S&P 500 advances despite geopolitical woes as big US banks turn more bullish

• US equities shrugged off geopolitical concerns and advanced on Monday amid outperformance in large-cap tech stocks.
• Recent Russo-Ukraine war developments raise the risk of an EU embargo on Russian energy imports and peace talk breakdown.
• But major US banks have been becoming more bullish on the equity market’s outlook.

US equity markets rose on Monday despite a resoundingly negative tone to the geopolitical newsflow and further hawkish commentary from Fed officials over the weekend. The S&P 500 was last up roughly 30 points to just over 0.6% and trading in the 4575 area, led by gains in large-cap tech stocks. That has helped the Nasdaq 100 to outperform healthily, with the tech-heavy index last up over 1.6%, versus more modest gains for the Dow of just 0.2%.

As Russian forces pull back from parts of northern Ukraine, a mountain of evidence of war crimes against the civilian population has emerged and, as a result, the pressure on Western leaders to further toughen sanctions against Russia has ramped up. Talk of an EU-wide embargo on Russian oil imports has re-emerged and, with it, downside risks to the Eurozone economy. Meanwhile, mounting evidence of Russian war crimes casts a dark shadow over peace negotiations.

But, as noted, equities are becoming increasingly resilient, not least as a chorus of big US banks adopt a more bullish outlook for the asset class. The equity market’s “risk-reward is not as poor as it is currently fashionable to believe,” noted JP Morgan on Monday. “The Fed repricing might be closer to the end, and headline inflation will mechanically peak soon… The start of Fed tightening should not be seen as a negative for stocks”.

In terms of individual movers, the biggest story was micro-blogging social media site Twitter’s historic near-30% on-the-day gain on the news that eccentric Tesla CEO Elon Musk had taken out a 9.2% stake in the company. TWTR shares jumped above $50 on Monday after closing below $40 last Friday on speculation that Musk’s stake, which was acquired in mid-March but only disclosed on Monday, was just the first step towards a total takeover of the company.

The Tesla CEO has been critical of Twitter for failing to adhere to free speech principles in recent weeks and the speculation is that Musk might want to takeover the company change how it regulates discource on the platform. Of course, Monday’s price action means musk is now sitting on healthy profit on his 9.2% stake, but the biggest boon to his net worth came in the form of a more than 5.5% surge in the value of Tesla’s share price after the company reported record deliveries in the quarter just gone.