S&P 500 rebounds to close at 4500 level, as investors shrug off geopolitics and hawkish Fed chatter

• US equities rose on Thursday, as dip-buying helped shield the major indices from negative geopolitical newsflow and further Fed hawkishness.
• The S&P 500 rose 0.4% to close at the 4500 level amid big gains in some large US healthcare names.
• Focus is already turning to next week’s US inflation data and the unofficial start to the Q1 2022 earnings season.

US equities gained across the board on Thursday, with the S&P 500 rebounding from weekly lows in the 4450 area to close bang on the 4500 mark, a gain of 0.4% on the session. The index was propped up by big gains in some of the largest US healthcare names and managed to close back to the north of its 200-Day Moving Average, with traders largely ignoring downbeat news on the geopolitics front.

The US Senate voted to strip Russia of its “most favoured nation” trading status and the UN general assembly voted to kick Russia out of the human rights council, a day after the US, UK and EU toughened sanctions on Russia’s economy. Meanwhile, the Russian Foreign Minister was pessimistic about the state of Russo-Ukrainian peace talks.

Elsewhere, with equities having already seen a substantial dip since the start of the week, dip-buying helped shield the market from further downside as a result of more hawkish Fed chatter. Specifically, Fed’s James Bullard called for rates to hit 3.5% by the year’s end. While the equity market didn’t react to these comments, US yields, particularly at the long end, continues to press higher.

This capped the rebound in the growth/tech stock heavy Nasdaq 100 index, which mustered a more modest 0.2% rebound back above the 14,500 level. The Dow Jones Industrial Average, meanwhile, also rose about 0.2% to back above 34,500. The CBOE S&P 500 Volatility Index or VIX remained not too far above 20.00, its long-run average.

A record strong US weekly initial jobless claims figure of 166K was shrugged off by equities, but does underpin the idea that the US labour market is red hot, which should bolster Fed confidence that the economy can handle aggressive monetary tightening. US inflation data (Consumer and Producer Price Indices) out next week should further bolster the idea that aggressive Fed tightening is very much needed, with MoM inflation rates expected to surge thanks to the outbreak of the Russo-Ukraine war. Another key risk for investors to watch next week will the unofficial start to the Q1 2022 earnings season, which kicks of as the big US banks start reporting.