A roundup of Wednesday’s stock market results from across the Americas
👑 Colombia’s Colcap posts LatAm’s highest gains
Solo las bolsas de Brasil y Colombia presentaron leves ganancias el miércoles, en contraste con la jornada estadounidense.
Colombia’s Colcap (COLCAP) posted the strongest gains in Latin America, closing 0.73% higher, driven by the materials, energy and consumer sectors.
On the Colombian stock exchange, the shares of BAC Holding International Corp were suspended on Wednesday, at the request of Rendifin, a company of the Sarmiento Angulo Group, following the filing of a request for a takeover bid for the company, seeking to acquire between 5% and 25% of the shares.
Brazil’s Ibovespa (IBOV) closed 0.46% higher, boosted by the communications and energy sectors, with the shares of 3R Petroleum Oleo S.A. (RRRP3), TIM S.A. (TIMS3) and Petro Rio S.A. (PRIO3) having the strongest showing.
📉 A bad day for Argentina, Chile, Mexico and Peru:
Chile’s IPSA (IPSA) closed 0.69% lower, affected by falls in the prices of shares in the consumer and financial sectors.
The Economic Commission for Latin America and the Caribbean (ECLAC) said Wednesday that Chile’s will be the only economy in the region to shrink in 2023, with GDP falling by around 0.9%.
🗽 On Wall Street:
Stock traders balked at any rebound attempt on Wednesday, with Treasury yields creeping back to multiyear highs and mounting concern that a hawkish Federal Reserve will raise the odds of a hard landing.
The day that marked the 35th anniversary of the equity crash saw the market halting a back-to-back rally, making any calls for a bottom look elusive. Not even bright earnings spots like Netflix Inc. (NFLX) and United Airlines Holdings Inc. (UAL) were able to enthuse investors about more gains in the S&P 500. A late day rout in Tesla Inc. on disappointing sales could further weigh on sentiment.
The Nasdaq Composite (CCMPDL) slipped 0.85%, the Dow Jones Industrial Average 0.33% and the S&P 500 0.67%.
“Earnings are not allowing us to see that capitulation and resetting of 2023 earnings expectations yet,” Morgan Stanley’s Lisa Shalett told Bloomberg Television. “It’s not yet a clearing event that sets up for a durable, viable bottom in this market.”
To Nicholas Colas at DataTrek Research, a more sustainable advance would require a backdrop of stabilizing yields -- which was the setup for the two-month surge in the US equity benchmark that started in mid-June. That seems like a “tall order” given that Fed policy remains tight and bond rates are stuck at such high levels, he noted.
Treasuries saw a renewed wave of selling, spurred by firmer global inflation readings, corporate deal hedging flows and a poorly received US 20-year bond auction. The two-year yield jumped to the highest since 2007 as traders pushed expectations for the peak policy rate closer to 5% -- from a current range between 3% and 3.25%.
Fed Bank of St. Louis President James Bullard said it’s good news that markets are pricing in anticipated hikes by policymakers, making it important that officials “follow through” and implement those increases to curb high inflation.
In another sign of economic jitters, a Bank of America Corp. survey showed 60% of chief investment officers want companies to use cash reserves to improve their balance sheets -- rather than opting for capital expenditures or stock buybacks.
The economy will probably mostly slow in 2023, so companies have time to use “still strong cash flow generation this year to shore up their balance sheets before a potential recession hits next year,” wrote credit strategist Yuri Seliger.
As the third-quarter earnings season gets underway, a nightmare scenario for stock pickers is unfolding. The S&P 500′s three-month realized correlation -- a gauge of how closely the top weighted stocks in the benchmark move relative to each other -- is at its highest level since July 2020. As correlations rise, it becomes increasingly difficult for fund managers to outperform the broader market.
For anyone attempting to catch a bottom in stocks, history shows that the last innings of bear markets typically inflict a lot of pain on stock investors. That means more turbulence may lie ahead since the S&P 500′s drop over the past six months looks tame when compared with they type of declines typically seen in the last half-year of major equity downturns, according to Bespoke Investment Group.
“Oversold conditions coinciding with key support has recently underpinned a recovery in stocks, leaving many investors wondering if this will be another trick or a potential treat?” said Craig Johnson, chief market technician at Piper Sandler. “From our technical perspective, risk for another trick appears high as there is insufficient evidence to confirm the equity market has fully capitulated. This does not eliminate the probability of a sizable relief rally developing into year-end.”
On the currency markets, the Bloomberg Dollar Spot Index rose 0.6%, the euro fell 0.9% to $0.9773, the British pound fell 0.9% to $1.1223 and the Japanese yen fell 0.4% to 149.87 per dollar.
🔑 The day’s key events:
Oil volatility continues as the United States seeks to curb the advance in prices, and amid greater uncertainty due to a looming economic recession. West Texas Intermediate (WTI) for November delivery surpassed $84 per barrel in the middle of the day, to close at $85.55, an advance of 3.30%.
Brent crude oil for December settlement also advanced more than 2% to close at $92.58.
US movements have been key. The release of 15 million barrels from the country’s strategic reserve is the latest installment of a program that the White House initiated in the spring. While the country may consider releasing more strategic crude this winter, there will be no announcement to reduce refined product exports in the near future.
“The change in tone is subtle, but the market is not overlooking it. Biden did not ban product exports, something that concerned many in the market,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management.
🍝 For the dinner table debate:
Latin America will suffer a slowdown in economic growth in 2023, according to new projections presented Wednesday by the Economic Commission for Latin America (ECLAC), placing next year’s expansion at 1.4%.
Meanwhile, the World Bank forecasts 1.6% growth, and the IMF projects 1.7% for 2023.
The latest ECLAC economic study points out that although in 2023 inflation expectations could be adjusted in the countries, due to the restrictive monetary policy, this will have an effect on private consumption and investment, while public debt levels will remain high in a large number of countries.
The most alarming case in the October review is Chile, which in 2023 will see a contraction of its economy, estimated by ECLAC to be around 0.9%.
For 2022, the United Nations agency improved its growth projection and placed it at 3.2%, higher than the 2.7% forecast in the August economic study, despite the fact that “the war conflict between Russia and Ukraine negatively affected global growth -and with it the external demand faced by the region this year- together with accentuating inflationary pressures, volatility and financial costs”.