Ibovespa Plunges 2,800 Points in Three Days as Fiscal Storm Hits Brazil

The Ibovespa closed Thursday’s session, May 22, 2025, down 0.44% at 137,272.59 points, breaking the sequence of historical records it had been establishing in recent weeks.

The index had reached the historic mark of 140,109.63 points the previous Monday but now accumulates losses of more than 2,800 points in just three trading sessions. The Brazilian market faced significant pressures from the domestic fiscal scenario.

The federal government announced a contingency of R$ 20.7 billion, added to the blocking of another R$ 10.6 billion in the 2025 Budget, totaling R$ 31.3 billion in cuts – a value above market expectations, which projected between R$ 20 and R$ 30 billion.

Simultaneously, the upward revision of expenses was significant, with an addition of R$ 25.8 billion, mainly in Social Security and Continuous Cash Benefit (BPC).

Finance Minister Fernando Haddad also confirmed the increase in the Tax on Financial Operations (IOF), a measure that generated additional apprehension among investors.

The spot dollar reacted to these pressures, gaining strength in the final stretch of the session and reaching close to R$ 5.70, but ending the day at R$ 5.6610, up 0.33% against the real. The movement followed the external trend, with the DXY rising 0.39% to 99,947 points.

Global Markets: American Fiscal Concerns

American markets showed mixed performance after consecutive days of declines. The S&P 500 closed practically stable with a drop of only 0.04% to 5,842.01 points, while the Dow Jones ended at zero to zero at 41,859 points.

The Nasdaq managed to stay in positive territory, closing up 0.28% at 18,925 points. The approval by the U.S. House of Representatives of President Trump’s comprehensive tax cut bill generated volatility in the markets.

The project, which seeks to fulfill various campaign promises such as not taxing tips, also provides for expanding funding to combat immigration and increasing defense spending.

Significant Fiscal Impact: The proposal will add approximately $3.8 trillion to the federal debt of $36.2 trillion over the next decade, according to the Congressional Budget Office. This perspective, combined with the downgrade of the United States’ credit rating by Moody’s the previous week, intensified concerns about American fiscal sustainability.

U.S. Treasury yields reacted strongly, with the 30-year note yield reaching a peak of 5.161%, its highest level since October 2023, while the 10-year yield briefly surpassed 4.6%.

Federal Reserve Relief

What provided some relief to the markets was the statement by Christopher Waller, FOMC member and potential successor to Jerome Powell as Federal Reserve chairman.

Waller stated that if import tariffs stabilize around 10%, he sees a path for resuming interest rate cuts from the second half, generating optimism among investors.

Biggest Moves of the Day

Top Gainers:

• Raízen (RAIZ4): +12.36% to R$ 2.00 – The company benefited from positive prospects in the fuel and sugar sector
• Assaí (ASAI3): +5.46% to R$ 10.24 – Food retail sector showed resilience
• Azul (AZUL4): +4.90% to R$ 1.07 – Technical recovery after previous declines
• Marcopolo (POMO4): +3.13% to R$ 6.91 – Transportation sector partially recovered
• Magazine Luiza (MGLU3): +2.82% to R$ 9.47 – E-commerce showed relative strength

Top Decliners:

• Bradespar (BRAP4): -3.24% to R$ 16.13 – Pressures in the mining sector
• GPA (PCAR3): -3.23% to R$ 3.00 – Traditional retail under pressure
• Vamos (VAMO3): -3.19% to R$ 4.25 – Equipment rental sector affected
• Brava Energia (BRAV3): -2.47% to R$ 18.14 – Oil under pressure
• Tim (TIMS3): -2.45% to R$ 19.28 – Telecommunications declining

Volume and Technical Indicators

Trading volume reached R$ 28.2 billion, slightly above May’s daily average, indicating active participation from investors despite negative sentiment. The CBOE Brazil ETF Volatility Index rose 1.58% to 27.07, reflecting increased market uncertainty.

Technical Analysis: The Ibovespa broke its 20-day moving average, signaling a potential change in short-term trend. The index now approaches its 50-day moving average around 136,500 points, which could offer technical support.

Commodities and Other Markets

In the commodities market, gold for June delivery fell 0.62% to $3,292.95 per troy ounce, while oil for July declined 1.33% to $60.75 per barrel. American coffee for July plunged 2.51% to $361.00.

Bitcoin reached a new all-time high of $112,030 during the session, benefiting from the search for alternative assets amid global fiscal uncertainties.

Outlook

The Brazilian market faces a challenging environment with domestic fiscal pressures and global uncertainties. The combination of higher-than-expected budget contingency, IOF changes, and concerns about American debt created a cautious scenario among investors.

Waller’s Fed statement offers some relief, but the sustainability of recovery will depend on the evolution of fiscal policies in both Brazil and the United States.

Related coverage: Concrete Jungles: Brazil's Megacities Among World's Most Dysfunctional · North Leads Brazil's 2024 Growth at 4.8% as South Region Follows at 4.2% · Brazil’s Financial Morning Call for May 23, 2025 · Brazil-U.S. Trade Defies Tariff Storm, Hits Record $20 Billion in Q1 2025

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