The Ibovespa led declines among major stock benchmarks in the Americas after Moody’s Investors Service lowered its outlook for Vale SA amid a plunge iron-ore prices.
The miner also extended a two-day slump after Macquarie Group Ltd. reduced its recommendation on the shares. Utility Centrais Eletricas Brasileiras SA sank after being cut from the MSCI Brazil Index. Diagnosticos da America SA posted its longest slide since November on disappointing results.
The stock gauge fell 0.7 percent to 56,372.04 at the close of trading in Sao Paulo. Its valuation rose to a five-year high last week even as analysts forecast Brazil’s economy will shrink the most since 1990. The outlook for Vale’s margins is challenging, Moody’s said in a note Tuesday. Iron ore has tumbled 39 percent over the past 12 months as miners boosted low-cost production amid a Chinese slowdown, spurring a glut.
“We’re still in a scenario of weak commodity prices, and we need to find a clear bottom there before Vale can improve,” Fernando Goes, an analyst at brokerage firm Clear Corretora, said by telephone from Sao Paulo. “In addition, the Ibovespa has reached a level where investors are taking a second look, considering economic prospects.”
Brazilian stocks entered a bull market last month, after rallying more than 20 percent for their January low, on prospects spending cuts and the release of Petroleo Brasileiro SA’s results would prevent a sovereign rating downgrade. Still, the nation is struggling to navigate a slowing economy amid the fastest inflation in more than a decade.
Vale, the largest iron-ore producer, dropped 2.6 percent to 18.03 reais. The shares have slumped 6.2 percent this year, compared with a 13 percent jump in the Ibovespa. The miner was cut to neutral from the equivalent of buy at Macquarie.
The company’s signal that it may reduce some higher-cost output helped spur a rebound of iron ore from a decade-low. While prices surged 33 percent since bottoming at $47.08 a dry ton April 2, they are 67 percent below a 2011 record. Ore with 62 percent content at Qingdao was at $62.58 a dry ton on Wednesday, according to Metal Bulletin Ltd.
Investors also watched first-quarter earnings data. While companies in the Ibovespa have reported an average 41 percent drop in profits, sales grew by 1.3 percent, according to data compiled by Bloomberg.
Dasa, a medical-diagnostics company, retreated 1.7 percent to 9.63 reais in a sixth day of losses. A gauge of profitability tumbled 39 percent to 68.7 million reais ($22.8 million), trailing estimates.
Airline Gol Linhas Aereas Inteligentes SA rose 2.5 percent to 7.91 reais as sales beat forecasts. The stock slumped earlier after Chief Executive Officer Paulo Kakinoff said the second quarter will be challenging.
Eletrobras, as Centrais Eletricas Brasileiras is known, slid 3.9 percent to 9.62 reais.
Trading volume of equities in Sao Paulo was 6.83 billion reais on Wednesday, according to data compiled by Bloomberg. That compares with a daily average of 6.98 billion reais this year, according to the exchange.