S&P 500 grinds higher into 4360s despite mixed Russo-Ukraine peace talk headlines, as hawkish Fed shrugged off

• US equities have traded in mixed fashion thus far on Thursday, having been buffeted by mixed Russo-Ukraine negotiations headlines.
• The S&P 500 is a tad higher on the day in the 4360s and eyeing a test of 4400.
• With the Fed meeting and US data out of the way, investor focus will switch back to geopolitics and China.

US equities have traded in mixed fashion thus far on Thursday, having been buffeted in recent hours amid conflicting reporting regarding the state of Russo-Ukraine peace talks. The major US indices are currently trading in mixed fashion, with the S&P 500 very slightly in the green in the 4360s after an earlier dip below 4350 was bought into. The Nasdaq 100 index is modestly lower with the 14,000-level capping the price action for now and the Dow is flat just above 34,000. That comes after the three indices posted respective 2.2%, 3.7% and 1.6% rallies on Wednesday as equity investors took the first 25bps rate hike from the Fed in three years and hawkish guidance in their stride.

Analysts said that the positive reaction to the hawkish Fed meeting likely reflects the fact that investors deem such a policy shift from the Fed (to signaling six more 25bps hikes in 2022 and four in 2023) as appropriate given the economic backdrop of hot inflation and a tight labour market. Thursday’s US data in the form of a robust weekly jobless claims report and stronger than expected Philly Fed March survey reinforced these economic themes and thus didn’t impact market sentiment.

With the Fed meeting out of the way and no more important US data releases for the rest of the week, investor focus will switch back onto geopolitics, which suggests markets will remain choppy and headline-driven. Asia markets are also worth watching with indices having seen considerable volatility as a result of initial fears about a widespread Covid-19 outbreak but also optimism related to new pledges for economic support from Chinese officials. So long as news regarding Russo-Ukraine peace talks and the Chinese Covid-19 outbreak doesn’t take a substantial turn for the worse, the S&P 500 probably has a good shot at hitting 4400 again and testing earlier monthly highs around 4415.