A roundup of Monday’s stock market results from across the Americas
🌎Argentina leads the gains in LatAm:
Latin America’s markets closed mixed on Monday, with Argentina’s Merval index (MERVAL) posting the highest gains, up 2.44% at closing and boosted by the shares of Ternium Argentina (TXAR) and Transportadora de Gas del Norte (TGN04).
A US court on Monday approved an agreement between YPF S.A. (YPF), Repsol and the Maxus Liquidating Trust, for the latter to release the claims filed against both companies in the Bankruptcy Court of the District of Delaware. The amount agreed and approved by the judge, $287 million, is 2% of the amount originally demanded by Occidental Chemical Corporation.
Meanwhile, Chile’s Ipsa (IPSA) had gains of 2.34%, after the results of the elections for the Constituent Council in the country, whose main victories went to the right, meaning a strong blow to the progressive agenda of President Gabriel Boric.
For its part, Colombia’s Colcap (COLCAP) dropped 0.58%, weighed down by the shares of Organización Terpel S.A. (TERPEL) and Corporación Financiera Colombiana (CORFICOL).
Political uncertainty in Colombia stemming from proposed changes could affect business confidence and thus investment levels even if President Gustavo Petro’s government’s reforms fail to materialize, rating agency Moody’s warned in a report released Monday.
“A deterioration in business confidence towards Colombia due to political uncertainty could affect investment levels, hurting potential GDP growth,” the report said.
🗽On Wall Street:
US equities eked out a small gain Monday while Treasuries fell as investors weighed what it would take to finally reverse the Federal Reserve’s path on rates after a survey of loan demand showed signs of credit tightening.
The S&P 500 ended the day little changed after wavering between gains and losses in a subdued session Monday. The gauge had jumped 1.9% Friday to halt its longest losing streak since February. The tech-heavy Nasdaq 100 (CCMPDL) advanced 0.2% as AI-capable chipmakers Advanced Micro Devices Inc. (AMD) and Nvidia Corp. (NVDA) rose alongside Google-parent Alphabet Inc. (GOOGL).
A gauge of the dollar erased losses after the Fed’s Senior Loan Officer Opinion Survey signaled that the credit market was tightening slightly while business loan demand was weakening. The yield on the policy sensitive two-year Treasury rose to 4.01%. Syndicate desks brace for as much as $35 billion pf corporate bond sales volume this week while Apple Inc. kicked off a $5.25 billion sale.
Paypal Holdings slid 4% in postmarket trading after second quarter outlook fell short of some analysts’ estimates. Shares of Premier Inc. were halted after the health-care consulting firm said it was exploring options including a sale; the stock had fallen over 20% since cutting its forecast last week.
US stocks have been rangebound since the beginning of April as better-than-feared corporate earnings offset concerns around an economic slowdown and the health of regional banks. PacWest Bancorp rose 3.6% while lending peers mostly traded lower with the KBW Regional Banking Index slumping 2.8%.
“US banking sector stress and a looming debt ceiling deadline elevate near-term recession risk,” Marko Kolanovic, JPMorgan Chase & Co.’s chief strategist said. “Absent a disruptive event, we expect a US recession dynamic will take hold gradually and won’t create space for pre-emptive Fed easing this year.”
Yet, swaps traders remain optimistic the Fed is prepared to pause as contracts suggest interest-rate cuts will start as early as the central bank’s July meeting, with at least two quarter-point cuts by year-end.
“Persistently strong economic data suggests that such a significant pivot in Federal Reserve sentiment is unlikely,” said Seema Shah, chief global strategist at Principal Asset Management. “The conditions necessary for the Fed to pivot and cut rates are dismal, requiring a desperately struggling economy or a financial crisis. Investors: be careful what you wish for.”
Consumer-inflation data Wednesday may provide further clues on the Fed’s rates path as well set the tone for equities.
“Traders will be looking to see if this week’s inflation numbers will be able to push stocks out of their recent consolidation. The S&P 500 hasn’t had a weekly gain or loss of at least 1% since March—its longest stretch in nearly two years,” Chris Larkin, managing director of trading and investing at E*Trade Financial said.
Tech sector
Tech stocks have been trading at a 49% premium to the rest of the S&P 500, according to a Goldman Sachs analysis. Sector bulls argue that valuation premium is supported by earnings growth outlook and a macro backdrop of slowing GDP growth and declining interest rates.
“However, if the economic outlook improves and rates rise, further valuation expansion will be challenging, and more cyclical stocks will likely outperform,” the bank’s strategists led by David Kostin wrote. “If the economy enters a recession, the popularity of mega-cap tech in hedge fund long portfolios leaves the stocks vulnerable.”
The rout in US bank shares has the S&P 500 financials index on the verge of falling back below its 2007 peak.
Meanwhile, Treasury Secretary Janet Yellen sees “simply no good options” for solving the debt limit stalemate in Washington without Congress raising the cap. She even cautioned that resorting to the 14th Amendment would provoke a constitutional crisis.
“The deficit ceiling is a political football and since 2024 is an election year, both sides are seeking to score political points,” Louis Navellier, chief investment officer of Navellier & Associates, said. “However, the Biden Administration has the most to lose, so it will be interesting if there will be any caps on federal spending. As long as Treasury bond yields do not panic, investors should not panic either.”
Elsewhere in markets, oil gained as investors assessed a complex outlook for global demand after a period of volatile trading. Bitcoin slipped below $28,000, reaching session lows after the SLOOS data.
On the currency markets, the Bloomberg Dollar Spot Index was little changed, the euro fell 0.2% to $1.1002, the British pound fell 0.2% to $1.2616 and the Japanese yen fell 0.3% to 135.14 per dollar.
🍝 For the dinner table debate:
Potential changes to the political chessboard in emerging markets this year have investors on edge, as a series of elections approach that will impact their bonds, stocks and currencies.
Turkey’s elections, which take place in less than a week, will be one of the most closely watched of the year.
But there are several others that will have the markets’ attention, including Argentina, Poland, Pakistan and Thailand.
This creates even more complexity when investing in emerging markets, where political uncertainty adds to the risks associated with monetary policy trends, concerns about economic growth and turmoil in the banking sector of developed countries.
The performance of this asset class has held up after a volatile first quarter thanks to fundamentals and attractive valuations. However, bouts of political instability can lead to disruption and a flight to safety, a bad combination for emerging markets.
Sebastián Osorio Idárraga, a content producer at Bloomberg Línea, and Emily Graffeo and Isabelle Lee of Bloomberg News contributed to this report.
