A roundup of Friday’s stock market results from across the Americas
🌎 Argentina’s Merval climbs:
The week has been highly volatile for Argentina’s Merval (MERVAL), which is still awaiting the results of the primary elections to be held this Sunday, August 13. Priscila Bruno, analyst at Rava Bursátil, pointed out that the results of the PASO could provide the financial market with a clearer outlook for the last part of the year.
The best performing share in the Merval this week was Pampa Energía (PAMP) with an increase of 14.53%, while the share with the highest accumulated decrease was Edenor (EDN), with a drop of 4.45%.
It should be noted that the only regional stock exchange to close the week with gains is the Argentine Merval, after rising 6.35% in the last five days (according to Bloomberg data).
In contrast, the stock exchange that fell the most this week in Latin America was that of Colombia (COLCAP), after registering a 2.25% drop in the last five days. On Friday, the Colombian COLCAP fell 0.46%, dragged down by the financial (-1.36%) and materials (0.37%) sectors.
The second largest regional stock market to fall during the week was the Mexican stock market, with Mexico’s S&P/BMV IPC index (MEXBOL) dropping 1.39% over the last five days. The Mexican market was also the biggest faller on Friday, after posting a drop of 1.20% at the end of the day.
The Mexbol was dragged down in today’s session by the fall of the communication services (-3.97%), materials (-1.12%) and industrial (-0.95%) sectors. Meanwhile, América Móvil (AMXB), with a decline of 4.36%, and Volaris (VOLARA), with a fall of 4.34%, were the shares with the lowest performance in the session.
The Brazilian Ibovespa (IBOV) was the third index that fell the most during the week in Latin America (-1.21%), followed by the general index of the Lima Stock Exchange (SPBLPGPT) of Peru (-0.79%). The Peruvian stock market fell 0.81%, a day after the Central Reserve Bank maintained for the seventh consecutive session its benchmark interest rate at 7.75%, leaving hints that a rate cut will be forthcoming.
🇺🇸 On Wall Street:
A renewed slide in tech megacaps and mixed economic data left stocks struggling for direction on Friday. Bond yields rose.
In a choppy trading session, the S&P 500 closed at a one-month low with a drop of just 0.1%. The Nasdaq 100 notched its longest weekly losing streak this year, hovering around 15,000. It last finished below that mark in June. Nvidia Corp. — which has more than tripled in 2023 — extended a four-day decline to 10%. The Dow Jones Industrial Average posted a mild gain.
There’s little question stocks have lost a lot of their upside momentum, according to Matt Maley, chief market strategist at Miller Tabak + Co.
“As we move closer to the usually volatile September/October time frame, it does seem like the ‘dippers’ are losing some of their strength,” Maley noted. “This does not mean that the stock market will roll over in a serious manner over the next month or two, but it does raise the odds of a correction in the not-too-distant future.”
Earlier Friday, the S&P 500 traded within a whisker of its 50-day moving average. A breach of that threshold could portend further losses, according to some technical analysts.
Still, with equities pressing moderately toward oversold territory on a short-term basis, the path lower wouldn’t be a straight one, according to Dan Wantrobski at Janney Montgomery Scott.
That means stocks are soon poised to attempt “another oversold rally effort,” he noted.
Equity risk premium
Bill Gross, the one-time bond king, said stock and Treasury bulls are wrong as both markets are “overvalued.”
The former chief investment officer of Pacific Investment Management Co. told Bloomberg Television that the fair value of the 10-year Treasury yield is about 4.5%, compared with the current level of 4.15%.
Early this month, a key market indicator that has been described as possibly the “most important number in finance” sank to its lowest since 2004, worrying investors that it was sending a bearish signal. Yet, history shows that despite the extreme move, the typically ominous sign is instead pointing to more gains.
The plunge in the equity risk premium — which measures the difference between the earnings yield on the S&P 500 and the current rate on 10-year Treasury notes — signals stocks are getting overvalued relative to bonds. But a Bloomberg Intelligence analysis found the gauge is now at a level where returns for the S&P 500 historically averaged in high single digits over a 12-month horizon.
Treasuries are on course for a record year of inflows as investors chasing some of the highest yields in months pile into cash and bonds, according to Bank of America Corp. strategists led by Michael Hartnett.
Cash funds attracted $20.5 billion and investors poured $6.9 billion into bonds in the week through August 9, they wrote in a note, citing data from EPFR Global. US stocks had their first outflow in three weeks at $1.6 billion.
Meantime, Friday’s economic reports did little to alter swap market bets that the Federal Reserve will pause its rate hikes next month. Traders also continued to expect the central bank to signal its battle against inflation isn’t over yet.
Consumer inflation expectations as measured by the University of Michigan unexpectedly fell in early August, despite higher gasoline and grocery costs. Meantime, producer prices grew last month by more than expected, primarily due to increases in certain service categories.
Elsewhere, UK bond yields climbed on data showing the British economy delivered its strongest quarterly growth in more than a year, a surprising show of resilience that will keep pressure on the Bank of England to raise rates further.
Oil posted its longest streak of weekly gains since mid-2022 as multiple reports forecasting increased demand gave a fresh boost to a rally built on increased supply-disruption risks and extended Saudi production cuts.
The Bloomberg Dollar Spot Index rose 0.1%, the euro fell 0.3% to $1.0947, the British pound rose 0.2% to $1.2699 and the Japanese yen fell 0.1% to 144.96 per dollar.
🍝 For the dinner table debate:
The Latin American airline industry is showing itself to be resilient to the crisis generated after the pandemic of higher interest rates and skyrocketing jet fuel prices, but travelers’ pockets continue to be impacted by high ticket prices. Why?
According to the results of a report by the Latin American and Caribbean Air Transport Association (Alta), while last month the average price of jet fuel was 31% below the average for July 2022, compared to the same period in 2021 it was 27% higher. Considering that jet fuel represents about 30% of the airlines’ cost structure, which is 60% in dollars on average, the dynamics of these price increases have a direct impact on the cost of airline tickets, which is aggravated in an inflationary environment.
But despite prices that may remain high, the region has once again led the world ranking in air passenger traffic recovery, according to Alta.
-- Paola Villar S, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report
