Ibovespa Drops as Consumer Stocks Tumble Amid Earnings Concern

The Ibovespa slumped, following the biggest gain in two months, on concern the rally fueled by bets on a government change may have outpaced the outlook for corporate earnings.

The benchmark equity gauge fell 0.6 percent to 52,764.46 at the close of trading in Sao Paulo as retailer Cia. Brasileira de Distribuicao SA tumbled 5 percent after posting its first loss since 2006. More than half of the 35 Ibovespa companies that have reported results for the quarter missed analyst estimates. A gauge for consumer stocks on the MSCI Brazil Index fell the most among 10 industry groups, with for-profit college operator Kroton Educacional SA dropping for the first time in four days.

The Ibovespa earlier jumped as much as 1.7 percent as the Senate opened a session to vote on whether President Dilma Rousseff must step down while she stands trial for allegedly doctoring fiscal accounts. The gauge is the best performer among the world’s biggest equity indexes this year, rallying 39 percent in dollar terms on optimism that a new administration will be better able to contain a ballooning budget deficit and boost growth.

“Now that the impeachment looks more like a done deal, people are starting to realize that the recent optimism pushed some stocks way too far,” said Luis Gustavo Pereira, an analyst at brokerage Guide Investimentos in Sao Paulo.

Verde Asset Management, the investment firm that has Credit Suisse Group AG and money manager Luis Stuhlberger as shareholders, said in a report Tuesday that its flagship Multimercado fund is short Brazilian equities as the optimism fueled by political speculation seems unjustified.

Brazil’s Senate speaker, Renan Calheiros, said that the debate over Rousseff’s removal on Wednesday may last about 10 hours and end by 10 p.m. local time. Polls by the country’s major newspapers show the opposition has about 50 votes, more than the simple majority needed to put the president on trial in the 81-seat chamber.

During Rousseff’s five and a half years as the nation’s leader, Brazil was cut to junk as government spending skyrocketed while the economy plunged into its worst recession in a century. Brazil’s retail sales fell more than analysts expected in March, underscoring the economic challenges Vice President Michel Temer will face if he takes over the nation’s top job.