Merval Drops 1.4% as Telecom Sinks 9%; Labor Reform Passes

Argentine equities retreated on Wednesday as the S&P Merval fell 1.40% to 3,017,641 points, snapping a winning streak measured in hard currency. The session was dominated by a single stock-specific catalyst: Telecom Argentina cratered 9.3% after Bloomberg Línea reported that Mexican billionaire David Martínez, who controls roughly 41% of the company, sold a block of shares reducing his stake by approximately 2.3%. The ADR in New York plunged as much as 10% before partially recovering to close at $11.43, down 8.9%. This is part of The Rio Times’ daily coverage of Argentine markets and Latin American financial news.

Beyond Telecom, the selling was broad but not indiscriminate. Grupo Supervielle lost 3.2% and the financials sector saw widespread softness, with the reform debate adding uncertainty. Yet pockets of strength persisted: Transportadora de Gas del Norte led the index with a 3.2% gain, while IEB Construcciones — the company led by Juan Ignacio Abuchdid — surged 11.5% in the General Panel, the session’s standout performer. The divergence between the Panel Líder and the broader market suggests institutional selling in large-cap names rather than panic liquidation.

The political backdrop dominated the session as the Senate debated Milei’s labor reform — the most ambitious overhaul of Argentina’s workplace laws in five decades. After accepting 28 modifications to secure the necessary votes from allied blocs, the government secured a 42-30 approval in the early hours of Thursday. The bill creates a Fondo de Asistencia Laboral to finance severance payments, reduces the calculation base for indemnifications, modifies overtime rules, and introduces limits on the right to strike. The CGT and other unions staged a massive protest outside Congress that turned violent, with police deploying tear gas, water cannons, and rubber bullets. At least 15 civilians and four police officers were injured, and 32 demonstrators were detained.

The peso continued its remarkable strengthening trajectory. The dollar mayorista fell ARS 6 (−0.4%) to 1,400 — the lowest since November 17, 2025 — with the BCRA capitalizing on robust FX supply to execute its largest daily purchase of 2026 at USD 214 million, absorbing 36.2% of spot market volume. The central bank has now purchased USD 1,907 million across 28 consecutive sessions, representing roughly 19% of the annual reserve accumulation target. Gross reserves rose to USD 45,307 million.

The brecha cambiaria compressed to just 0.7% between the official and blue rates, an extraordinary convergence that reflects two structural flows: corporate and provincial dollar liquidations (entities are required to sell 90% of foreign-sourced financing within six months), and a dovish global backdrop that sustains carry trade appeal. The CCL traded at ARS 1,476.68 (+0.23%), the MEP at ARS 1,431.10, and the dolar blue at ARS 1,435, the latter having shed ARS 60 (−4.1%) since year-end.

Tuesday’s INDEC release confirmed January CPI at 2.9% — the highest since March 2025 and above the 2.4% market consensus from the BCRA’s REM survey. Food and non-alcoholic beverages led at 4.7%, followed by restaurants and hotels at 4.1%. Seasonal prices surged 5.7%, while core inflation decelerated to 2.6% and regulated prices advanced 2.4%. The data marks the eighth consecutive month of rising monthly inflation, complicating the government’s narrative of sustained disinflation. The next key question is whether February’s reading — likely softened by seasonal factors — can break back below 2.5%, as Caputo has guided.

The sovereign bond market diverged constructively from equities. Bonares and Globales traded with majority gains in Buenos Aires, led by the Global 2046 (+1%), Global 2038 (+0.9%), and Bonar 2029 (+0.8%). In New York, however, sovereign debt was “slightly offered,” closing with average declines of 10 centavos, with the exception of the GD30 which gained 5 centavos. Country risk held at 506 basis points — seven consecutive sessions above 500 after briefly falling below that threshold on January 27 for the first time since June 2018.

The Treasury completed a critical domestic debt auction on Wednesday, receiving ARS 11.51 trillion in bids and adjudicating ARS 9.02 trillion — achieving a rollover above 100% on maturing debt. The standout was the S17A6 Lecap, which cut at a TEM of 2.81%, while the longer S31L6 cut at 2.74% and the S30N6 at 2.61%. The successful auction — particularly at rates near 40% TNA — signals continued market confidence in the government’s peso-denominated debt management, even as the elevated CPI reading complicates the path to lower rates.

Oil prices firmed, with Brent crude rising 1.34% to $69.72 and WTI gaining 1.58% to $64.97, driven by US-Iran supply-risk premiums that continue to offset the bearish inventory and demand outlook. Gold surged 1.54% to approximately $5,109 as haven demand persisted, while the DXY edged up 0.15% to 96.82.

Wednesday’s 1.40% decline continues the consolidation pattern that has defined the Merval since its January 28 all-time high of 3,296,502. The index opened at 3,060,606, tested a high of 3,061,609 before sellers pushed price to a session low of 2,984,691 — briefly dipping below the psychological 3-million mark — before closing at 3,017,641. The intraday low tested the zone near the 200-day SMA at approximately 2,415,155, which remains well below current levels, while the orange EMA cluster near 2,845,112 provides the first meaningful dynamic support.

The daily RSI at 53.33/47.39 sits in neutral territory — a significant pullback from the overbought readings above 70 that characterized the late-January highs. The RSI’s descent toward the 50 midline without reaching oversold territory suggests the correction is mature but not yet exhausted. The daily MACD has turned bearish: the histogram is negative at −14,183, with the MACD line (7,649) below the signal line (−6,534), confirming weakening momentum. The negative histogram has been deepening over recent sessions, indicating selling pressure is accelerating rather than abating.

Price is currently testing the upper edge of the Ichimoku cloud on the daily chart. A decisive close below the cloud (approximately 2,845,000–3,000,000) would signal a trend change from the primary bull market that has been in place since late 2023. The 200-day SMA at 2,415,155 represents the ultimate structural support — a level that would only be tested in a scenario of severe macro deterioration.

The USD/ARS pair on the ICE printed a flat session at 1,404.0 (O/H/L/C all at 1,404), but the more liquid mayorista rate fell to 1,400 — a level that has now acted as a floor across multiple sessions. The chart shows the peso’s steady appreciation from the September–October range of 29.600–30.100 (left-hand axis scale), with the pair now pressing against the lower Bollinger Band at 1,403.42 and the ascending 200-day SMA at 1,351.92.

The daily RSI at 43.04/27.97 has entered oversold territory on the smoothed reading (27.97), the most stretched in favor of the peso since the crawling peg era. The MACD is bearish with the histogram at −9.52 and widening, though the signal lines (−4.39/−5.13) are relatively close together, suggesting the downtrend may be approaching a momentum inflection. The Ichimoku cloud overhead (approximately 1,425–1,429) provides the first resistance zone, with the Kijun-sen near 1,425 acting as an intermediate barrier.

The 1,400 level has crystallized as a key psychological support for the mayorista rate. While the BCRA maintains its crawling peg within the band system — with the upper band at ARS 1,581.83, a full 13% above spot — the market is overwhelmingly positioned for further peso appreciation. The structural drivers remain intact: mandatory liquidation of corporate foreign financing, agricultural export proceeds, and the global carry trade. However, the oversold RSI readings suggest a corrective bounce toward 1,420–1,430 is increasingly probable before any further leg lower.

Verdict

Wednesday’s session encapsulated the fundamental duality of the Argentine market in early 2026: a peso that keeps getting stronger and equities that can’t sustain their highs. The BCRA’s USD 214 million purchase — absorbing more than a third of daily spot volume — underscores how aggressively the central bank can accumulate reserves when corporate and provincial dollar liquidations are flowing. With USD 1,907 million banked in just 28 sessions (19% of the annual target), the reserve story is unambiguously positive. But equity investors are questioning whether the peso appreciation is creating its own headwinds: a stronger currency erodes the peso-denominated earnings power of exporters and, in dollar terms, makes Argentine stocks look less cheap than they did a month ago.

The Senate’s approval of the labor reform is a genuine inflection point for the Milei administration’s reform agenda. This is the most sweeping labor legislation Argentina has passed in 50 years, and the 42-30 vote — secured through pragmatic deal-making with governors and modest concessions to the CGT on compulsory union dues — demonstrates the government’s improved legislative capability relative to the bruising battles of 2024. The bill’s passage should be read as moderately positive for medium-term fundamentals: formalization of employment, reduced litigation risk for employers, and a signal to foreign investors that structural reform is achievable. However, the violent protests and the fact that the Diputados vote still lies ahead mean implementation risk remains.

The January CPI at 2.9% is the elephant in the room. The eighth consecutive monthly acceleration in the monthly rate — from a low of 2.2% in June 2025 to nearly 3% now — makes it difficult for the government to credibly claim disinflation is on track. Food inflation at 4.7% is particularly damaging politically, given the sector’s weight in household budgets. The market implications are twofold: first, the BCRA may face pressure to slow its monetary easing cycle; second, the government’s preference for maintaining the crawling peg with an appreciating peso may come under strain if inflation fails to decelerate in the February–March window that Caputo has highlighted as critical.

Technically, the Merval’s flirtation with the sub-3-million zone during Wednesday’s intraday low (2,984,691) is a warning. The RSI at 53/47 is neutral but the MACD histogram at −14,183 continues to deepen, signaling accelerating negative momentum. A sustained break below 3,000,000 would target the EMA cluster near 2,845,000, which coincides with the Ichimoku cloud’s upper boundary. For USD/ARS, the oversold RSI readings on the smoothed line (27.97) are the most extreme of the cycle, yet the structural peso-positive flows show no signs of abating. The base case: equities range-bound between 2,845,000 and 3,060,000 pending a catalyst; the peso continues grinding lower toward 1,380–1,400 on the mayorista rate, with the BCRA happily absorbing the surplus.