A roundup of Tuesday’s stock market results from across the region
👑 Chile leads in Latin America:
Latin America’s stock markets closed mixed again on Tuesday, with Chile’s Ipsa (IPSA) leading the gains after rising 0.71%, driven by the good performance of the real estate, industrials and utilities sectors.
Shares of SMU SA (SMU), Inversiones Aguas Metropolitanas (IAM) and Quinenco (QUINENC) led the index’s gains and pushed it into positive territory.
Morgan Stanley today turned bullish on Chilean stocks due to the easing of macroeconomic risks thanks to the moderation of the government’s tax and pension changes.
In a note to clients issued Tuesday, analysts gave local stocks a double upgrade to overweight, citing lower interest rates, a shallower recession and diminishing political risks. They raised the year-end target for the benchmark stock index to 6,100 points, up from 5,357 at the last close.
“In summary, Chile is not out of the woods, but we believe macro risks are diminishing in terms of both magnitude and probability,” wrote analysts Lucas Almeida and Juan Ayala.
📉 A bad day for Colombia’s Colcap:
Colombia’s Colcap (COLCAP) saw the sharpest losses on Tuesday, falling 1.55%, dragged down by the non-basic consumer and public services and finance sectors. Shares of Banco de Bogotá (BOGOTA), Corficolombiana (CORFICOL) and Interconexión Eléctrica (ISA) saw the deepest declines.
Colombia’s unemployment rate was 13.7% in January 2023, a drop of 0.9 percentage points compared to the report for the same month in 2022, which was 14.6%. The drop is the second lowest in the last year, according to statistics agency DANE’s data.
As expected by experts consulted by Bloomberg Línea, the unemployment rate started 2023 on the wrong foot and alarm bells will be ringing for the coming months. Although due to seasonal factors the unemployment rate usually rises in January, analysts expected a lower rate for the national total, close to 11%.
🗽On Wall Street:
Stocks dropped during the final stretch of Tuesday’s session and bonds pared earlier losses as investors rounded out a brutal month for both assets with low-conviction moves.
The S&P 500 fell 2.6% in February. The Nasdaq 100 didn’t manage to avert a monthly decline either. A dollar index rose the most this month since September. The benchmark 10-year Treasury yield, meanwhile, climbed more than 40 basis points in February.
The S&P 500 ended Tuesday 0.30% lower, the Nasdaq Composite (CCMPDL) slipped 0.10% and the Dow Jones Industrial Average fell 0.71%.
On Tuesday, Treasuries pared earlier losses that had pushed the 10-year yield toward the closely watched 4% level. Bonds in Europe also fell after hot inflation data caused a reassessment of rate expectations, picking up a theme that has dominated trading in a month that saw the Federal Reserve signal its intention to ratchet rates higher than the market had been anticipating.
Investors in February grappled with realization that inflation isn’t cooling to the extent the Fed would like to see, especially as key indicators the central bank is watching came in hotter than expected. That subdued some of the optimism that had sent stocks soaring in January.
Bond traders now no longer view the odds of a Fed rate cut this year as better-than-even, a shift from what they were expecting just a month ago. Traders are pricing US rates to peak at 5.4% this year, compared with about 5% just a month ago. Market expectations also see the European Central Bank raising rates through February 2024, with a 4% ECB terminal rate fully priced.
“This whipsaw between narratives this year – Fed pause hopes being constructive for high beta assets, recession realities being the opposite – will continue,” Lauren Goodwin, economist and portfolio strategist at New York Life Investments, wrote in a note. “For this reason, and because the hurdle rate for keeping up with inflation is so high, we believe it’s important for investors to stay invested, leveraging resilient themes.”
Traders also, once again, sifted through economic data on Tuesday. US consumer confidence declined in February because of concerns about the outlook for jobs, incomes and business conditions. US home prices, meanwhile, fell for a sixth consecutive month.
“A lot of what the Fed is doing is working,” said Eric Diton, president and managing director of the Wealth Alliance, who noted layoffs at large companies and bankruptcies in small retail firms. “But it’s not a smooth ride. You’ll get blips — January was stronger data across the board and we’ll have to see what February and March look like. But I still think the overall trend is working — inflation is coming down, but it’s going to come down at this slower pace.”
Earnings also continued to trickle in. Rivian Automotive Inc. slumped in late trading as its revenue fell short of estimates. Nextdoor Holdings Inc., meanwhile, posted sales for the quarter that beat analysts’ expectations despite a broader slowdown in the digital-advertising arena. Shares of the company rose in late trading.
The Bloomberg Dollar Spot Index rose 0.1%, the euro fell 0.3% to $1.0576, the British pound fell 0.3% to $1.2027 and the Japanese yen was little changed at 136.20 per dollar.
🍝For the dinner table debate:
Mexican President Andrés Manuel López Obrador (AMLO) confirmed Tuesday that Tesla will build an electric vehicle plant in Monterrey, Nuevo León, on the condition that the company owned by Elon Musk, the world’s richest man, commits to care for the water supply in a state ravaged by drought.
“There is already an understanding. Yes they are going to dedicate the investment to Mexico and the plant is going to be established in Monterrey with a series of commitments to face the problem of water scarcity,” he revealed during his morning conference on February 28.
AMLO did not reveal more information, as Musk will make the official announcement during Tesla’s Investor Day in Texas on March 1, where the governor of Nuevo León, Samuel García, will be present. Details about the plant and investment amounts will also be provided.
The Mexican president said he spoke with Musk on two occasions. The first call took place on the evening of February 24 from Chetumal, Quintana Roo, and the second on the morning of February 27 from Mexico City.
Leidys Becerra, a content producer at Bloomberg Línea, and Isabelle Lee and Emily Graffeo of Bloomberg News, contributed to this report.
