A roundup of Friday’s stock market results from across the Americas
🌎 Argentina’s Merval leads LatAm gains:
Latin American stock markets also closed a month of strong gains, with Argentina’s Merval index (MERVAL) outperforming by far all of the year’s second quarter results after registering a 94.4% rise between April and June of 2023.
This Friday, the Merval also posted the largest gains among its regional peers, after rising 2.36% at the close of trading.
The Merval was boosted this June 30 by gains in shares of companies such as Banco Macro (BMA), whose shares rose 7.38%; Bolsas y Mercados S.A. (BYMA), with its shares up 5.99%; and Transportadora Gas del Sur (TGSU2), with a 4.77% increase in its shares at the close of the session.
Priscila Bruno, analyst at Rava Bursátil, highlighted that the local Argentinean market had a month immersed in pre-electoral volatility, due to the fact that the lists of candidates to be presented in the next PASO were defined. “Thus, the assets that make up the leading panel, although they suffered corrections throughout June, ended the month on the rise”, said Bruno.
At the same time, this Friday Argentina closed a payment of the equivalent of US$2.7 billion to the International Monetary Fund (IMF), making a repayment operation of part of its debt with the organization in Chinese yuan. “IMF staff and the Argentine authorities will continue to work together in the coming days, with the objective of reaching an agreement on the fifth review of the Fund-supported program,” said Julie Kozack, Director of Communications at the IMF, after the operation.
Elsewhere, Brazil’s Ibovespa (IBOV) was the second best-performing regional stock market in the second quarter, with the main Brazilian market index rising 19.49% between April and June 2023. The Ibovespa fell slightly on Friday, registering a 0.25% drop, pushed down by the energy (-3.48%), materials (-1.64%) and consumption (-1.42%) sectors.
On the other hand, the selective index of the Chilean Stock Exchange’s IPSA index (IPSA) was the third Latin American stock exchange to record double-digit gains in the second quarter of this 2023, after rising 10.25% in that period. The Chilean stock market rose by 1.02% on Friday, driven by real estate (1.94%) and mining (1.59%).
🗽On Wall Street:
The rally in tech megacaps gained further traction, with the Nasdaq 100 notching its best ever first-half of a year and Apple Inc. hitting the $3 trillion milestone.
Traders decided to look at the glass half full as data showed inflation is moderating, even if that comes at the expense of growth. Stocks extended this year’s surge, with tech consolidating its leadership amid the ascent of artificial intelligence. Big banks saw their first monthly gain since January after passing the Federal Reserve’s stress test. In late hours, JPMorgan Chase & Co., Wells Fargo & Co., Morgan Stanley and Goldman Sachs Group Inc. announced higher dividends.
Nearly $5 trillion has been added to the value of companies in the Nasdaq 100 since the start of the year, with the tech-heavy gauge defying bubble warnings and jumping almost 40%. The advance in the most-influential group in the S&P 500 helped push the index up 16% in 2023. Gains have been even more pronounced when narrowed down to the megacap space — which has soared 74%.
“I still do like big tech,” Larry Adam, chief investment officer at Raymond James, told Bloomberg Television. “I do believe in technology continuing to reinvent itself — obviously with the latest addition being AI. That’ll continue to drive earnings.”
The “Big Seven” — including Apple, Microsoft Corp., Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., Nvidia Corp. and Tesla Inc. — boosted profits by 14% a year during the decade through 2022. While their combined earnings slumped more than 20% last year, they’re expected to recover swiftly.
The Nasdaq 100 rose over 1.5% Friday, while the S&P 500 hit the highest since April 2022. The US equity benchmark posted its best first half since 2019. Nvidia, which has almost tripled this year, was up about 3.5%.
If history is any guide, the Nasdaq 100′s strength this year augurs well for the rest of 2023.
Years that start with rallies in the index of at least 10% average returns of about 14% over the second half of the year, though that shrinks to an 8.3% gain when the first-half gain tops 20%, according to an analysis of data compiled by Bloomberg.
The market’s fascination with the power of generative AI has trumped every major issue that could potentially drag down sentiment this year: recession fears, elevated levels of inflation, prospects for more Fed hikes, geopolitical risks, the debt-ceiling debate and the collapse of a few regional banks.
While the rally in AI has drawn comparisons with the dot-com bubble of 2000, when the market was driven by a similarly narrow breadth of tech stocks before a crash, BlackRock’s Tony DeSpirito said earnings growth is coming.
“Demand is really real,” said DeSpirito, the firm’s chief investment officer of US fundamental equities. “That contrasts what’s going on in AI versus the metaverse a year ago, or virtual reality. The orders are there.”
Still, after such a strong advance, there’s growing concern about valuations, and that has recently spurred a surge in bearish bets against the largest tech companies. Short interest as a percentage of shares available to trade is near 12-month highs for Microsoft, Tesla and Amazon, according to data compiled by S3 Partners.
‘Be selective’
“We don’t believe the AI trend is a bubble, but advise investors to be selective on AI-related stocks after the strong year-to-date rally,” said Sundeep Gantori, equity strategist at UBS Global Wealth Management. “From a positioning point of view, we recently closed our self-help theme as we see better risk-reward in mid-cycle industries (software, internet) and tech laggards.”
Barring evidence of any technical deterioration, it’s likely that markets will push even higher into mid-to-late July ahead of a possible minor correction into August, according to Mark Newton at Fundstrat Global Advisors.
“Until evidence of more rampant overbought conditions joins forces with more bullish sentiment and some evidence of defensive strength and/or waning technical breadth, it’s arguably wrong to consider abandoning this rally based on overbought conditions alone when technical trends remain very much intact,” Newton noted.
Also helping tech on Friday was the fact that action in the bond market was subdued. Treasury 10-year yields fell to around 3.8%. The dollar dropped, extending this year’s losses.
Key measures of US inflation cooled in May and consumer spending stagnated, suggesting the economy’s main engine is starting to lose some momentum. The personal consumption expenditures price index, one of the Fed’s preferred inflation gauges, rose 0.1%. From a year ago, the measure stepped down to 3.8%, the smallest annual advance in more than two years.
“The May PCE report released today is relatively benign from a Fed perspective and leans in the direction of the Fed ultimately delivering only one more rather than two more rate increases,” said Krishna Guha, vice chairman of Evercore ISI. “This should curb a bit the recent back-up in yields and favor big tech.”
Elsewhere, Brent oil posted its longest run of quarterly losses in data going back more than three decades amid robust supplies and persistent concerns over demand.
The global benchmark settled below $75 a barrel on Friday, marking its fourth straight quarterly loss, while West Texas Intermediate posted its first back-to-back quarterly declines since 2019.
The Bloomberg Dollar Spot Index fell 0.3%, the euro rose 0.4% to $1.0913, the British pound rose 0.7% to $1.2699 and the Japanese yen rose 0.3% to 144.27 per dollar.
🍝 For the dinner table debate:
Brazil was the scene this Friday of a political event that will have a key impact on the upcoming presidential elections: the majority of the Brazilian Supreme Electoral Court (TSE) voted in favor of disqualifying the country’s former president, Jair Bolsonaro, from holding public office for eight years; a decision that will prevent him from running in the next two elections for any office, amid other investigations being pursued against the ex-president.
On Friday, more than half of the seven judges of the court said that Bolsonaro abused the powers of his presidency by convening a meeting of foreign ambassadors to make unsubstantiated statements about Brazil’s voting system months before the October elections, putting the Latin American country’s democracy at risk.
Bolsonaro spent years - especially during his presidency - spreading conspiracy theories about the elections, generating fury among his supporters, events that ended in a massive assault on the main government buildings in the capital, Brasilia, on June 8, claiming that Luiz Inácio Lula da Silva’s victory had been fraudulent.
Bolsonaro can appeal the ruling to the Supreme Court, but his legal troubles are far from over. He faces 15 other cases in the electoral court over allegations that he abused his authority as president and tried to undermine faith in Brazil’s electronic voting system.
Paola Villar S., a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this story.