Wall Street awaits inflation data as U.S. stocks hold steady, Wells Fargo sets highest S&P 500 target

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9th April 2024 – (New York) U.S. stocks experienced a lacklustre performance on Monday, as investors turned their attention to the upcoming inflation data scheduled for release this week. The outcome of this data could potentially reshape expectations regarding multiple interest-rate cuts in the coming months.

The Dow Jones Industrial Average slipped by 11.24 points, or 0.03 per cent, closing at 38,892.8. Similarly, the S&P 500 edged down 1.95 points, or 0.04 per cent, settling at 5,202.39. On a more positive note, the Nasdaq Composite Index inched up by 5.43 points, or 0.03 per cent, reaching 16,253.95.

Among the primary S&P 500 sectors, six ended the day in negative territory, with energy and health sectors leading the losses at 0.63 percent and 0.38 per cent, respectively. Conversely, real estate and consumer discretionary sectors spearheaded the gainers, rising by 0.82 per cent and 0.75 per cent, respectively.

On Monday, Wells Fargo raised its year-end target for the S&P 500 index to 5,535, marking the highest target set by any Wall Street brokerage.

This upward revision is based on optimism surrounding artificial intelligence and the potential for reduced borrowing costs. The S&P 500 has already achieved a 9 per cent increase this year, largely driven by expectations of interest rate cuts and heightened investor enthusiasm for the AI sector. In a note, Wells Fargo stated, “The bull market, AI’s secular growth story, and index concentration have shifted investors’ attention away from traditional valuation measures and toward longer-term growth and discounting metrics.”

However, among 15 other Wall Street price targets, the consensus predicts that the broad-market index will conclude the year at 5,062, indicating a 2 per cent decline from its current level. Out of these analysts, seven anticipate a downturn in the S&P 500, with price targets ranging from JPMorgan’s 4,200 to Oppenheimer’s 5,500.

Recent data indicating a rebound in manufacturing activity and signs of rising inflation have prompted speculation about an imminent market slowdown, as pointed out by Torsten Slok, the chief economist at Apollo Global Management. Slok emphasised, “This repricing of rates, I think, is very important because it is telling you that we’ve been waiting for this slowdown for so long. Why isn’t everyone expecting this rate slowdown to come in the next several quarters, in particular with the tailwind of the stock market up 10 trillion dollars since the November FOMC meeting? We have a dramatic tailwind to consumption and to capex over the coming quarters that will continue to support inflation to the upside.”