Chile’s Stock Market the Sole Climber In LatAm; NYSE Closes Higher

A roundup of Friday’s stock market results from across the Americas

👑 Chile’s IPSA closes higher:

Most Latin American stock exchanges closed with losses on Friday, with only Chile’s IPSA (IPSA) closing higher, climbing 0.33% and driven by the good performance of the information technology, consumer staples and materials sectors. Shares of Cencosud SA (CENCOSUD), Sonda SA (SONDA) and Aguas Andinas (AGUAS/A) led the gains.

The president of Chile’s central bank, Rosanna Costa, on Friday dismissed market bets on a series of sharp interest rate cuts from April. Inflation remains “extraordinarily high” and the bank needs more time to make sure it’s slowing toward target before it can ease monetary policy, Costa said in an interview with Bloomberg Television, after policy makers decided Thursday to keep rates unchanged at 11.25% for a second straight meeting.

“As long as we don’t have more clarity on whether the convergence of inflation toward the target is actually taking place, the policy rate will remain stable,” Costa, 65, said in Santiago. “We have extraordinarily high inflation and it is important to have that prior diagnosis before changing the policy bias.”

📉 Argentina’s Merval leads the losses:

Argentina’s MERVAL (MERVAL) was the region’s index that saw the sharpest fall in the region, dropping 2.75%, dragged down by the shares of Central Puerto (CEPU), Banco Macro (BMA) and YPF SA (YPFD).

“Taking into account their evolution in the last month, it can be considered “normal” to experience a drop in their prices in the short term”, said Ayelen Romero, account analyst at Rava Bursátil.

Brazil’s Ibovespa (IBOV) was the second indicator with the most losses with the weight of commodity-linked shares, such as Vale (VALE3) and Petrobras (PETR4), as well as those of banks such as Itaú (ITUB4) and Bradesco (BBDC4).

On Thursday, Petrobras confirmed the swearing-in of the company’s new CEO, Jean-Paul Prates, which caused B3′s shares to fall. Finance Minister Fernando Haddad said in an interview with newspaper Valor Econômico that the tax reform will keep the tax burden at the current level, which will help put Brazil on a sustainable fiscal path.

According to Haddad, the inflation target has to be demanding, but feasible, and that it is important to observe the scenario and the behavior of expectations for the decision on the 2026 target.

🗽On Wall Street:

Wall Street brushed off disappointing outlooks from some of the world’s largest technology companies to push stocks higher on speculation of smaller Federal Reserve hikes as inflation shows signs of easing.

The nascent year’s tech resurgence gave the Nasdaq 100 its best week since November — with Tesla Inc. and Facebook parent Meta Platforms Inc. climbing at least 3% Friday. The gauge also notched its fourth straight weekly advance. That’s even after a bleak forecast from Intel Corp. that followed recent worrisome remarks from Microsoft Corp. and Texas Instruments Inc.

The S&P 500 climbed 0.25%, the Nasdaq Composite (CCMPDL) 0.95% and the Dow Jones Industrial Average inched up 0.08%. The S&P 500 is on pace for its second-best January since the turn of the century, trailing only the 7.9% jump in 2019.

If history is any guide, the gauge is also likely to be in the green on Dec. 31, as the direction in the first month — a gain or loss — has matched the annual result two-thirds of the time since 1973. The positive-positive periods delivered a full-year average gain of 20%, while the negative-negative years saw a typical decline of 17%.

Looking into next week, heavyweights Apple Inc., Amazon.com Inc. and Meta are set to report their quarterly figures, and investors will get a sense on whether market projections are still too rosy as the economy slows down.

The megacaps that have reported so far have mostly beaten estimates by a small margin, said Dennis DeBusschere, founder of 22V Research. “Strong results from these names will help keep index level estimates from deteriorating too far.”

Companies in the S&P 500 that have exceeded projections on both earnings per share and sales have outperformed the benchmark by an average of 1.45% within a day of reporting, exceeding the norm of the past six years, according to data compiled by Bloomberg Intelligence.

And those that fell short underperformed by just 1.7%, the least negative reaction in eight quarters, as many companies are taking steps to adjust to shifting business conditions.

Also helping sentiment on Friday was a report showing the Fed’s preferred inflation measures eased in December to the slowest annual pace in over a year and spending fell. Separate data from the University of Michigan showed US inflation expectations continued to retreat in late January, helping boost consumer sentiment.

The central bank watches long-term views especially closely, as expectations can become self-fulfilling and lead to higher prices.

Treasury Secretary Janet Yellen said she’s encouraged by recent data on inflation and jobs, but conceded the economy is at risk of recession. Former Treasury Secretary Lawrence Summers urged the Fed to refrain from signaling its next move after an expected hike next week because of the highly uncertain economic outlook.

“The market has been rallying on the idea that inflation is whipped. But I’m not so sure it’s settled yet,” said Kara Murphy at Kestra Investment Management. “When you think about how monetary policy works, it’s generally slow. Imagine trying to turn the Titanic way in advance of the iceberg — you have to start long before the iceberg is right in front of you, and you can’t always be sure how the economy is going to react.”

Hopes are high for the Fed to deliver a 25 basis-point increase on Feb. 1 — shifting away from last year’s bigger moves — but expectations for end-2023 rate cuts are “a step too far,” according to Erick Muller at Muzinich & Co.

“We will probably see the Fed say ‘we are entering the final phase, but listen carefully guys: we will continue to raise rates,’” Muller said. “A lot of volatility in rates will depend on the path of inflation from here.”

The Bloomberg Dollar Spot Index was little changed, the euro fell 0.2% to $1.0867, the British pound fell 0.1% to $1.2392 and the Japanese yen rose 0.3% to 129.88 per dollar.

🔑 The day’s key events:

Oil prices fell on Friday and accumulated its first weekly loss since the beginning of the year. West Texas Intermediate crude oil fell 2% this week and much of that decline came today after it fell 1.94% and settled at $79.44 a barrel in New York. On the other hand, Brent for the same month fell 1.21% and settled at $86.66 a barrel.

Throughout the week, oil rebounded on optimism generated by China’s recovery, but plunged as risk aversion sentiment gripped the broader markets amid mixed corporate results and lingering doubts about the Federal Reserve’s reaction.

Crude oil has recovered from a massive drop earlier in the year, with much of the optimism coming from China, the world’s largest importer.

🍝For the dinner table debate:

FIFA published its Global Transfer Report 2022, which shows the numbers of footballers transferred from one country to another in 2022. And Latinos are also protagonists.

And among the top 10 international transfers of 2022, there were five Latin American players: three Brazilians, one Uruguayan and one Colombian.

Among them is Uruguay’s Darwin Nuñez, who moved from Portugal’s Benfica to England’s Liverpool. Brazilian Antony, moved from Ajax in the Netherlands to Manchester United in England. Brazilian Casemiro, moved from Real Madrid to Manchester United, while Colombian Luis Diaz transferred from Porto to Liverpool, and Brazil’s Raphinha moved from Leeds United to Barcelona.

However, FIFA’s report states that the 10 most expensive transfers alone generated 12.5% of the total amount spent on transfers throughout 2022. Likewise, of the 2,843 operations that involved a cost, the 100 most expensive ones accounted for almost 50% of all the money spent on transfers.

Leidys Becerra, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.