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Wells Fargo raises S&P 500 target to market high of 5,535 by end of 2024
(Reuters) - Wells Fargo raised its year-end target for the U.S.-based S&P 500 to 5,535 on Monday, leading Wall Street brokerages, citing optimism about artificial intelligence and a potential easing of borrowing costs.
The index has risen a cumulative 9% so far this year, driven by expectations of interest rate cuts and investor fervor over the AI boom.
"The bull market, AI's long-term growth story, and index concentration have shifted investor attention away from traditional valuation metrics to long-term growth and discount metrics," Wells Fargo said in a note.
Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia and Tesla - the so-called "Magnificent Seven" - are among the index's heavyweights that are benefiting from the AI wave.
The Fed stuck to its view of three rate cuts last month, which has supported a broad rebound in US equities, minimizing the pressure from recent hawkish comments from policymakers and strong economic data.
Wells Fargo also raised its earnings per share estimate for the S&P 500 this year to $242 from $235.
"We see some upside for the stock market from now on, but still expect volatility to peak in the first half of 2024," the brokerage said.
"The likelihood of a 'meltdown' in the second half of 2024 seems increasingly likely, partly because of political outcomes supporting more takedowns, and partly because the expected multi-year easing cycle supports risk-taking," Wells Fargo added.
The revised target gives the index nearly 6.4% of upside from Friday's closing price of 5204.34. The brokerage had previously forecast a year-end target of 4625.
Last month, HSBC and BofA Global Research predicted the index would reach 5,400 by the end of 2024, while Oppenheimer predicted 5,500.
(Reported by Siddarth S and Roshan Abraham in Bangalore; edited by Varun H K)