A roundup of Thursday’s stock market results from across the Americas
🌎 Argentina’s Merval clocks up Latin America’s sharpest gains:
Latin American stock markets rallied on Thursday, led by Argentina’s Merval index (MERVAL), which climbed 3,47%.
“ADRs in the foreign market also had an excellent day, in which both the energy and financial sectors stood out. YPF S.A. (YPFD) rose by 7.68%, and in relation to banks, Grupo Supervielle S.A. (SUPV) stood out with a rise of around 7.06%”, wrote Leonel Buccolo, account executive at Rava Bursátil.
In New York, YPF’s rise was accompanied by Satellogic (+6.6%) and Edenor (4.8%).
“Today the driver is the electoral issue, with the fronts already registered and everything ready to start a race where the ruling party looks like a clear loser, for now,” according to financial analyst Franco Tealdi.
Meanwhile, the other stock exchanges in the region had a moderate performance, with increases of 0.44% in Chile’s Ipsa (IPSA) and 0.36% in Mexico’s S&P/BMV IPC (MEXBOL).
In Mexico, the appreciation of the peso in the face of the weak dollar is taking its toll on exports, while tourism is receiving fewer pesos for dollars and Mexican families are also recording a lower income with the money sent by their families in the US. The Mexican currency has gained more than 13% against the US dollar so far this year.
🗽On Wall Street:
The stock rally driven by the exuberance surrounding artificial intelligence is widening beyond the tech industry, defying naysayers and raising concern about an overbought market.
Bets that the Federal Reserve will end its tightening cycle sooner rather than later to prevent a recession added fuel to the equity advance, with the S&P 500 topping 4,400 and rising for a sixth straight day. All of its major groups gained. The Dow Jones Industrial Average extended its surge from a September low to nearly 20%, while the Nasdaq 100 hit the highest since March 2022.
Microsoft Corp. (MSFT), which has unveiled a procession of AI-based products in recent months, climbed to a record. Lennar Corp. led a rally in homebuilders, restaurant chain Cava Group Inc. almost doubled in its trading debut and Delta Air Lines Inc. climbed for a 15th straight session. A gauge of US-listed Chinese stocks jumped with Beijing seen rolling out more stimulus to help the economy.
In late trading, Adobe Inc. gained after raising its sales forecast on optimism that generative AI features will spur demand for its software.
Wall Street’s fervor will face a big test on Friday with the expiration of a massive amount of options contracts tied to stocks and indexes. The event, known as OpEx, typically obliges traders to either roll over existing positions or start new ones. That usually involves portfolio adjustments that lead to a spike in volume and sudden price swings.
Equities continued to gain traction after the US benchmark crossed the bull-market threshold last week, surging more than 20% from its October low. Traders kept piling into stocks even after the S&P 500′s 14-day relative strength index topped 70 — which is seen by some traders as one indication of an overbought market.
“US stocks have defied skeptics and rallied this year in the face of bank collapses, constant fears of a recession, and what’s expected to be a slowdown in corporate profits,” said Arthur Hogan, chief market strategist at B. Riley Wealth. “For our part, we assume that inflation will look better in the second half.”
Market breadth
Market breadth has improved notably, with multiple sectors outside of technology exhibiting stronger relative strength trends, according to Dan Wantrobski at Janney Montgomery Scott.
“All this being said, our concern grows that leadership areas like the Nasdaq 100 index and S&P 500 remain very overbought/extended on a short-term basis,” wrote Wantrobski. “While we understand that overbought conditions such as these can last for some time, we also understand that historical data illustrates they cannot be sustained indefinitely.”
Wantrobski says there’s still a “high probability” of a pullback ahead as we move beyond June.
In fact, the rally in equities faces a fresh threat over the next few weeks with the world’s biggest money managers set to unload as much as $150 billion of stocks. JPMorgan Chase & Co. projects real-money portfolios will tilt back in favor of bonds to meet allocation targets, in the largest rebalancing flows to the asset class since the fourth quarter of 2021.
The periodic rejigging could knock off as much as 5% from the price of global stocks, according to estimates by JPMorgan strategist Nikolaos Panigirtzoglou.
Bonds climbed Thursday, with the yield on 10-year Treasuries declining seven basis points to 3.71%. The dollar slumped the most since February.
The euro rallied as the European Central Bank lifted interest rates by another quarter-point, with President Christine Lagarde describing a further hike in July as “very likely.”
The move came a day after Fed officials paused their series of interest-rate hikes, but projected borrowing costs will go higher than previously expected, owing to what Chair Jerome Powell called surprisingly persistent inflation and labor-market strength.
‘Awkward’
The Fed is now in a “data-dependent” mode before it delivers what may be just one final increase in US borrowing costs next month, former Vice President Richard Clarida said.
“It was what I would call an awkward but hawkish pause,” Clarida, who is now a global economic advisor at Pacific Investment Management Co. told Bloomberg Television on Thursday.
The US economy is holding up, but losing steam.
While an advance in retail sales last month exceeded nearly every estimate, the report also showed consumer demand has moderated from the past year. Separate data showed factory production remained sluggish and applications for unemployment benefits held at the highest level since late 2021.
Elsewhere, oil rose amid strengthening demand in China. West Texas Intermediate futures approached $71 a barrel on Thursday.
Bitcoin’s share of total crypto market value is the highest in about 20 months, a sign of the cautious mood in digital assets.
The token wavered near $25,000 on Thursday, giving it a capitalization of $484 billion — or 45.8% of the value of the more than 10,000 coins tracked by CoinGecko. That’s the highest percentage since October 2021.
The Bloomberg Dollar Spot Index fell 0.7%, the euro rose 1.1% to $1.0947, the British pound rose 0.9% to $1.2783 and the Japanese yen fell 0.1% to 140.26 per dollar.
🍝 For the dinner table debate:
Investors now expect the Fed to keep raising rates and that it will only start cutting well into 2024. That was 70% of the responses in a Bloomberg survey, whose participants believe the central bank is not done with its tightening campaign. The remaining 30% do.
The survey took place in the hours after the Fed’s monetary policy announcement, which left its rates unchanged after 15 months. Some 56% of respondents predicted cuts would not occur until 2024 or later, while about 35% expected a lowering in the first three months of next year. A smaller proportion, 10%, predicted a cut in the fourth quarter of 2023.
Federal Reserve Chairman Jerome Powell also weighed in, stating that cuts are likely to be implemented in the coming years. As a result of this information, Treasury yields saw a modest decline on Thursday, with 10-year yields rising by two basis points to 3.81%. Swap traders, who had expected a rate cut in early June, now anticipate a 50% chance of a 25 basis point increase by the end of the year.
Sebastián Osorio Idárraga, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.
