Elon Musk brings money and some oomph to US stock market

SAN FRANCISCO (BLOOMBERG) - The world's richest man was all over the US stock market on Monday (April 4).

By disclosing that he had bought a chunk of Twitter, Mr Elon Musk triggered the biggest rally in the social media platform's shares since its debut in 2013, with nearly every other growth stock tailing on those gains - and to boot, the Nasdaq 100 and the S&P 500 and even the Russell 2000.

"Here is a guy that just put a bunch of money back to work into the market," said Mr Michael O'Rourke, chief market strategist at Jonestrading.

Sentiment was also buoyed by Mr Musk's Tesla, whose shares rose 5.6 per cent after posting record first-quarter deliveries over the weekend that bolstered investor confidence that the company can power through a series of disruptions.

"The headline stories are positive and they are driven by Musk, and I think it has helped the growth space out," Mr O'Rourke said. "It has investors that are licking their wounds feeling a little bit better."

The tech-heavy Nasdaq 100 Stock Index rose 2 per cent, while an exchange-traded fund (ETF) that tracks the social media sector gained more than 5 per cent. Among the big advancers were Facebook parent Meta Platforms with a gain of 4 per cent and Snapchat parent Snap adding 5.2 per cent. Pinterest jumped 10 per cent and Twitter closed 27 per cent higher at US$49.97.

Mr Musk took a 9.2 per cent stake in Twitter to become the platform's biggest shareholder, a week after hinting he might shake up the social media industry. The stake is worth about US$2.89 billion (S$4 billion), based on Friday's market close.

"For a stock that has been significantly underowned, it's a Cinderella story for the bulls that Musk has gotten involved with Twitter," said Mr Dan Ives, managing director and senior equity analyst at WedBush Securities.

"Whether it is Musk or another strategic bidder, this could really rock the social media world. Musk isn't going to just take a 9 per cent passive stake and go home," he said.

Star fund manager Cathie Wood's ARK Innovation ETF underscored the risk-on mentality that was fanned by Mr Musk on Monday. The fund that invests in fast-growing companies like Block and Teladoc Health rose 4.4 per cent.

The moves added up to a strong start for United States stocks in April, the month that has been the best for the S&P 500 in the past 25 years.

Hopes are high that stocks will get a further boost this month even as US companies start to report what damage has been done to profit margins by decades-high inflation. Since 1997, the S&P 500 has averaged a return of 2.5 per cent in April, according to data compiled by Bloomberg.

Still, not everybody shared Monday's enthusiasm. US brokerage firm BTIG pointed out that cyclical shares tied to the US economy's health, including banks and home builders, are struggling against the broader stock market, raising questions about the durability of the latest rally.