S&P 500 above 4,400 leaves no room for more gains, says Citigroup

(Bloomberg) — The bullish rally in U.S. stocks is about to run out of steam, according to Citigroup Inc.

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Strategists at the Scott Chronert-led bank this week reiterated their call for the S&P 500 index to fall to 4,000 by the end of the year, and issued a new target of 4,400 by the end of the year. mid-2024, just below Friday’s close of 4,410.

A lack of concrete earnings revisions and a looming U.S. recession will catch up with soaring stock prices, while many key measures of investors’ psyches suggest wariness about the latest S&P 500 breakout, Chronert wrote in notes to customers this week. The Levkovich Index, a sentiment gauge, remains in “panic” territory at -0.18, while his team called the backdrop for equity flows “putrid”.

“Combined, this implies that this move above 4,400 on the S&P 500 is relatively unloved,” he wrote.

Even as stocks have challenged naysayers in recent months, Chronert remains among a chorus of Wall Street Bears unconvinced the rally has legs.

Michael Hartnett of Bank of America Corp. said Friday that a “shiny new bull market” was unlikely to be underway, comparing the current setup to 2000 or 2008. Prominent bearish voices like Morgan Stanley’s Mike Wilson and Co.’s JPMorgan Chase & Marko Kolanvovic. also doubled down on its pessimistic outlook this week.

The S&P 500 fell 0.4% on Friday, its first decline in seven sessions. Still, the benchmark index posted its fifth consecutive weekly gain.

It’s a pivotal moment for Wall Street strategists tasked with predicting where the stock market will go after the bearish consensus outlook heading into 2023 failed to materialize. The common view was that stocks would fall in the first half and recover to end the year with little change from end-2022 levels. Instead, the S&P 500 is up about 15% since the beginning of the year and the Nasdaq 100 by almost 40%.

While big names such as BofA’s Savita Subramanian and RBC’s Lori Calvasina have changed their calls, those who remain adamant about the downturn ahead of them face a big test as the second half of the year begins.

“While acknowledging that we missed the AI ​​euphoria to seize the mega cap growth cohort, the lack of concrete support for the earnings review implies a digestive phase” in the second half, Chronert wrote earlier this year. week. “As appealing as it may be to follow the tape and push our year-end target higher, we just don’t see the fundamental rationale for this yet.”

(Updates with closing levels)

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