A roundup of Wednesday’s stock market results from across the Americas
👑 Colombia’s Colcap leads in Latin America:
Latin American markets closed mixed on Wednesday, with Colombia’s Colcap (COLCAP) posting the region’s highest gains, closing 1.28% higher.
Shares of Mineros SA (MINEROS), Celsia SA (CELSIA) and Interconexión Eléctrica (ISA) posted the highest gains.
On Colombia’s agenda, the focus is on inflation, which continues to break records and March was no exception, despite the fact that most of the market expected it to be and that since that month the downward trend would begin. According to the DANE, Colombia’s inflation was 13.34% annualized in March, driven by food, accommodation and utilities and transportation. These three items contributed 64% of the total result, or 8.52 percentage points (pps). This result is a high not seen since 1999.
In monthly terms, Colombia’s inflation was 1.05% in March, explained by accommodation and utilities, food and transportation. These three items contributed 0.66 points to the total monthly variation, that is, they accounted for 63% of the final result.
📉 A bad day for Mexico’s BMV:
Mexico’s S&P BMV/IPC (MEXBOL) posted the sharpest losses, closing 1.25% lower on Wednesday.
Shares of Controladora Vuela Compañía De Aviación (VOLARA), Promotora y Operadora de Infraestructura (PINFRA*) and Orbia Advance Corporation (ORBIA*) posted the deepest losses.
Today in today’s news, it was reported that inflation in Mexico slowed in March in line with analysts’ expectations and maintained a downward trend for the second consecutive month, bringing inflation slightly below the Bank of Mexico’s forecast for prices during the first quarter of 2023.
🗽On Wall Street:
Wall Street saw a renewed flight to safety, with bonds climbing and equities dropping after weaker-than-estimated economic data revived fears that a recession could be in store.
In a rotation away from growth shares, the Nasdaq 100 underperformed major benchmarks. Some of the most-speculative pockets of the market bore the brunt of the selling, with a gauge of newly minted stocks getting hit and a basket of profitless technology firms tumbling over 4%. Banks finished lower even after Western Alliance Bancorp’s deposit disclosure.
The S&P 500 dropped 0.25% and the Nasdaq Composite (CCMPDL) 1.07%, while the Dow Jones Industrial Average managed to close higher, up 0.24%.
Treasury 10-year yields fell to the lowest since September, and was around 1.5 percentage points below the three-month Treasury bill rate — the widest margin in decades and historically a reliable signal that the economy is headed for a slowdown. The dollar rose alongside the Japanese yen. Gold was near a 13-month high.
“Recession risks have increased,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “The equity outlook is challenging. As the slowdown of the US economy becomes more apparent, we think investors should prepare for a peak in interest rates by considering opportunities in bonds.”
To Ed Moya at Oanda, investors are realizing that a strong economy is necessary to keep stocks higher. And the reason equities aren’t selling off harder is that many traders believe that even if the Fed doesn’t slash rates as soon as the market is pricing in, officials will cut them more aggressively next year.
Swap market
The slide in Treasury yields subsided in afternoon New York trading, but the intense volatility underscored the market’s standoff with the Federal Reserve, which last month raised its benchmark to a 4.75%-5% range. In addition to favoring a pause in tightening — rather than a quarter-point hike in May — swap contracts linked to Fed meeting dates now anticipate the policy rate falling to 4% in December.
Policymakers speaking since the March meeting have said they are watching economic data to determine how much recent banking stress may tighten access to credit or slow growth. Fed Bank of Cleveland President Loretta Mester told Bloomberg Television that officials will need to raise rates “a little bit higher” and then hold them there for some time to bring inflation back toward their goal.
That doesn’t mean the Fed will continue to raise rates until inflation hits the target, Mester added.
For several market observers, one thing that might tilt the central bank toward the end of its hiking cycle is the fact that a year’s worth of interest-rate hikes might already be filtering through economic activity.
Still, even if the Fed pauses its rate hikes, “restrictive policy will continue to hit the economy with a lag,” according to Don Rissmiller at Strategas.
‘Whisper fears’
The Institute for Supply Management’s index fell nearly four points to a three-month low of 51.2. When paired with the latest ISM factory survey that showed a further deterioration, the services data may heighten concerns about the economic outlook as credit conditions tighten and interest rates remain high.
While the magnitude of the decline in ISM services was certainly unexpected, the details don’t spell a “prelude to recession” just yet,” said Oscar Munoz at TD Securities. He says the numbers correspond to an economy that’s losing momentum and heading to below-trend growth in the near term.
Separate figures Wednesday from ADP Research Institute showed private payrolls increased by a less-than-expected 145,000. The data precede Friday’s US payrolls report, which is forecast to show employers added about a quarter of a million jobs last month and the unemployment rate held at a historically low level.
“ADP private employment tally was much weaker than expected, and with other high-frequency labor market metrics, suggests deteriorating labor-market growth,” said Stan Shipley at Evercore ISI. “Whisper fears suggest a tepid jobs report on Friday.”
To Bill Adams at Comerica Bank, while the recent jobs figures support a pause in Fed policy tightening, an upside surprise from next week’s inflation reports could still tip the balance toward another quarter-point rate increase.
“The labor market is getting less tight. This is one of the Fed’s conditions for pausing its interest rate hiking campaign, but the Fed also wants to see core inflation slow more,” Adams noted.
$1.5 trillion to enter mutual funds
The wave of cash plowing into the safest of money-market mutual funds has only just begun with as much as another $1.5 trillion set to enter over the next year, according to Barclays Plc.
Coffers of government-only money funds, which invest just in securities with virtually no credit risk such as Treasury bills and repurchase agreements, have already ballooned since fears of a banking-sector crisis erupted last month. A continued exodus from banks and rotation out of prime funds, which can buy more risky debt, will only further fuel that trend as investors search for higher yields and greater safety, Barclays says.
The Bloomberg Dollar Spot Index rose 0.3%, the euro fell 0.4% to $1.0904, the British pound fell 0.3% to $1.2460 and the Japanese yen rose 0.3% to 131.29 per dollar.
🍝 For the dinner table debate:
The generative artificial intelligence revolution could contribute to the move toward a four-day working week by boosting the productivity of many jobs, according to a Nobel laureate on the economics of work.
Christopher Pissarides, a professor at the London School of Economics who specializes in the impact of automation on the world of work, said the market can adapt quickly enough to such tools.
“I’m very optimistic that we could increase productivity,” he said in an interview at a conference in Glasgow.
“We could increase our overall well-being from work and we could spend more time on leisure. We could move to a four-day week easily.”
Chatbots, such as OpenAI’s ChatGPT and Google’s Bard, have been hailed as a potentially transformative technology that could cause a productivity boom, but also expose hundreds of millions of white-collar jobs.
Leidys Becerra, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.
