Merval Drops 7% in Worst Week as INDEC Crisis and Risk Spike Overshadow US-Argentina Deal

Argentina’s financial markets delivered a week of violent contradictions: the most significant bilateral trade deal in the country’s modern history was signed on Wednesday, yet the Merval posted its worst weekly decline in months, country risk breached 500 basis points, and Argentine bank stocks on Wall Street suffered double-digit losses. This is part of The Rio Times’ daily coverage of Argentine markets and Latin American financial news.

The disconnect between the macro narrative — which is arguably the most constructive it has been in decades — and the price action tells a story of a market that has run too far, too fast, and is now repricing risk at the margins.

The sell-off began in earnest on Monday and accelerated through Thursday, driven by three converging forces. First, the INDEC crisis — the resignation of Argentina’s statistics chief after the Milei government froze a planned overhaul of the inflation index — struck at the heart of the credibility narrative that has underpinned the Merval’s 400%+ rally since Milei took office.

For a government whose entire economic program rests on demonstrating that inflation is falling and fiscal discipline is real, any perception of data manipulation is toxic.

The timing was particularly damaging: Argentina is in active negotiations with the IMF over the next tranche of its program, and the Fund has historically demanded statistical independence as a condition of disbursement.

Second, country risk climbed above 520 basis points — a level not seen since the early months of Milei’s presidency — as dollar-denominated sovereign bonds slipped roughly 0.6% on average.

The spike was amplified by the revelation that Argentina purchased $808 million in special drawing rights from the US Treasury to meet upcoming IMF payments — a move that, while technically routine, reminded markets that the country’s external financing needs remain substantial ($19 billion in 2026, $25 billion in 2027 ) even as Economy Minister Caputo ruled out any return to international debt markets.

Third, the global tech rout that hammered the Nasdaq on Tuesday and Wednesday hit Argentine ADRs disproportionately hard. Bank stocks crashed up to 11% on Wall Street, with Grupo Financiero Galicia, Banco Macro, and BBVA Argentina leading the decline as foreign investors de-risked their EM exposure.

The dollar-denominated Merval fell 3.4% on Wednesday alone, a sharper decline than the peso-denominated index — indicating that the selling was driven by international rather than domestic investors.

Against this backdrop, the US-Argentina trade deal signed on February 5 was a genuinely historic achievement that the market largely ignored.

Under the agreement, the US will eliminate over 1,600 reciprocal tariffs on Argentine goods — including agricultural products, lithium, and manufactured goods — while Argentina will cut tariffs on 220+ American products including machinery, medical devices, and motor vehicles.

The deal, which the US Embassy called “a model of how countries in the Americas can work together,” positions Argentina as Trump’s preferred Latin American partner and gives Milei a powerful diplomatic card to play in IMF negotiations. That the Merval sold off on the day of the signing tells you everything about the current risk appetite.

The peso, paradoxically, strengthened 1.05% on the week to 1,431.49 per dollar — moving against the direction of the 2% monthly crawling peg. This is a significant signal: even as equities sold off and country risk spiked, the currency market expressed confidence in the macro framework.

The narrowing of the blue dollar gap, the removal of most capital controls under the IMF program, and the carry-trade appeal of a 29% policy rate in a disinflationary environment have created a floor under the peso that the equity sell-off could not breach.

The Merval’s 7% weekly decline needs to be understood in context: even after this sell-off, the index is up over 400% since Milei’s inauguration in December 2023 and trades at a P/E of 16.32x — reasonable by emerging market standards but rich by Argentine historical norms.

The correction is healthy in the sense that it is repricing the index from “everything goes right” to “most things go right but risks remain.” The INDEC crisis, while optically damaging, is unlikely to derail the broader reform program — Milei’s fiscal surplus is real, inflation has fallen from 25% monthly to under 3%, and the trade deal with the US provides a structural tailwind that no previous Argentine government has enjoyed.

The more concerning signal is the country risk spike above 520 basis points. This metric captures the bond market’s assessment of default probability, and its rise from ~450 to 520 in a single week — despite the trade deal — suggests that fixed-income investors are more worried about Argentina’s $19 billion in 2026 external obligations than equity investors are about the growth story.

Caputo’s decision to rule out new international debt issuance is strategically sound (it avoids diluting existing bondholders ) but operationally risky: if the IMF disbursement is delayed by the INDEC controversy, Argentina will need to find alternative financing for its maturities.

The peso’s strength against the crawling peg is the week’s most underappreciated story. Under the current regime, the BCRA allows the peso to depreciate 2% per month against the dollar — yet the official rate actually fell from 1,446.75 to 1,431.49, a 1.05% appreciation.

This means the market is pricing in a stronger peso than the central bank’s own framework allows, driven by carry-trade inflows (29% policy rate vs. ~4.5% US rates) and growing confidence that the crawling peg will eventually be replaced by a managed float.

The St Andrews Economist noted that the IMF program’s goal is to give Argentina enough external finance to ease pressure on the peso and rebuild reserves — and the peso’s behavior this week suggests that goal is being achieved even before the next disbursement.

S&P Merval Key Levels

USD/ARS Key Levels

Merval technicals: The weekly RSI at 65.53 has pulled back from the overbought zone — a healthy reset that creates room for a resumption of the uptrend if fundamental catalysts emerge.

The daily RSI at 54.09 is neutral, while the 4-hour RSI at 47.42 remains below the midline, confirming that the short-term momentum is still bearish.

The MACD tells a divergent story across timeframes: the weekly histogram at 6,479 is barely positive and fading fast (signal at 239,919 vs. MACD at 233,439), suggesting the weekly trend is losing steam.

The daily MACD has completed a bearish crossover (histogram at -20,353), and the 4-hour MACD is deeply negative (-31,323). Price closed at 2,977,118 — just below the daily Ichimoku cloud top at 3,013,045 — meaning the index needs to reclaim that level to re-enter the bullish cloud structure. The 50-day MA at 2,843,480 is the first major support, with the 200-day MA far below at 2,402,420.

USD/ARS technicals: The daily RSI at 45.92 is below the midline — unusual for a crawling-peg currency that should be structurally depreciating — confirming that the peso is outperforming the central bank’s own framework.

The 4-hour stochastic RSI at 20.41 is deeply oversold (signaling extreme peso strength), a reading that has historically preceded at least temporary corrections back toward the crawling-peg trajectory.

The MACD is bearish across all timeframes: daily histogram at -1.934, 4-hour at -2.799, and the weekly histogram has turned negative at -11.629 — the first negative weekly MACD reading since the crawling peg was established.

The Bollinger Bands on the daily chart have compressed to a historically narrow range (1,422-1,443), indicating that a significant directional move is imminent.

The Ichimoku cloud on the daily (1,431-1,441) is acting as overhead resistance, with price closing right at the cloud base — a pivotal level that will determine whether the peso continues strengthening or reverts to the crawling-peg trajectory.

The coming week will test whether the Merval’s Friday bounce was the beginning of a recovery or a dead-cat bounce before further losses.

Three catalysts dominate: first, the market’s digestion of the US-Argentina trade deal — the agreement was signed during the sell-off and has not yet been priced in by equity investors, meaning any positive implementation details (tariff schedules, sector-specific benefits) could trigger a relief rally.

Second, the INDEC situation — any resolution, whether through the appointment of a credible replacement or a government reversal on the inflation index freeze, would remove the primary overhang on sentiment.

Third, US CPI data on Wednesday, which will reshape Fed rate expectations and the carry-trade calculus that has been supporting the peso.

For the Merval, the 3,013,045 level (daily Ichimoku cloud top) is the line in the sand: reclaim it, and the index re-enters the bullish cloud structure with a path back toward the 3,200,000 all-time high.

Fail to reclaim it, and the next stop is the 50-day MA at 2,843,480 — a level that would represent a 12% correction from the January peak and a more typical pullback in the context of a 400%+ rally.

For USD/ARS, the compressed Bollinger Bands and deeply oversold stochastic RSI argue for a bounce back toward 1,441-1,453 (Ichimoku cloud top to upper Bollinger), but the structural peso-strength trend — driven by carry, capital controls removal, and the trade deal — suggests any dollar rally will be capped.

Verdict

Argentina’s week encapsulates the Milei paradox: the macro story has never been stronger (historic US trade deal, falling inflation, fiscal surplus, capital controls removal), yet the market just posted its worst week in months.

The disconnect is not irrational — it reflects the repricing of a crowded trade (400%+ Merval rally) against rising institutional risks (INDEC crisis, 520 bps country risk, $19B in 2026 external obligations).

The peso’s 1.05% appreciation against the crawling peg is the market’s real verdict: the currency market trusts the framework even as the equity market takes profits.

At 16.32x P/E and with the daily RSI at a neutral 54, the Merval is neither cheap enough to be a screaming buy nor expensive enough to be a clear sell — it is in the uncomfortable middle ground where the next move will be determined by whether the INDEC crisis is a speed bump or a structural crack in the credibility edifice that Milei has spent two years building.