Brazil’s Financial Morning Call for Monday, May 18, 2026

S&P −1.2% · Ibovespa Intraday 175K · BRL R$5.05 · Brent $110 · Michigan Sentiment Record Low 48.2 · No Fed Cuts 2026 Priced · Trump: Iran Running Out of Time · Nvidia Earnings This Week · War Day 79

Brent at $110, Michigan at a Record Low, and No Fed Cuts in 2026 — the Macro Backdrop Has Shifted

Three developments on Friday structurally changed the market’s positioning framework. First, Brent crude surged back to $110.47 as investors grew increasingly concerned about the impact of the prolonged Iran conflict on energy prices and inflation, per Trading Economics. The oil rebound from $100 to $110 in a week erases the deal-hope discount that had driven the May 6-8 rally. Second, the University of Michigan Consumer Sentiment index posted a 48.2 preliminary reading, down 3.2% from April’s prior record swoon and off 7.7% from a year ago, per CNBC — the first concrete evidence that the oil shock is destroying consumer confidence. Third, traders fully ruled out any Federal Reserve rate cuts this year, per Trading Economics — a structural repricing that eliminates the primary catalyst for EM carry inflows. JPMorgan economists warned clients they “expect to see increasing signs of demand destruction as energy product consumers adjust to rising prices”.

For Brazil, the no-cuts-in-2026 repricing is consequential. The 14.50% Selic carry trade was built on the assumption that the Fed would cut 2-3 times in 2026, maintaining a ~900bp differential. With the Fed now priced for zero cuts and a 30% chance of hikes by December (per CME FedWatch from earlier this week), the differential narrows if the Copom continues cutting. This creates a dilemma: cut further and risk BRL weakness (already at R$5.05), or pause and risk equity weakness from tighter domestic rates. The Copom’s June 17-18 meeting is 30 days away, and the macro inputs have deteriorated significantly since the ata’s “net dovish” signal.

Market Snapshot AS OF FRI, MAY 15 CLOSE

Ibovespa Touched 175,417 Intraday — the Deepest Point of the 2026 Correction

Friday: O:178,340.52, H:178,340.52, L:175,417.25, C:177,283.83 (−0.61%, −1,082.03), per B3 data. Open = High for the third time in the correction — the persistent bearish session structure. The intraday low at 175,417 marks an 11.7% decline from the ATH and the deepest print since late February. MACD: −1,407.01/−1,421.86/−2,828.87 — the histogram at −2,829 is a new cycle extreme, confirming the bearish momentum is still accelerating. RSI at 40.09, signal at 32.72 — the signal at 32.72 is approaching the 30 oversold threshold for the first time in the correction.

Resistance: 177,284 (Fri close) → 178,366 (Thu close) → 180,342 → 181,864 → 187,197 (Kijun).

Support: 175,417 (Fri intraday low) → 174,984 (next chart level) → 163,172 (200-day SMA).

Copom Watch SELIC 14.50% · NEXT: JUNE 17-18 (30 DAYS)

The June cut is now the central debate. Since the ata’s “net dovish” signal on May 5, every macro input has deteriorated: US CPI 3.8%, PPI 6.0%, 30Y above 5%, Fed cuts priced out for 2026, BRL above R$5.05, Brent back at $110, Focus IPCA at 5.02% (9th rise), and Michigan Sentiment at a record low confirming demand destruction. The Focus survey at 07:25 BRT today determines whether expectations rise for a 10th consecutive week or stabilize. If Focus hits 5.1%+, the June cut probability drops below 30%. If it holds at 5.0-5.02%, the Copom retains room. Terminal Selic estimates: Genial at 13.25% (increasingly outlier), consensus shifting to 14.00-14.25%.

Economic Calendar MONDAY, MAY 18

Latin America Markets FRIDAY CLOSE

Friday was a universal LatAm red day. All five indices fell, with Mexico’s IPC leading losses at −1.78% — its sharpest session since the war’s early weeks. The Ibovespa, MERVAL, IPSA, and COLCAP all declined between 0.58% and 1.44%. The regional breadth is unambiguously bearish with every index’s RSI signal below 45. Colombia’s COLCAP at 36.08 and IPSA Chile at 44.73 are approaching oversold territory. BTC fell below $77K for the first time since late April, per TradingView — the risk-off rotation hit every asset class simultaneously.

Positioning BOTTOM LINE

Frequently Asked Questions

Why did the S&P 500 fall 1.2% on Friday?

The S&P 500 fell 1.24% to 7,408.50 on May 15 as investors took profits in technology stocks after a week of record highs, per Trading Economics and FRED data. Intel fell 5%, AMD and Micron dropped 3-4%, and Nvidia lost 2%. Brent’s surge back to $110 on Trump’s Iran warning, Michigan Consumer Sentiment hitting a record low of 48.2, and the market fully pricing out Fed rate cuts for 2026 added to the selling pressure.

How deep is the Ibovespa’s correction now?

The Ibovespa closed at 177,283.83 on May 15 but hit an intraday low of 175,417.25 — a 23,241-point (11.7%) decline from the 198,658 ATH set on April 14, per B3 data. The MACD histogram at −2,829 is a new cycle extreme. RSI signal at 32.72 is approaching the 30 oversold threshold. The correction has lasted three weeks with no confirmed technical reversal signal.

Are Fed rate cuts still expected in 2026?

No. Traders have fully priced out any Federal Reserve rate cuts for 2026, per Trading Economics, following the CPI at 3.8% (May 12), PPI at 6.0% (May 13), and the 30-year yield breaching 5%. CME FedWatch earlier this week showed a 30% probability of rate hikes by December. This is a structural shift from the start of the war, when markets expected 2-3 cuts. For Brazil, the no-cuts repricing narrows the Selic carry differential and weakens the BRL’s structural support.

When does Nvidia report earnings?

Nvidia reports Q1 FY2027 earnings on Wednesday, May 20, after market close. The company’s market cap reached a record $5.7 trillion on May 14 before pulling back 2% on Friday. Nvidia’s results are the most anticipated corporate event of May, with implications for the AI trade that has powered the S&P above 7,500. The US approval of H200 chip sales to 10 Chinese firms during Trump’s Beijing visit adds a geopolitical dimension to the earnings call.