A roundup of Monday’s stock market results from across the region
🌎 Peru’s market leads the gains in Latin America:
Most Latin American stock exchanges fell at the close of the day, with the exception of the Peruvian and Chilean stock exchanges. The stock market that fell most sharply in Monday’s session was that of Brazil, with its main index (IBOVESPA) dropping 0.80% at the close.
The Argentine (MERVAL), Mexican (MEXBOL) and Colombian (COLCAP) stock exchanges followed with drops of 0.66%, 0.46% and 0.20%, respectively. This Monday, in an exclusive interview with Bloomberg Línea, the manager of Colombia’s Banco de la República, Leonardo Villar, said that it is difficult to think of a downward decision in the Colombian reference interest rates this July, and considered that the decision should still be viewed with caution.
César Romero, senior analyst at Renta4 SAB in Peru, highlighted that in the Peruvian stock market the news of the day was the takeover bid of a stake in Alicorp (ALICORC1) by a company linked to Grupo Romero, a firm which is already the main owner of the Peruvian mass consumption company.
The takeover bid led Alicorp’s shares to record double digit gains since the beginning of the session at the Lima Stock Exchange (SPBLPGPT), and the company’s shares closed the trading day as the best performer with an increase of 10.31%. It was followed by the shares of SiderPerú (SIDERC1) and Empresa Agroindustrial Pomalca (POMALCC1), with an increase of 3.45% respectively.
Chile’s IPSA index (IPSA) continued its upward streak, driven by the non-basic consumption (2.69%), materials (0.75%) and real estate (0.22%) sectors. The shares that drove the gains of the Chilean index were those of Enel Chile (ENELCHIL), with a rise of 3.24%, and the shares of Falabella (FALAB), with an increase of 3%. In third place were the shares of Banco BCI (BCI), with a gain of 2.41%.
🗽On Wall Street:
The stock market kicked off the week on a cautious note, with traders sifting through remarks from a slew of Federal Reserve speakers while awaiting key inflation data and the start of the earnings season.
In a very choppy trading session, the S&P 500 closed with a small gain. The market didn’t get much support from the megacap space as Tesla Inc. fell almost 2% and Amazon.com Inc. dropped before its Prime Day event. The Nasdaq 100, which notched a historic first half of a year amid the artificial-intelligence craze, will go through a “special rebalance.” A gauge of big banks pared gains on news about a plan to boost capital requirements.
In the run-up to Wednesday’s consumer price index, the market got the latest thinking from a raft of policymakers. Three Fed officials — Michael Barr, Mary Daly and Loretta Mester — said the central bank will need to raise interest rates further this year to bring inflation back to its 2% goal. Meantime, Fed Bank of Atlanta President Raphael Bostic noted officials can be patient amid evidence of an economic slowdown.
Market momentum has slowed since equities notched a strong first-half rally as concern resurfaced about the impact of the many economic crosscurrents on corporate profits. Morgan Stanley’s Michael Wilson became the latest to warn that earnings forecasts will matter more than usual this time around given elevated equity valuations, higher interest rates and dwindling liquidity.
“Many risks still lie ahead,” said Seema Shah, chief global strategist at Principal Asset Management. “With broad equity valuations having once again become stretched and market breadth extremely narrow, the market is priced for perfection — leaving it vulnerable to earnings disappointments.”
‘Expensive ride’
This is the fifth straight time that analysts are leaning bearish heading into the earnings season, and in each of the four prior periods, the news wasn’t nearly as bad as expected — spurring an average gain of over 6% for the S&P 500, according to Bespoke Investment Group.
“Will this earnings season finally be the quarter that proves analysts correct?,” the firm’s strategists said in a note. “If they stay negative every quarter, eventually they’ll be proven right, but betting against the market heading into earnings season recently proved to be an expensive ride.”
The earnings season kicks off in earnest on Friday, when JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. report their numbers. There’s more pain on the way for the S&P 500 as profit warnings and fears of higher interest rates combine to threaten the key US stock indicator, according to the latest Markets Live Pulse survey.
While earnings seasons have usually been positive for equities in the past decade, according to Deutsche Bank AG strategists, the upcoming one will hurt stocks, said 55% of the 346 MLIV respondents.
To Matt Maley at Miller Tabak + Co., it’s going to be harder for the market to rally if the earnings season is “not as bad as we thought” — especially since the market has become so expensive.
This does not mean that if the guidance from companies is “just OK,” the market will sell off meaningfully, Maley added. However, if corporate outlooks show any material disappointment, “it should create some serious headwinds for the stock market.”
Cutting estimates
The question is whether earnings can continue to bend without markets breaking, according to Saira Malik at Nuveen. With analysts cutting earnings estimates in recent weeks, companies may once again find it easier to deliver stronger-than-expected results.
“We are cautious about the self-fulfilling optimism driven by these diminished expectations,” Malik noted. “Additionally, we’re mindful of mixed US economic data and the potential for two more rate hikes this year.”
In other corporate news, a gauge of US-listed Chinese shares climbed on news the Asian nation will extend policies to support the property market. Icahn Enterprises LP soared as Carl Icahn renegotiated loan terms with a group of banks just months after a report by Hindenburg Research sent shares in his investment firm tanking. Cava Group Inc. rallied as a majority of brokers initiated coverage on the fast-casual restaurant operator with buy-equivalent recommendations.
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.3% to $1.0997
- The British pound rose 0.2% to $1.2863
- The Japanese yen rose 0.6% to 141.30 per dollar
🍝 For the dinner table debate:
Foreign direct investment (FDI) in Latin America grew 55.2% last year, to $254.57 billion, more than half of which went to the services sector, the Economic Commission for Latin America and the Caribbean (ECLAC) said in a report on Monday.
This result is mainly explained by the increase in investment in some countries, particularly in Brazil, together with the growth of all FDI components, especially the reinvestment of profits.
The agency, through its annual report, says that this dynamic is congruent with the post-pandemic recovery and it is unclear whether it will remain at similar levels in 2023.
“The challenge of attracting and retaining foreign direct investment that effectively contributes to the sustainable and inclusive productive development of the region remains more relevant than ever. There are new opportunities in an era of reconfiguration of global value chains and geographic relocation of production in the face of changing globalization,” said José Manuel Salazar-Xirinachs, ECLAC’s Executive Secretary, who presented the main conclusions of the study at a press conference in Santiago, Chile.
Paola Villar S., a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this story.