Itaú Unibanco shares drop 4% on profit-taking after election rally

Itaú Unibanco Holding closed at $9.74, down 4.04%, as investors took profits following a surge in the stock price tied to the Brazilian presidential election. The decline in the Brazil-focused universal bank came after shares hit a multi-year high in the previous session.

Trading activity remained elevated during the pullback, with volume reaching 40.0 million shares. This figure stood approximately 64% above the company's three-month average of 24.3 million shares. The stock had previously soared to its highest level in more than five years, driven by market optimism surrounding the upcoming runoff election.

The rally was triggered by the first round of voting on Oct. 4, where no candidate secured the necessary 50% majority to win outright. Flávio Bolsonaro, a conservative candidate, outperformed incumbent President Luiz Inácio Lula da Silva in the vote count, a result that caught pollsters off guard. This outcome fueled a rally in Brazilian stocks, particularly within the banking sector, as analysts predicted a jump in recurring net income. Itaú shares briefly exceeded $10 per share for the first time in over five years during that period.

Sentiment across Brazilian diversified banking and financial services peers softened alongside Itaú's decline. Banco Santander closed at $13.66, down 2.50%, while Nu Holdings closed at $15.58, down 0.51%. The broader U.S. market also edged lower, with the S&P 500 closing at 7,801, down 0.23%, and the Nasdaq Composite closing at 27,539, down 0.22%.

Investors are now closely watching the Brazilian runoff election, as final results remain to be determined and could still surprise election watchers. Itaú Unibanco Holding went public in 2002 and has grown 825% since its IPO.