Chile’s Stock Market Hits New High; NYSE Closes Mixed

A roundup of Friday’s stock market results from across the Americas

🌎 Only Chile’s stock market closes higher:

In Latin America, equities closed an important week of gains, despite the decline of most indexes on Friday. Only Chile’s selective index of the Santiago Stock Exchange (IPSA) was spared from today’s setback, posting gains of 1.13% and closing at a new historic high of 6,130.68 points.

The gains in the Chilean stock market are maintained as there is optimism for the projected lower interest rates in the Andean country, in the midst of an economy that continues to decelerate and inflation that is receding. Now, the U.S. inflation data adds to the optimism for traders and investors in the Chilean market.

According to Bloomberg, this Friday’s gains in the Ipsa were driven by the non-basic consumption (2.50%), basic consumption (1.88%) and technology (1.85%) sectors. The shares that gained the most during the day were those of the SMU SA (SMU) consortium, which rose 3.40%; Compañía Sudamericana de Vapores (VAPORES), with an increase of 3.07%; and Inversiones Aguas Metropolitana (IAM), with an increase of 2.60% at the end of the session.

Chile’s IPSA is one of the week’s best performers, with gains of 3.17%. It is in second place on the list, surpassed by the performance of Argentina’s Merval (MERVAL), which has risen by 4.66% in the last five days.

However, the Merval fell sharply this Friday: it was the index that fell the most in Latin America at the close of the day, with a variation of -1.74%. Ayelen Romero, account executive at Rava Bursátil, pointed out that volatility remains in the Argentine market as long as there is no major news regarding the negotiations on the agreement between Argentina and the IMF.

Notwithstanding the day’s fall, Romero commented that the equities in the Merval were boosted this week by the shares of Cablevision (CVH), Sociedad Comercial del Plata (COME) and Banco Macro (BMA) with increases between 18% and 10%.

As for the other indices, Colombia’s Colcap (COLCAP) rose by 2.74% this week; and Peru’s Lima Stock Exchange (SPBLPGPT) posted gains of 1.06% in the last five days.

Meanwhile, Latin American currencies - for the most part - continue to shine against the dollar. The U.S. currency is trading at its lowest level in the last 14 months, which is boosting the currencies of emerging countries and especially those of the region.

Friday saw gains on the exchange market, and during the week the best performing currency was the Peruvian sol (USDPEN), with an appreciation of 2.38% against the dollar. In second and third place were the Mexican peso (MXN) (up 2.35%) and the Colombian peso (COP), which climbed 2.05%.

Este viernes hubo una mayoría de ganancias en el mercado cambiario, y en la semana la divisa de mejor desempeño fue el sol peruano, (USDPEN) registrando una apreciación de 2,38% frente al dólar. En segundo y tercer lugar se posicionaron el peso mexicano (MXN) (2,35%) y peso colombiano (COP) (2,05%).

🗽On Wall Street:

Wall Street got an extra dose of encouragement to bid up stocks after another inflation report reinforced bets the Federal Reserve is approaching an interest-rate peak.

All of a sudden, disinflation becomes the buzzword across trading desks, with investors looking on the bright side of data showing a slowdown in prices — even though core inflation is still running above the central bank’s 2% target. Equities gained further traction on news that Fed Bank of St. Louis President James Bullard — who called for aggressive hikes — has resigned.

Tech megacaps led gains on Thursday, with the S&P 500 topping 4,500 and the Nasdaq 100 up over 1.5%. Amazon.com Inc. hit a 10-month high after reporting record sales during its Prime Day sale. Google’s parent Alphabet Inc. rallied about 4.5%. Banks also gained ahead of results from JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. Two-year yields fell 11 basis points to 4.64%. The dollar dropped for a fifth straight day.

The producer price index for final demand rose 0.1% in June from a year earlier, the smallest advance since 2020. The figures came just a day after data showed consumer prices increased at the slowest pace since 2021.

“The disinflation narrative is in full effect,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “It does appear that inflation is coming down across the board, and although the Fed is still likely to raise rates again at the end of this month, there is a very strong possibility that they are done raising rates for the year.

The recent economic figures have sent clear signals that the Fed’s policy is working, but it’s possibly too early to claim victory against inflation, according to Fiona Cincotta, senior market analyst at City Index.

“If I had to choose a camp, I would probably go in the two rate hikes to come – July and possibly another one later in the year,” Cincotta added. “And I think that there will be a growing number of Fed officials who will be questioning whether more rate hikes are actually needed after July.”

Fed Bank of San Francisco President Mary Daly told CNBC Thursday that it’s too soon for policymakers to say they have done enough to return US inflation to their target. While the latest consumer-price report “is very positive,” the official said she’s in a “wait-and-see mode on that, because I remain resolute to bring inflation down to 2%.”

Aside from the economic debate, traders also awaited the unofficial start of the second-quarter earnings season Friday.

The focus is going to be mostly on the corporate outlooks given that beating profit expectations seems to be a low hurdle — even as some estimates have started to rise slowly.

Goldman Sachs Group Inc. strategists expect US companies to be able to meet the low bar set by consensus. And Bloomberg Intelligence strategist Gina Martin Adams says “the S&P 500 earnings season will likely reveal more of the ‘less bad than feared’ trend that emerged in 1Q.”

“The thing I’m focusing on in the market, of course, is earnings, to see where the numbers come in, to try to get a gauge on how companies are doing, and really what they’re forecasting going forward,” said Chris Gaffney, president of world markets at TIAA Bank.

In other corporate news, Delta Air Lines Inc. said it will make more money this quarter than Wall Street anticipated as it reported better-than-predicted results for the prior three months. PepsiCo Inc. raised its sales and earnings estimates once again after a strong quarter. Exxon Mobil Corp. agreed to buy Denbury Inc. for $4.9 billion, its biggest acquisition in six years.

• The Bloomberg Dollar Spot Index fell 0.7%
• The euro rose 0.9% to $1.1226
• The British pound rose 1.1% to $1.3133
• The Japanese yen rose 0.3% to 138.02 per dollar

🍝 For the dinner table debate:

What is happening with the Latin American labor market? The latest labor market report published by the Economic Commission for Latin America and the Caribbean (ECLAC) and the International Labor Organization (ILO) shows that although labor participation and unemployment rates returned last year to pre-pandemic levels, returning to 2019 figures, the recovery has not been homogeneous and leaves a number of challenges for the region’s economies, which largely face low wages and high informality.

According to the report, for example, structural gender gaps persist, and there is still a drop in average labor productivity in 2022, with a contraction in sectors such as industry, construction and commerce.

The contrasts can be seen in different areas. For example, last year the average unemployment rate in the economies of Latin America and the Caribbean fell 2.3%, from 9.3% in 2021 to 7.0% in 2022, a figure that is lower recorded since 2016, when it reached 7.8%. However, informal employment remains high.

Paola Villar S, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.