A roundup of Tuesday’s stock market results from across the region
👑 Peru leads in Latin America:
It was a mixed day for Latin American stock markets, after the markets of Argentina, Chile and Colombia returned to trading after Monday’s holiday.
The highest increase was in the Peruvian market, after it fell more than 1% yesterday. The S&P/BVL Peru (SPBLPGPT) gained 0.67%, driven by the materials, financials and consumer staples sectors.
After swinging between losses and gains, the Ibovespa (IBOV) ended Tuesday’s session in positive territory, tracking the improving mood on Wall Street, with investors digesting retailers’ balance sheets.
The Brazilian stock market’s rise was driven by meat companies, such as BRF (BRFS3), JBS (JBSS3) and Marfrig (MRFG3). The sharpest losses of the day were for Yduqs (YDUQ3), whose shares fell 11.76% after the company reported a net loss in the second quarter.
The Mexican stock market rebounded after starting the week with losses. The S&P/BMV IPC (MEXBOL) rose with the better mood of the US stock markets and thanks to the performance of the non-basic consumer products, health and communication services sectors.
📉 A bad day for Argentina’s MERVAL:
Argentina’s stock market registered the biggest drop during the day, after the market reopened following Monday’s holiday, with the Merval index (MERVAL) falling 0.95% during the session.
“In a key day, the market’s eyes are focused on the meeting of Economy Minister Sergio Massa with representatives of the agricultural sector, and which brought uncertainty to the local market with stocks trading mostly lower, despite the positive adjustment of Monday’s trading on Wall Street,” said Mauro Natalucci, analyst at Rava Bursátil.
🗽 On Wall Street:
US stocks closed higher following a sudden pullback in tech shares, with investors assessing the latest round of upbeat earnings against a backdrop of growing concerns over slowing growth and rising borrowing costs.
The S&P 500 climbed 0.19%, after the index failed to push above its 200-day moving average, and the Dow Jones Industrial Average advanced 0.71%, but the Nasdaq Composite (CCMPDL) slipped 0.19%, weighed down by big-tech shares.
Equity markets seesawed in a session marked by steep losses and gains. Treasuries stayed lower, with short-dated yields, the most sensitive to interest-rate changes, up more than five basis points.
Stocks started the day on the back foot as investors weighed the latest mixed economic data with the Federal Reserve on the path of hiking interest rates. Data Tuesday showed a bigger-than-expected drop in US home construction, while production at US factories increased in July for the first time in three months.
Stocks gained traction later as risk sentiment got a boost from Walmart’s (WMT) second-quarter results, which exceeded analysts’ expectations, reporting $152.9 billion in revenues during second quarter, above the market’s expectations of $151.1 billion, while Home Depot (HD) saw sales climb 5.8% in second quarter, above the market’s expected 4.6%.
Those results helped spur gains in a swath of retailers, including the Target Corp. and Lowe’s Cos. ahead of their earnings due Wednesday.
“The move lower in the last hour is mostly technical -- once the S&P 500 got to its 200-day moving average, the rally began to be exhausted and short sellers challenged the upward momentum,” Joe Gilbert, portfolio manager for Integrity Asset Management. “Realistically, at this level the market is range bound because there is still a fair amount of uncertainty as to how the Fed will perceive the most recent economic data in the prism of likely economic outcomes. The market is not confident enough to break out above this range with so many unknowns.”
Reports Monday showing a sharp drop in New York state manufacturing along with the longest streak of declines since 2007 in homebuilder sentiment sparked optimism in equity markets that the Fed may slow interest-rate hikes. The S&P 500 has rallied 17% from its mid-June nadir, fueled in part by traders dialing back wagers on rate hikes and speculation that inflation has peaked.
“We would caution investors against chasing this rally,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said. “We expect renewed market volatility ahead, and we continue to recommend positioning portfolios for resilience under various scenarios. With inflation still high, we favor value stocks including global energy. And with the economic outlook uncertain, we think investors can consider defensive equity exposure via global healthcare or quality income stocks.”
Clues on how sensitive the Fed is to unfolding economic data may be known when the minutes of the last meeting of the Federal Open Market Committee is released on Wednesday. However, the big event investors are waiting for is the annual monetary policy symposium at Jackson Hole, Wyoming during Aug. 25-27. Traders are bracing for higher volatility until then.
“I like consumer discretionary,” Brad McMillan, chief investment officer at Commonwealth Financial Network, said on Bloomberg Radio. “As inflation goes down, consumer confidence is going to come back.” The Walmart data “is something that says, ‘yeah, that may be starting to happen.’ I think tech is also a good place going forward. Play on growth, play on the consumer.”
On the currency markets, the Bloomberg Dollar Spot Index was little changed, the euro was little changed at $1.0170, the British pound rose 0.3% to $1.2095, while the Japanese yen fell 0.6% to 134.18 per dollar.
🔑 The day’s key events:
Increased optimism over negotiations for a nuclear deal with Iran has hit oil prices again, as a deal could bring Iran’s crude back to the international market. The European Union described as “constructive” the response Iran sent Monday night to a proposed draft to revive the 2015 nuclear deal, according to a source consulted by Bloomberg.
The bloc is now discussing with the US which way forward, the official familiar with the talks added. The EU has described the text as the “last hope” to salvage the deal, which seeks to limit Tehran’s nuclear activity in exchange for the lifting of sanctions.
On the news, oil settled at its lowest level in six months as a possible return of Iran to the oil market would come at a time when investors are weighing the possibility of falling demand in the face of slower economic growth.
“The potential for a deal is being priced in, which creates a two-way risk to oil prices if there is a final announcement this week,” said Craig Erlam, senior market analyst at Oanda. “But the main driver of weakness, which could keep prices around US$90 or below, is the threat of recession around the world and lockdowns in China.”
🍝 For the dinner table debate:
“Prepare for the worst.” This was one of the pieces of advice given by Martín Escobari, co-president of General Atlantic, to startup founders during an event organized in São Paulo by Endeavor.
The executive assured that it is necessary to be attentive to take advantage of the opportunities that arise after surviving the “darkest moment of the night”.
However, Escobari warned that we are not yet in that moment although “it will come”, so for the businessman entrepreneurs have to know how to take advantage of the crisis they are going through.
“I love a good crisis,” he said, noting that in such situations “the cards get rearranged” and the best can stand out. “When I look at my career as an investor, my seven greatest successes in history were during crises,” he recalled.
In his view, when problems arise, the main function is to survive to make it to “summer” and to do so he says that entrepreneurs must make difficult decisions, such as layoffs, doing so with courage, transparency and respecting merit.
“An organization embraces and respects the leader who makes the tough decisions,” he said.
-- Carlos Rodríguez Salcedo, a content producer at Bloomberg Línea, and Stephen Kirkland and Vildana Hajric of Bloomberg News, contributed to this report.