Brazil small-cap fund falls 37% in the week Lula won again

BlackRock's iShares MSCI Brazil Small-Cap ETF, EWZS, fell 37% last week, from $16.74 on Oct. 23 to $10.54 on Oct. 30. Among U.S.-listed funds, leaving out leveraged and inverse funds, that was the worst week.

BlackRock's iShares MSCI Brazil ETF, EWZ, fell 23.8%, to $32.46. Franklin Templeton's Franklin FTSE Brazil ETF, FLBR, fell 24.1%.

All three hold Brazilian stocks. The small-cap fund fell further than the other two.

The shock was Sunday's runoff. President Luiz Inácio Lula da Silva won a fourth term with 51.8% of valid votes to 48.2% for Senator Flávio Bolsonaro, the count from Brazil's Superior Electoral Court, as CNBC reported. Bolsonaro, son of former president Jair Bolsonaro, had led the first round. CNBC said prediction markets still favored him into Sunday.

Monday did the damage. Brazil's main stock index, the Bovespa, fell 13.9%, its sharpest daily drop since the start of COVID-19, CNBC reported. The New York Times reported that trading was halted for 30 minutes after the index fell more than 10% at the open.

The dollar rose 8.2% against Brazil's currency, the real, and finished Monday at 5.40 per dollar. Valor, Brazil's financial paper, reported that was the biggest one-day gain since 1999.

EWZ fell 19.8% that day, to $34.15. EWZS fell 31.6%.

In New York on Monday, Nu Holdings fell 17% and Itaú Unibanco, the Brazilian bank, fell 20.4%. Petrobras, the state oil company, fell 14%, and Vale, the miner, fell 3.2%.

Tuesday was not a recovery. The Bovespa closed down 0.5%, a second straight decline. EWZ rose 0.4%, to $34.30. EWZS closed at $11.49, up from $11.45.

"Yesterday's reaction was much more about the positions the market had adopted in recent days," Finance Minister Dario Durigan told reporters in Brasília on Tuesday, speaking of Monday's selloff, Reuters reported.

Wednesday was a third straight decline for the Bovespa, which fell 2.7%. Jornal Nacional, the nightly newscast on Brazil's TV Globo, said investors were still waiting on public spending, the public debt and the new economic team.

EWZ fell on Wednesday, Thursday and Friday, and closed 4.9% under Monday's price. EWZS closed 7.9% under Monday's price.

Citigroup and Morgan Stanley, which had advised clients to add Brazil before the vote, were telling them to cut back, Bloomberg reported Wednesday.

The loss spread into the regional funds and mostly stopped there. Franklin Templeton's Franklin FTSE Latin America ETF, FLLA, fell 15.9%. BlackRock's iShares Latin America 40 ETF, ILF, fell 14.8%.

BlackRock's iShares MSCI Emerging Markets ETF, EEM, fell 1.6%. BlackRock's iShares MSCI EAFE ETF, EFA, which holds developed markets outside the United States, rose 0.7%.

A chip rally that did not last

State Street SPDR S&P 500 ETF, SPY, fell 0.6% for the week. Invesco QQQ Trust, Series 1, QQQ, the Nasdaq-100 fund, fell 2%. Through Wednesday that fund had been up 3% from the prior Friday.

BlackRock's iShares Russell 2000 ETF, IWM, a fund of small U.S. companies, rose 1.3% for the week, even after a 1.6% drop on Friday.

BlackRock's iShares Semiconductor ETF, SOXX, was up 9.1% from the prior Friday through Wednesday. CNBC tied Monday's chip strength to Anthropic's filing for an initial public offering. On Tuesday it reported that a group of banks and Blackstone had announced $63 billion in financing for Anthropic's purchase of Broadcom technology.

The break on Thursday came from Alphabet, not from the semiconductor fund. The company reported earnings late Wednesday, missing expectations, with negative free cash flow of $9.07 billion, CNBC reported. Its class A shares fell 12.6% on Thursday, and the stock ended the week down by that same amount.

Friday took the rest of the chip gain. The S&P 500 fell 1.8%, to 7,580.07, and the Nasdaq Composite fell 2.9%, the Associated Press reported.

The AP said Intel sank almost 29% after its profit forecast missed analysts' expectations, and that Amazon's results raised further concerns about spending on artificial intelligence. It attributed the selloff to worries that enthusiasm for the technology had pushed prices too high.

SOXX fell 8.2% on Friday and finished the week down 1.4%.

The U.S. Federal Reserve left its target range at 3.75% to 4% on Wednesday. The 10-year Treasury yield ended Friday at 4.94%, down 6 basis points from 5% on Oct. 23.

BlackRock's iShares Core U.S. Aggregate Bond ETF, AGG, rose 0.4%. BlackRock's iShares 20+ Year Treasury Bond ETF, TLT, rose 0.6%. SPDR Gold Shares, GLD, the gold bullion fund, fell 3% for the week and 3.5% on Friday.

Three funds, one token

The week's best funds were three that follow one token.

Hyperliquid is a crypto network with an exchange for perpetual futures, contracts that do not expire. HYPE is its token.

Bitwise Hyperliquid ETF, BHYP, which holds the token, rose 17.7%. 21Shares Hyperliquid ETF, THYP, rose 17.5%. Grayscale Hyperliquid Staking ETF, HYPG, rose 17.5%. The three finished within a quarter of a percentage point of one another.

BHYP was already up 6% from the prior Friday through Wednesday. On Thursday, Intercontinental Exchange, owner of the New York Stock Exchange, said it had a definitive agreement with TradeXYZ to bring that firm's markets to the United States, subject to regulatory approvals. TradeXYZ builds those markets on Hyperliquid.

ICE would operate the U.S. version and intends to build a new regulated market for retail traders, plus a clearing house, the part of a market that guarantees trades. The Block, a crypto news site, reported that the HYPE token rose 15% as the deal was announced. BHYP rose 15.2% that day, and THYP rose 15.3%.

Friday took 3.6% off BHYP and 3.7% off THYP. Most of the week's gain was still in the price at the close.

The gain was not a broad crypto rally. BlackRock's iShares Bitcoin Trust ETF, IBIT, fell 5.7%.

By Friday the semiconductor fund had given back the rally. The Brazil funds had not given back Monday, and the small-cap fund closed under that day's price. That is the loss still in the market going into next week.