LatAm Markets Close Mixed; Wall Street Recovers

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

🌎 Argentina’s Merval leads in Latin America:

Latin American markets closed mixed on Wednesday, with the gains led by Argentina’s Merval index (MERVAL), which was buoyed by the strong performance of the shares of Sociedad Comercial de Plata (COME), which climbed 5.4%, and Transener (TRAN), which gained 4.92%, and Aluminio Argentino (ALUA), which climbed 4.69%.

The sharpest decline was suffered by Colombia’s Colcap index (COLCAP), which dropped 0.30%, dragged down by shares in the financial sector, such as Grupo de Inversiones Suramericana SA (GRUPOSUR), which fell 5.05%, and Grupo Aval (PFAVAL), which slipped 2.22%.

Among other news from Latin America, on Wednesday, Ecuador’s President Guillermo Lasso dissolved Congress as it was about to hear an impeachment process against him, and in which 92 votes would have been required to remove him from office.

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Ecuador’s President Guillermo Lasso Dissolves Congress to Avoid Impeachment

Ecuador’s President Guillermo Lasso dissolved the opposition-held congress to avoid his looming impeachment, an unprecedented move that triggers snap elections in the Andean nation

🗽On Wall Street:

The NYSE climbed Wednesday on speculation that a narrower group of Washington negotiators will break a deadlock on raising the US debt ceiling and avoid an unprecedented default.

Equities halted the recent trading lull, with gains in the S&P 500 topping 1% and the Nasdaq 100 hitting the highest since August. Treasuries dropped, with yields on 10-year notes approaching 3.6%. President Joe Biden expressed confidence there will be no default, and House Speaker Kevin McCarthy said reaching an agreement this week is “doable.”

“We don’t want to get too excited as the two sides reportedly remain far apart,” said Win Thin, global head of currency strategy at Brown Brothers Harriman. “However, we get the sense that there is a real effort to avert a debt ceiling catastrophe as the X-date of June 1 is fast approaching. Stay tuned.”

The Nasdaq (CCMPDL) saw the biggest gain, with the index and the S&P 500 and the Dow Jones Industrial Average all climbing more than 1%.

JPMorgan Chase & Co.’s chief Jamie Dimon said the US government “probably” will not default on its debts. He joined other top executives of major banks in a meeting with Senate Majority Leader Chuck Schumer to discuss the debt limit.

The Treasury’s cash balance rose to $94.6 billion as of May 16, according to data published Wednesday. That’s up from from $87 billion a day earlier and compares with $140 billion at the end of last week. The Treasury’s bank account has been under downward pressure recently because of measures being taken to avoid breaching the $31.4 trillion debt cap.

“We all know the US Treasury is about to run out of ways to pay its bills, but we have seen this movie too many times before,” said Chun Wang at Leuthold Group. “While, theoretically, there is a threat of default, we certainly don’t recommend planning our lives around it. The script is very predictable: political posturing and grandstanding will go on until the 11th hour, and then a deal will be hastily put together to avoid a default.”

‘Uncomfortably similar’

If history is any guide, the debt-ceiling turmoil tends to be short-lived, without much impact on stocks before or after a resolution, Wang added. However, the August 2011 instance caught many investors by surprise, with equities slumping for a week or so before stabilizing. Assuming the date of resolution is June 1, the current pattern is “uncomfortably similar to August 2011,” he noted.

To Amy Wu Silverman at RBC Capital Markets, while markets are betting on a rocky end to the debt-ceiling debate, if they are wrong, investors may miss out on the gains.

“The tale of optimism does not exist,” she told Bloomberg Television. “Is there a possibility of a congressional miracle? If it at all comes in a little bit easier than we expect, that right tail is very cheap.”

Also helping sentiment Wednesday was a rally in regional banks after Western Alliance Bancorp reported growth in deposits, easing worries about the health of the industry.

In late trading, Cisco Systems Inc. dropped after the networking company reported its third-quarter results and gave an outlook. While the report was better than expected overall, Vital Knowledge noted some weakness in underlying numbers.

The Bloomberg Dollar Spot Index rose 0.2%, the euro fell 0.2% to $1.0840, the British pound was little changed at $1.2493 and the Japanese yen fell 0.9% to 137.60 per dollar.

🍝 For the dinner table debate:

Elizabeth Holmes, the US entrepreneur who was found guilty of defrauding investors and customers with her blood-testing startup Theranos, lost her last remaining bid to face trial on bail as she appeals her 11-year, three-month fraud conviction.

Holmes led Theranos’ growth alongside entrepreneur and former company president Ramesh ‘Sunny’ Balwani, who is also due to go to prison to begin his 13-year sentence.

While Holmes and Balwani can appeal the move by the Northern District of California court in San Jose, both are still ordered to pay more than $452 million in restitution to Theranos victims who were defrauded by the company’s proposal for immediate readings using just a drop of patients’ blood.

Holmes’ attorneys said Wednesday in a court filing that the proposed two weeks before her sentencing begins will give the former businesswoman time to make medical and childcare arrangements. The date Holmes asked to appear before authorities is May 30, and prosecutors did not object to that deadline.

Both Holmes and Balwani have stated in court that they cannot afford to pay the nine-figure sums demanded by the government. The judge in the case, Edward Davila, had determined that of the more than $452 million, $125 million will go to Theranos investor Rupert Murdoch, while smaller amounts will go to 13 victims of the firm’s fraud.

Paola Villar S., a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this story.