A roundup of Monday’s stock market results from across the Americas
📉 A bad day for Latin America:
Latin American stock markets were affected by the mood of the U.S. markets and the main indices closed with losses.
The S&P/BVL Peru (SPBLPGPT) was the index that closed with the sharpest losses in the region on Monday, down 0.89%. The performance of the financials, materials and consumer staples sectors affected the Peruvian stock market. While the good performance of the utilities sector softened the fall.
Colombia’s Colcap (COLCAP) was the second worst performing index on Monday, ending the trading session with a loss of 0.85%, dragged down by the performance of the energy, finance and materials sectors and the performance of the shares of Grupo Aval (PFAVAL), Ecopetrol (ECOPETL), the shares with the highest trading volume, and those of Bancolombia (BCOLO).
🗽 On Wall Street:
US stocks fell for a fourth day as prospects for policy tightening and geopolitical risks weighed on investor sentiment. A gauge of dollar strength rose to the highest level this month.
The S&P 500 ended off lows in a choppy afternoon session that saw the benchmark almost reverse losses of more than 1%, before selling pressure gathered pace in the final minutes of trading. The Nasdaq 100 underperformed, with semiconductors among the worst performers after Washington’s move to further restrict China’s access to US technology added to signs of slowing chip demand worldwide.
The S&P 500 closed 0.75% lower, the Dow Jones Industrial Average dropped 0.32% and the Nasdaq Composite (CCMPDL) dropped 1.04%.
The pullback from the day’s low came after Federal Reserve Vice Chair Lael Brainard laid out a case for caution, noting that previous rate increases were still working through the economy. Earlier, Chicago Fed President Charles Evans said the Fed needs to quickly get to a level where policy makers can feel comfortable pausing in order to reduce the risk of overshooting. Treasury futures traded lower, while the US cash market was closed for Columbus Day.
The dollar rose against almost all of its major counterparts amid signs of a new escalation in the Russia-Ukraine war. In the UK, turbulence gripped the gilt market, with the selloff accelerating despite the Bank of England extending its emergency backstop measures.
The mood remains fragile ahead of Thursday’s US inflation data and a raft of bank earnings that will kick off the third-quarter season in earnest. A hotter-than-expected inflation reading, coming on top of last week’s strong labor print, will heap pressure on the Fed to extend 75 basis-point rate hikes beyond this year.
“Inflation and the Fed should dominate this week,” wrote Paul Nolte, portfolio manager at Kingsview Investment Management. “If the discussion of higher rates remains front and center, the markets are likely to stay on their heels.”
Relentlessly hawkish central banks are making investors gloomy about the upcoming earnings season. JPMorgan Chase & Co. and Citigroup Inc. are among the big banks that will unveil earnings later this week.
“The market right now is trying to digest all this data coming in and then put it alongside some sort of Fed rate-hike path,” Shawn Cruz, head trading strategist at TD Ameritrade, said in an interview at Bloomberg’s New York headquarters. “And every time you get something that comes in not in the absolute rosy potential outcome for that data point, the market has some pretty big jitters. With the opening salvo from the earnings season coming from the banks, that’s going to drive a lot of volatility.”
Even after this year’s brutal selloff, markets have not priced all the risks stemming from higher interest rates and stubbornly high inflation. More than 60% of the 724 respondents to Bloomberg’s latest MLIV Pulse survey predicted the earnings season would push the S&P 500 Index lower. Strategists at Goldman Sachs Group Inc. and Morgan Stanley warned it would be a difficult reporting season, given risks such as slowing demand and soaring costs
“The bear market will not be over until the deteriorating fundamental picture is more fully discounted,” Morgan Stanley strategists told clients.
On the currency markets, the Bloomberg Dollar Spot Index rose 0.3%, the euro fell 0.4% to $0.9703, the British pound fell 0.3% to $1.1057 and the Japanese yen fell 0.3% to 145.72 per dollar.
🔑 The day’s key events:
The International Monetary Fund and the World Bank warned of increased risks of a global recession as faster inflation leads central banks to raise interest rates, impacting growth.
Higher borrowing costs “are really starting to be felt,” IMF Managing Director Kristalina Georgieva and World Bank President David Malpass said at a virtual event to kick off the two institutions’ annual meetings.
The IMF estimates that about one-third of the global economy will see two quarters of contraction in a row this year and in 2023, with output lost by 2026 amounting to US$4 trillion. At the same time, Georgieva said, policymakers cannot let inflation become a “runaway train.”
🍝 For the dinner table debate:
Jamie Dimon, CEO of JPMorgan Chase & Co. (JPM), said he expects to see a recession in the US and globally, and even put a date on it. The executive said there are “serious” headwinds that could push the rest of the world into a recession by the middle of next year.
“These are very, very serious things that I think will probably push the US and the world. I mean, Europe is already in recession, and the US is likely to fall into some sort of recession as well in the next six to nine months from now,” Dimon said Monday in an interview with CNBC.
While the US is doing well at the moment, a number of global indicators and issues such as the impact of rising inflation, interest rates rising more than expected, the effects of the Federal Reserve’s quantitative easing and Russia’s war in Ukraine are sounding alarm bells, Dimon said.
-- Leidys Becerra, a content producer at Bloomberg Línea, and Stephen Kirkland and Vildana Hajric of Bloomberg News, contributed to this report.