Latin American, US Markets Close Higher

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

👑 Chile leads in Latin America:

Las bolsas de América Latina cerraron la jornada bursátil con ganancias, siguiendo el buen ánimo del mercado estadounidense.

Chile’s (IPSA) led the gains among the region’s main indices, closing the day 2.63% higher, driven by the performance of the materials, industry and energy sectors.

Shares of Sociedad Química y Minera de Chile (SQM/B), Banco de Crédito e Inversión (BCI) and Inversiones Aguas Metropolitanas (IAM) had the strongest gains.

GE Healthcare on Monday announced a long-term agreement with Sociedad Quimica y Minera de Chile to secure its supply of iodine, a key ingredient for its contrast media products used in X-ray and CT scan procedures worldwide.

The agreement will enable SQM to increase its supply of iodine raw material year over year.

The S&P/BVL Peru (SPBLPGPT) and the S&P/BMV IPC (MEXBOL) also closed higher, both climbing 1.71%.

The Peruvian index rose driven by the performance of the financials, materials and consumer staples sectors. While the Mexican stock market was supported by the performance of the real estate, finance and communication services sectors.

Colombia’s Colcap (COLCAP) remained closed on Monday due to a public holiday.

🗽 On Wall Street:

US stocks saw big gains Monday, with the S&P 500 closing above a key technical level and another giant bank coming out with solid results. A reversal of the UK’s vast fiscal stimulus also bolstered trader sentiment.

The breadth of the rally was so strong that at one point over 99% of the companies in the US equity benchmark were up, with the gauge pushing away from its 200-week moving average. The tech-heavy Nasdaq 100 outperformed, notching its biggest gain since July.

A rout in the S&P 500 has left the index testing a “serious floor of support,” which could lead to a technical recovery, Morgan Stanley’s Mike Wilson wrote. The strategist, who’s one of Wall Street’s most-prominent bearish voices, said he “would not rule out” the measure rising to about 4,150. That’s 13% above current levels.

The S&P 500 closed 2.65% higher, with shares of 99% of companies on the index rising at one point, while the Dow Jones Industrial Average rose 1.86% and the Nasdaq Composite (CCMPDL) 3.43%.

“Stocks may be ripe for a near-term bounce,” wrote BCA Research strategists led by Roukaya Ibrahim. “While economic conditions have not changed -- and therefore do not warrant a shift in the cyclical outlook -- technical conditions are pointing to a potential rebound.”

The arrival of earnings has historically served as a remedy for ailing equities, lifting the S&P 500 roughly 76% of the time since 2013. Cut-to-bone profit estimates are making the hurdles easy to clear.

To Jeffrey Buchbinder at LPL Financial, while expectations are indeed very low for the current earnings season, forecasts for 2023 still remain elevated.

“The tough part is figuring out how far estimates need to fall and how much of a headwind that haircut will be for stocks as they try to dig their way out of this bear market,” he added.

Markets have historically bottomed out when investors began to contemplate materially looser policy over the next six to 12 months, when a trough for economic activity was in sight or when valuations reflected a “bear case” scenario, according to Mark Haefele at UBS Global Wealth Management.

“We do not believe these conditions have been fulfilled,” Haefele added. “Despite the increased risks to growth and the rise in volatility, equity markets have neither become cheaper relative to bonds, nor yet priced in a material slowdown in growth and earnings.”

Some 86% of respondents in the latest MLIV Pulse survey expect US markets to recover first, with investors slightly favoring stocks over bonds. The result suggests the longstanding premium for equities will remain in place — and as the Federal Reserve’s peak hawkishness becomes apparent, traders will be prepared to return to Treasury markets in droves.

The latest US recession probability models by Bloomberg economists Anna Wong and Eliza Winger forecast a higher probability of such an event across all time frames -- with the 12-month estimate of a downturn by October 2023 hitting 100%. That’s up from 65% for the comparable period in the previous update.

Data Monday showed a measure of New York state manufacturing contracted for a third month in October, and a larger share of factories were more downbeat about business conditions in early 2023. The prices-paid measure rose for the first time since June.

“This isn’t a Pollyanna moment,” said Robert Teeter, a managing director of Silvercrest Asset Management. “Inflation clearly remains a problem until proven otherwise, and disappointing earnings, particularly from consumer facing-companies, could trigger another rough stretch, with recession fears at the fore.”

On the currency markets, the Bloomberg Dollar Spot Index fell 0.7%, the euro rose 1.2% to $0.9837, the British pound rose 1.6% to $1.1352 and the Japanese yen fell 0.2% to 149.04 per dollar.

🔑 The day’s key events:

West Texas Intermediate (WTI) closed lower in a choppy session in which prices settled below $85 and also above $87. At the day’s end, WTI for November delivery closed at $85.46 a barrel, while Brent for December settlement ended the day at $91.97 per barrel.

Crude oil is facing headwinds as demand is expected to slow as China continues its Covid Zero policy and the US Federal Reserve continues to raise interest rates next month.

In addition, OPEC’s production cut is tightening the supply outlook. The International Energy Agency warned last week that such a cut could push the global economy into recession.

“Crude oil markets remain exceptionally choppy following the OPEC meeting. Counterintuitively, the decision to cut production to support prices has exacerbated volatility, as it has increased geopolitical and political risk in the market, while offsetting some of the fundamental risks,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management.

🍝 For the dinner table debate:

Food importers are scrambling for dollars to pay their bills in the face of difficulties brought on by the appreciation of the US currency in countries already facing a historic global food crisis.

Around the world, countries dependent on food imports are grappling with a destructive combination of high interest rates, the rising dollar and high commodity prices, eroding their ability to pay for goods normally priced in the greenback. Dwindling foreign exchange reserves in many cases have reduced access to dollars, and banks are slow to release payments.

The problem is not new for many of the countries - nor is it limited to agricultural commodities - but reduced purchasing power and dollar shortages are exacerbating wider tensions in global food systems in the wake of Russia’s invasion of Ukraine.

The International Monetary Fund has warned of a catastrophe at least as severe as the 2007-08 food emergency, US Treasury Secretary Janet Yellen has called for more food aid for the most vulnerable, while the World Food Program says the world is facing the biggest food crisis in modern history.

-- Leidys Becerra, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.