 months, but could start to amplify its effects on the economy around the middle part of next year, Jeff Schulze, investment strategist at ClearBridge Investments, said in an interview.
Other risks range from China’s economic slowdown to an energy crisis that threatens to tip Europe into recession with winter approaching.
On the currency markets, the Bloomberg Dollar Spot Index rose 0.2%, the euro rose 0.2% to $1.0019, the British pound fell 0.5% to $1.1656 and the Japanese yen was little changed at 138.73 per dollar.
🔑 The day’s key events:
The possibility of lower economic growth impacting demand halted the rebound in oil prices to the point that the Brent benchmark fell back below $100.
Investors are still perceiving fear that the US monetary policy will lead that economy into a recession, while Europe seems to be heading toward that scenario amid the energy crisis.
The market weighed the possibility that supply will remain firm despite violent clashes in Iraq and Libya. Clashes between militias from two political factions vying for power in Libya, which left dozens dead over the weekend, have not yet affected oil exports.
Something similar has happened in Iraq, where the clashes in Baghdad have also not hit crude oil shipments abroad. The resignation of Shiite cleric Muqtada al-Sadr led to violent clashes between pro-Sadr militias and rival groups that left at least 30 people dead, according to the AP, citing local officials.
“At the beginning of the week, it looked like energy traders were anticipating some disruptions in Iraq or Libya, and so far that doesn’t seem to be the case. Today, everything seems to turn bearish for oil,” said Edward Moya, an analyst at Oanda.
🍝For the dinner table debate:
Elon Musk’s fortune is increasingly dependent on SpaceX despite the fact that in recent years the importance of Tesla (TSLA) in his wealth had grown. A year and a half ago, in January 2021, the entrepreneur’s stake in Tesla had reached $135.3 billion, well above the $18.7 billion represented by his stake in SpaceX, according to Bloomberg Billionaires Index accounts.
However, that reality has now changed. Tesla shares have fallen 50% from their November highs amid investor fears of Fed monetary policy, and the entrepreneur has opted to sell part of his stake in the electric car maker in the face of the - so far - failed bid for Twitter.
While this is happening, SpaceX shares continue to perform well and were sold for $250 million in a secondary transaction by five undisclosed investors.
As a result of these moves, Musk’s $46.9 billion stake in the company is now worth almost half of his position in Tesla shares, the largest since the early days of the pandemic, according to Bloomberg estimates.
-- Carlos Rodríguez Salcedo, a content producer at Bloomberg Línea, and Vildana Hajric and Isabelle Lee of Bloomberg News, contributed to this report.