Three's a trend. Citi is the latest to bump S&P 500 target, but it sees opportunistic pullbacks coming.

By Barbara Kollmeyer

Critical information for the U.S. trading day

Like Peter Pan's lost boys, Wall Street banks are falling in line and following each other's higher S&P 500 targets.

Citigroup just rolled out a fresh 5,600 year-end S&P 500 SPX forecast (from 5,100), matching Goldman Sachs' most recent bump, as Evercore also hiked its price target.

Investors are living in "unusual times," says Citigroup in our call of the day, where a team of strategists led by Scott Chronert explain their shift and offer a glimpse into 2025.

Their fesh stock optimism is not about the economy.

Last year, they laid out a 5,700 bull case for 2024, "predicated on a goldilocks scenario of soft-landing implications for earnings along with some valuation improvement predicted on lower interest rates." But those traditional target methods no longer work due to that mega cap growth cohort's "outsize influence," say Chronert and his colleagues in a note.

So the firm has three new requirements to figure out where stocks are headed next: a view on AI-kingmaker Nvidia (NVDA), the rest of the Magnificent Seven stocks and the other 493 companies in the index.

Nvidia, on its own, is responsible for $4.20 of its $22.40 earnings per share growth it expects from the S&P 500 next year.

"Solid earnings visibility" in the intermediate term for the Magnificent Seven "implies that current index multiples can hold," they say.

Also a "persistent beat and raise pattern" - that triggered their first 2024 earnings revision in nearly a year to $250 for the S&P 500 from $245 - should continue, as the remaining 493 stocks in the index are performing in line with Citi's base case.

Read: How Nvidia's new Street-high stock-price target stacks up in the chip sector

And: Nvidia's stock packs 50% more upside, says Wall Street's new biggest bull

Still, the strategists warn that risk factors are growing and investors should be prepared for a 5% to 10% pullback in the second half of the year, which they want to be ready to use "opportunistically."

Among those risks: increasing expectations for free cash flow growth, cross-asset valuations that increasingly favor bonds, and any signs of macro headwinds, plus U.S. election strain.

As for 2025, Chronert and his team see a mixed picture, forecasting an 8% bump in S&P 500 earnings growth, but they also say investors are likely "paying ahead" for future growth and baking lower rate expectations into current valuations. Their base case: 5,700 by mid and 5,800 at end year.

The markets

Stock futures (ES00) (YM00) (NQ00) are mixed, with Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y steady. Gold prices (GC00) are slipping. Remindingly, markets will close on Wednesday for the Juneteenth holiday. Check out MarketWatch's Live blog here for all the latest markets news.

Read: French stocks are pressuring widely held equities indexes. Should you buy the dip?

   Key asset performance                                                Last       5d      1m      YTD     1y 
   S&P 500                                                              5473.23    2.10%   3.11%   14.75%  24.12% 
   Nasdaq Composite                                                     17,857.02  3.87%   6.32%   18.96%  30.44% 
   10-year Treasury                                                     4.298      -10.70  -12.30  41.71   57.53 
   Gold                                                                 2326.7     -0.06%  -4.26%  12.30%  18.06% 
   Oil                                                                  79.45      1.56%   0.29%   11.38%  10.84% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Retail sales for May are due at 8:30 a.m., with expectations for a 0.2% rise. Industrial production is due at 9:15 a.m., then business inventories at 10 a.m.

A bunch of Fed speakers are also ahead -Richmond Pres. Tom Barkin appearing in a podcast interview at 10 a.m., then speeches from Fed Gov. Adriana Kugler and Dallas Pres. Laurie Logan at 1 p.m., St. Louis Pres Alberto Musalem at 1:20 p.m., Chicago Pres. Austan Goolsbee at 2 p.m.

Troubled electric vehicle maker Fisker (FSRN) has filed for bankruptcy protection.

In a 20-minute shareholder meeting, GameStop (GME) execs were asked about the recent $2.14 billion stock sale and overall direction for the retailer/meme stock. Shares are sliding.

U.S. regulators are suing Adobe (ADBE) for making it too hard for customers to cancel subscriptions.

Kansas is suing Pfizer (PFE) over COVID vaccines.

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The chart

Goldman Sachs offers some history when it comes to the potential, or not, for artificial intelligence profits over the long run. In a recent note, analysts talk about Nvidia's 2024 sales forecasts - $120 billion versus $37 billion just a year ago. For those too young to remember, here's their chart that depicts how lofty growth forecasts ended the dot-com boom:

Top tickers

These were the top-searched tickers on MarketWatch at 6 a.m.:

   Ticker  Security name 
   GME     GameStop 
   NVDA    Nvidia 
   TSLA    Tesla 
   TSM     Taiwan Semiconductor Manufacturing 
   AVGO    Broadcom 
   AAPL    Apple 
   AMC     AMC Entertainment 
   PLTR    Palantir Technologies 
   MBIO    Mustang Bio 
   AMD     Advanced Micro Devices 

Random reads

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-Barbara Kollmeyer

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06-18-24 0808ET

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