Latin American Markets Close Mixed; NYSE Climbs Following Fed Rate Hike

Mexico led the gains in Latin America on Wednesday, while Federal Reserve chairman Jerome Powell’s perception of cooling inflation boosted US shares

Jerome Powell, chairman of the US Federal Reserve, speaks during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, DC, US, on Wednesday, Feb. 1, 2023. The Federal Reserve slowed its drive to rein in inflation and said further interest-rate hikes are in store as officials debate when to end their most aggressive tightening of credit in four decades.
By Bloomberg Línea
February 01, 2023 | 10:27 PM

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

👑 Mexico leads in Latin America:

Latin American markets closed mixed on Wednesday, with Mexico’s S&P BMV/IPC (MEXBOL) posting the highest gains, with shares of Grupo Televisa (TLEVICPO), GCC SAB (GCC*) and Promotora y Operadora de Infraestructura (PINFRA*) had the best performance.

Mexico’s President Andrés Manuel López Obrador said Wednesday that air cargo operations will move to Mexico City’s Felipe Angeles Airport (AIFA), which will imply fewer operations at Mexico City International Airport (AICM), with the changes slated to come into effect in May or June.

The president will issue a decree to implement the move, and which will allow time for all customs offices and warehouses to be made ready, which are “first class, because it is a first class airport,” the president said.


During his morning press conference, AMLO, as the president is known, confirmed that the first company to decide that its air cargo operations would move to AIFA was DHL Express, even before his government proposed the measure through the decree. The president also mentioned that other logistics companies, such as Estafeta, are also willing to move their cargo operations to AIFA.

📉 A day day for Colombia’s Colcap:

Colombia’s Colcap index (COLCAP) saw the sharpest drop in the region, closing 1.68% lower, dragged down by the shares of Ecopetrol (ECOPETL), Promigas (PROMIG) and Grupo Aval Acciones (PFAVAL).

Colombian President Gustavo Petro’s plan to set utility rates has pushed down Colombian electric power utilities’ shares, with Colombian power company Interconexión Eléctrica SA’s shares dropping 2.5% in Bogotá on Wednesday, extending a selloff that began when Petro said last week he would temporarily assume responsibility for setting household utility rates.


Since Petro’s speech, the utility’s shares have fallen 11.5% on the Colcap index.

🗽On Wall Street:

US stocks rose with Treasuries as Federal Reserve Chair Jerome Powell said the central bank has made progress in its battle against inflation, even as he warned that additional rate hikes are likely warranted.

The S&P 500 jumped more than 1% after Powell said the “disinflation process has started,” suggesting the aggressive tightening cycle is starting to have its desired effect of reducing the pace of price growth. The Nasdaq 100′s gains exceeded 2%.

The S&P 500 closed 1.05% higher, the Nasdaq Composite (CCMPDL) climbed 2% and the Dow Jones Industrial Average 0.02%.


Stock futures extended gains after the cash close when Meta Platforms Inc. reported sales that topped estimates on strong demand for advertising. Shares in the Facebook parent surged 18% in late trading.

While megacap earnings continue to roll in, the Fed’s latest policy decision and Powell’s comments dominated sentiment during the regular session. The two-year yield sliding as much as 12 basis points to 4.08%, while the 10-year rate touched 3.38%. A dollar index fell to its lowest since April. Swaps traders are now pricing in a rate cut of about half a percentage point in the second half of the year.

Market optimism blossomed when Powell sidestepped a question about the recent easing of financial conditions, a measure of market stresses that the central bank monitors for the effectiveness of its policies. He said that the focus is “not on short-term moves but on sustained changes.” Investors had been bracing for harsh commentary from the Fed aimed at cooling the recent run-up in risk assets that could complicate its fight against inflation.


“Powell has said that financial conditions have tightened considerably despite the fact that they have eased considerably. The fact that he has said this is dovish in its own right,” wrote Neil Dutta, head of economics at Renaissance Macro Research. The odds are increasing that the Fed is “declaring victory too soon”, Dutta said. “The Fed’s flirtation with the soft landing today increases the risk of a harder landing later.”

The Fed’s message wasn’t without warnings for financial markets. The central bank said ongoing rate increases would likely be warranted and that officials were discussing a couple more hikes to get policy restrictive enough to beat back inflation. The Fed Funds rate of 4.5% to 4.75% is still more than 25 basis points below where officials in December said they expected it to peak.

“The Fed is essentially speaking out of both sides of the mouth as they signaled further increases are appropriate, but also acknowledged they will consider the cumulative amount of tightening in future policy decisions,” Charlie Ripley, senior investment strategist for Allianz Investment Management, wrote in a note.

Ripley said the Fed’s remarks indicate that it’s near the end of its tightening cycle and “ready to sit tight while the economic data catches up to the policy.”


But markets may be fighting the Fed again on Wednesday, according to Ronald Temple, chief market strategist at Lazard.

Powell’s comments, when taken together with data on Wednesday showing a surge in job openings makes Temple “believe markets remain too dovish regarding how high rates will go and how long they will stay there.”

The Bloomberg Dollar Spot Index fell 0.8%, the euro rose 1.2% to $1.0988, the British pound rose 0.4% to $1.2373 and the Japanese yen rose 1% to 128.84 per dollar.


🔑 The day’s key events:

Oil prices recorded their biggest drop in almost a month after it was learned that US crude inventories reached their highest level since June 2021.

West Texas Intermediate closed with a loss of 3.12% and settled at $76.41 a barrel in New York, its lowest level since January 10. The barrel also fell below its 50-day moving average, $77.60. Brent for April delivery fell 2.84% to settle at $83.03 a barrel.

The data offer a gloomy picture of current demand, said Bob Yawger, head of the futures division at Mizuho Securities USA. “You can fight the positions all you want, but at the end of the day there were some very bearish developments,” Yawger said in an interview.


While comments from Federal Reserve Chairman Jerome Powell following an announcement of a smaller rate hike than at its December meeting helped equities erase their losses, they failed to rally crude oil.

🍝 For the dinner table debate:

El Salvador’s President Nayib Bukele presented the Terrorism Confinement Center (CECOT), a penitentiary center that he described as a “key piece” to continue intensifying his war on gangs, which began in March 2022.

The complex, located in Tecoluca, in San Vicente, will have the capacity to house more than 40,000 alleged gang members and will be guarded by more than 600 members of the Armed Forces and 250 of the National Civil Police.


According to the presidency, the facilities were built in an area isolated from urban areas, with a size equivalent to seven times that of the Cuscatlán Stadium, making it the largest prison in the Americas.

In the penitentiary, “the terrorists who have caused so much grief to the Salvadoran population will serve their sentences”, Bukele said, while assuring that the prison has the necessary security standards and protocols to guarantee order, control and discipline of the inmates with the objective of not allowing illicit actions inside or the communication of gang members with those who are fugitives from justice.

Sebastián Osorio Idárraga, a content producer at Bloomberg Línea, and Isabelle Lee of Bloomberg News contributed to this report.