Ibovespa Drops 1.16% as Hot IPCA-15 Stalls Rate-Cut Bets

Friday’s session was an exercise in data-driven capitulation. The IPCA-15 landed at 0.84% — nearly 28 basis points above the Reuters median of 0.57% and above the Bloomberg consensus of 0.56%. It was the sharpest upside miss for February since 2003. Education costs alone added 0.32 pp to the index as back-to-school repricing hit hard, while transport contributed 0.35 pp, led by an 11.64% jump in airfares and rising fuel costs. The 12-month reading climbed to 4.10%, well above the expected 3.82%.

The immediate reaction was felt in the DI curve. Traders began scaling back conviction on a 50 bp Selic cut at the March Copom meeting, though most economists — including XP, Bradesco, and Monte Bravo — argued the surprise was concentrated in volatile and seasonal items rather than structural core pressure. The XP team noted that services inflation showed mixed signals, and its year-end IPCA forecast of 3.8% remains intact.

On the equity side, the selloff was broad. Only nine stocks in the Ibovespa closed positive. Cosan led losses at −4.96% after Fitch downgraded its global credit rating from BB to BB−, citing deteriorating leverage and weak operational efficiency. Natura fell 4.49%, while logistics names Vamos and Rumo shed over 3% each. The energy distribution cluster — Vibra, Raízen’s ecosystem — remained under pressure. Among blue chips, Petrobras dipped marginally (ON −0.05%, PN −0.71%), Vale lost 0.83%, and Santander Unit dropped 2.70%.

The bright spots were few but notable. Bradesco PN gained 0.81%, buoyed by the announcement of BradSaúde — a new R$52 billion health conglomerate consolidating all of the bank’s healthcare assets under Odontoprev’s listed structure. PRIO advanced 1.46% as Brent held above $70 on lingering Iran tensions. Pão de Açúcar (PCAR3) led the board at +5.73% on retail revaluation flows.

In New York, the day was equally punishing. The January PPI came in at +0.5% headline and +0.8% core — both well above the 0.3% consensus. The Dow shed 521 points (−1.05%), the S&P 500 fell 0.43%, and the Nasdaq dropped 0.92%. The VIX surged past 21. Both the S&P 500 and Nasdaq finished February in the red — their worst month since March 2025 — as AI valuation anxiety, tariff confusion after the Supreme Court ruling, and Block’s 4,000-employee layoff weighed on sentiment.

February was a month of two halves. The first three weeks saw relentless record-breaking — the index hit all-time highs on 13 sessions in 2026, with the latest at 191,490 on February 24. Foreign inflows were the engine: R$41.73 billion through February 25, already surpassing all of 2025’s net inflow. International participants accounted for 61% of traded volume, the highest share on record according to Elos Ayta data.

The sector map revealed clear winners and losers. Real estate was the star: MRV surged 26% on short-covering and valuation reopening (trading below 0.9x P/BV), while Direcional added 17%. Telecom delivered with Vivo rising 16% on strong post-paid migration. Axia (formerly Eletrobras) gained 15% after moving to Novo Mercado governance. On the flip side, Raízen collapsed 39% — the worst performer by far — as debt spiraled to R$55.3 billion and the Fitch downgrade contaminated sentiment across the Cosan ecosystem. Cogna lost 23% after a Bradesco BBI downgrade.

The dollar fell 2.16% against the real in February and 0.81% for the week, closing at R$5.1340 — near its lowest since May 2024. In dollar terms, the Ibovespa ended the month at 36,772 points, the highest since mid-2022 but still well below the July 2008 peak near 45,000. The carry trade remains a magnet: with the Selic at 15% and the Fed at 3.50-3.75%, the 1,125 bp spread continues to attract capital.

The daily chart shows the index pulling back from its all-time high of 191,490 (Feb 24) toward the Tenkan-sen at approximately 188,143, which served as the closing zone. The Kijun-sen stands at 179,451, providing deeper trend support. The Ichimoku cloud stretches from roughly 174,487 to 173,734 — well below current price — confirming the medium-term uptrend remains intact despite the short-term correction.

Bollinger Bands show the upper band at approximately 189,215, the middle at 186,616, and the lower at 183,797 on the daily timeframe. The close at 188,787 sits between the mid and upper band, suggesting the pullback has room to extend toward the 20-day mean before finding support. The 200-day SMA at 150,525 is 25.4% below current price, underscoring the strength of the longer-term trend.

Momentum indicators are cooling from overbought territory. The RSI reads 69.46 with a signal line at 62.40 — below the 70 threshold for the first time in several sessions, which reduces immediate overbought risk. The MACD histogram is negative at −474.32 (MACD 5,189.52 vs. signal 4,715.21), signaling fading bullish momentum. This divergence between the negative histogram and still-positive absolute MACD value suggests a consolidation phase rather than a trend reversal.

Copom March 17-18 → The hot IPCA-15 muddies the rate-cut narrative. While a 50 bp cut remains the base case for most houses, the probability has narrowed. Any hawkish tone from Galípolo will amplify the correction.

US PPI & Fed Path → The January PPI surprise (+0.5% headline, +0.8% core) reinforces the “higher for longer” dollar narrative. The 10-year Treasury yield dipped below 4% intraweek but the selloff Friday pushed it back. Fed rate-cut expectations for May collapsed from 65% to under 15%.

Geopolitics → Trump stated he hasn’t decided on Iran but military action “remains on the table.” The early-March diplomatic deadline looms. Brent’s $10/bbl risk premium remains embedded. Any escalation would benefit Petrobras but pressure the broader market through inflation passthrough.

China NPC → The annual Two Sessions parliamentary meeting begins March 5. Stimulus announcements could lift iron ore from the sub-$100 range and provide a tailwind for Vale and mining stocks. Chinese steelmakers face 30%+ production cuts from March 4 for clean air measures.

Termômetro → Despite the late-month pullback, the Broadcast Bolsa poll shows 50% of respondents expect Ibovespa to rise next week (up from 25%), while only 25% expect further decline. UBS cut its US equity allocation to neutral, reinforcing the global rotation trade that has driven R$41.73 billion into Brazil’s market this year.

The inflation surprise is uncomfortable but not structurally alarming. Education and transport — the two groups responsible for 80% of the IPCA-15 print — are seasonal by nature, and the 12-month reading actually declined from 4.50% to 4.10%. XP and Bradesco both maintain year-end inflation forecasts of 3.8%, suggesting the noise is concentrated in volatile items rather than underlying demand-driven pressure.

The three-day selloff looks like a healthy correction within a powerful uptrend. The index retreated 1.42% from its all-time high — barely a blip in the context of a 17.17% bimester gain. Technical indicators are cooling from overbought readings, which is constructive for the next leg. The RSI has dipped below 70, the MACD histogram is unwinding, and the index closed right on the Tenkan-sen — a natural reversion level.

The structural drivers remain firmly in place. Foreign inflows of R$41.73 billion already exceed all of 2025. UBS just cut US equity allocation to neutral, directing capital toward cheaper international markets. Brazil’s carry advantage of 1,125 bp over the US remains among the widest in the world. The question isn’t whether foreign money will keep coming — it’s how fast.

The March Copom meeting is now the key event. A 50 bp cut with dovish guidance would reignite the rally. A smaller cut or hawkish pause would extend the consolidation toward the 186,600 Bollinger midline. Either way, the path of least resistance remains upward so long as the foreign flow pipeline stays open and the Selic-Fed spread continues to attract capital from a rotating world.

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