A roundup of Thursday’s stock market results from across the Americas
👑 Chile’s IPSA leads in LatAm:
Chile’s IPSA (IPSA) closed with gains Thursday, up 0.73% at closing, boosted by the shares of Enel Américas (ENELAM), Empresa Nacional de Telecomunicaciones (ENTEL) and Inversiones Aguas Metropolitanas (IAM).
Inflation was again accelerated in Chile, with the consumer price index rising 1.1% in March compared to the previous month, and which coincided with analysts’ responses to a Bloomberg survey. Year on year, inflation was 11.1%, down from its August 2022 peak.
📉 A bad day for Brazil:
The only other index to operate on Thursday, Brazil’s Ibovespa (IBOV), closed lower, falling 0.15%, impacted by the financial and energy sectors, among others.
On hursday, President Lula again criticized the current Selic rate of 13.75% per annum and suggested that the inflation target, currently at 3.25%, would have to be changed to be more in line with the country’s reality. The president said he had heard that, in order to reach the 3% inflation target, interest rates should be 20%, something recently mentioned by the president of the central bank, Roberto Campos Neto.
“If the target is wrong, the target is changed. What is not understandable is to imagine that a businessman will borrow money at that interest rate,” said Lula in conversation with journalists this Thursday. The president affirmed that he should address the issue when he returns from his trip to China.
🗽On Wall Street:
Wall Street remained unwilling to commit to significant positioning ahead of Friday’s key jobs report, with stocks eking out gains, bonds trading mixed and the dollar barely budging.
Big tech led a rebound in equities, which also got a respite after Federal Reserve Bank of St. Louis President James Bullard said he doesn’t think tighter credit conditions stemming from the recent banking turmoil will tip the economy into recession. Still, uncertainties on whether the payrolls data will show inflation is cooling or fuel economic worries put many traders on hold.
As investors have aggressively priced in rate cuts this year, a “too hot” payrolls number would undermine those expectations, while a “too cold” report would add to concerns about a hard landing, according to Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter.
“There are two-sided risks to this jobs report for the first time in a long time, and to hold the recent rally, we will need a ‘just right’ number, otherwise we should prepare for more volatility,” Essaye noted.
In the run-up to the jobs data, the S&P 500 halted a two-day drop. The Nasdaq 100 outperformed major benchmarks, with Google’s parent Alphabet Inc. and Microsoft Corp. climbing at least 2.5%. Boeing Co. rose on a Bloomberg News report that the company plans to boost output of its 737 jets in a push for more cash.
Treasury two-year yields, which are more sensitive to imminent Fed moves, topped 3.8%. Benchmark 10-year rates dropped for a seventh consecutive session, trading near 3.3%.
Jobs report
Economists surveyed by Bloomberg forecast employers added nearly a quarter of a million jobs in March while the unemployment rate held at a historically low 3.6%.
The March payrolls print — as well as recent jobless claims and JOLTS data — will likely convince policymakers that rates are close to a sufficiently restrictive level, according to Anna Wong at Bloomberg Economics. BE expects the Fed will deliver another quarter point hike in May, then hold rates there for the rest of the year.
It’s worth noting that Bullard also reiterated Friday that the central bank should keep raising interest rates to fight high inflation.
To Yung-Yu Ma at BMO Wealth Management, there’s probably a bit of a sweet spot where the Fed sees tangible evidence that the economy is cooling — but not too much softness.
“That ‘sweet spot’ is probably around 100,000 to 200,000 jobs created where the market can take some comfort that we’re on a softening trajectory, but one that’s not gaining momentum to the downside,” he noted.
Data Thursday showed applications for US unemployment benefits signaling the labor market still remains relatively strong, even though revisions indicated some emerging signs of softening.
“Jobless claims this morning came in a little higher than expected and that lends credence to the idea that the Fed’s rate hikes are beginning to cool down the labor market and slow down the economy,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. “No one knows what it will take to bring inflation back down to the 2% target, but the odds are much higher that it will cause a recession – and even a significant recession – than most people are currently willing to believe.”
Bloomberg Economics’ recession-probability model, which relies on 13 indicators, sees a 97% chance of recession occurring as soon as July, up from 76% in the previous update - and that’s even before factoring in fallout from the banking crisis and oil-price shock. The 12-month-ahead recession probability remains at 100%.
The International Monetary Fund warned that its outlook for global economic growth over the next five years is the weakest in more than three decades, urging nations to avoid economic fragmentation caused by geopolitical tension and take steps to bolster productivity.
Money market
Investors, shaken by the ongoing turmoil in the banking industry and seeking higher yields, are racing into money-market funds.
About $350 billion flowed into those products in the four weeks ending April 5, according to the Investment Company Institute. That pushed assets to a record $5.25 trillion, topping the $4.8 trillion pandemic peak.
As traders parse economic data for signs of a slowdown, the upcoming earnings season will have added significance. It officially kicks off on April 14 when large US lenders including JPMorgan Chase & Co. and Citigroup Inc. report results.
Analyst consensus expectations are for S&P 500 earnings-per-share to fall 7% in the first quarter from a year earlier, marking the sharpest decline since the third quarter of 2020 and a low point in the profit cycle, Goldman Sachs Group Inc. strategists including Lily Calcagnini and David Kostin wrote in a note.
“If analyst projections are realized, this quarter will represent the trough in S&P 500 earnings growth,” they wrote.
The Bloomberg Dollar Spot Index was little changed, the euro rose 0.2% to $1.0923, the British pound fell 0.2% to $1.2443 and the Japanese yen fell 0.4% to 131.78 per dollar.
🍝 For the dinner table debate:
The International Monetary Fund (IMF) has issued a warning on global economic growth for the next five years, which it predicts will be the weakest in more than 30 years.
The entity advises countries to take measures to avoid economic fragmentation caused by geopolitical tensions and to increase productivity. Managing Director Kristalina Georgieva predicts that the world economy will grow by around 3% over the next five years, impacted by higher interest rates. This is lower than the 3.8% average of the past two decades, and in 2023 global GDP is likely to grow by less than 3%.
The IMF forecasts that around 90% of advanced economies will see a slowdown in growth in 2023 due to the tightening of monetary policies, which will affect demand and economic activity in the US and the Eurozone.
In addition, the IMF warned that geopolitical tensions, such as the conflict between Russia and Ukraine, have exacerbated the global inflation crisis and contributed to hunger around the world.
Leidys Becerra, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.
