A handful of Wall Street's biggest firms are slashing their S&P 500 forecasts for the year, predicting lower stock market returns thanks to a difficult quarterly earnings season ahead.
Analysts warn that corporate earnings will be under pressure this week.
There are a lot of reasons to be concerned about upcoming corporate earnings with the stock market down 20% so far this year.
Seven out of 11 S&P 500 sectors are facing reduced earnings estimates, as Wall Street analysts slash forecasts just after the first quarter ends.
The firm reduced its year-end price target for the S&P 500 to 4,150, down from a previous estimate of 4,850.
Evercore ISI lowered its year-end S&P 500 target the same day, to 4,200 from 4,300, as analysts sounded the alarm on corporate margins and earnings being under pressure.
Morgan Stanley chief strategist Mike Wilson is one of the biggest bears on Wall Street and he predicts that the S&P 500 will fall as low as 3000 if a recession hits.
Even some of Wall Street's most optimistic strategists are cutting their S&P forecasts, including John Stoltzfus, who reduced his estimate to 4,800 from 5,330.
Despite the gloomier forecasts recently, most Wall Street firms still predict a market rebound by the end of 2022, with the majority of price targets implying modest upside from the S&P 500. According to the most recent forecasts from Evercore ISI, the benchmark index will be 8% upside from current prices, while the price target from Oppenheimer is 25%. By the end of the year, Morgan Stanley expects the stock market to post a slight gain.
Not all Wall Street firms think the economy will go into a recession. The S&P 500 price target was slashed by analysts from 4,900 to 4,300 but they argued that the economy is not in a recession. Credit Suisse analyst Jonathan Golub said in a note on Tuesday that the most accurate way to describe a recession is with a meltdown in employment and an inability of consumers and businesses to meet their financial obligations. We are currently experiencing a meaningful slowdown in economic growth, but neither of the above conditions are present. With slowing growth and modest gains for the stock market ahead, he sees no recession.
Experts predict that consumer prices for June will surge higher than the 8.6% recorded in May, causing investors to remain nervous.
The S&P 500 lost over 1% as investors braced for the upcoming earnings season.
The stock market fell after the US economy added back 372,000 jobs in June.
There is a risk that high inflation could become entrenched.
The first half of a year has been the worst for stocks.
All Rights Reserved © 2024
