Wells Fargo cut its S&P 500 year-end target to 7,700 from 7,950, one of the first major Wall Street firms to lower an index target since early in the U.S.-Iran conflict. The bank stays bullish on earnings but warns valuations look stretched, while Bank of America moved the opposite way and raised its own target this week.
Wells Fargo cut its S&P 500 target to 7,700 from 7,950 on Tuesday, in what may be one of the first downgrades from a major Wall Street firm since early in the U.S.-Iran conflict. The index closed Monday just below 7,620, up 11% on the year.
Strategists led by Ohsung Kwon said the cut comes even as the firm grows more optimistic on earnings, targeting $425 per share for S&P 500 companies next year and $460 in 2028.
Earnings estimates draw scrutiny
That earnings call looks aggressive next to a separate note from Bank of America, which put the top-down consensus for 2027 earnings per share at $392 and the bottom-up estimate at $417. The bottom-up figure sums individual company estimates weighted by market cap.
According to MarketWatch, Wells Fargo argued the market is "entering late innings of the cycle, arguing for multiple compression". The firm said 2027 earnings will be cyclically elevated by 42% versus the trendline for this stage of the economic cycle, the widest gap since the 1950s. It isn't worried about 2027 profits, but it flagged slower AI capital spending as a risk to 2028 earnings.
Tech cut, healthcare raised
By sector, Wells Fargo lowered tech to equal-weight from overweight and raised healthcare to overweight from equal-weight, saying it prefers software over microchips within tech. Tech stocks have climbed 28% this year while healthcare has gained 9%.
The firm pointed to midterm election risk for tech as political pushback against data centers builds. It added that a Democratic sweep would likely help healthcare by opening the door to restoring enhanced Affordable Care Act subsidies.
Other banks move the other way
Bank of America went in the opposite direction earlier this week, raising its year-end target to 7,400 from 7,100 and launching a 12-month target of 7,800 — a level still below Wells Fargo's new call.
Source: MarketWatch
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