Goldman Sachs is getting more bullish about stocks, raises S&P 500 forecast to 6,000

Goldman Sachs is looking past some of the near-term volatility in markets and thinks the stars are aligning for stocks through year-end and beyond. The bank raised its 2024 S & P 500 target to 6,000 from 5,600. That’s tied with Evercore ISI for the second-highest estimate on the Street, according to CNBC Pro’s Market Strategy Survey . It also implies upside of 4.3% from Friday’s close. Goldman also raised its 12-month S & P 500 target to 6,300 from 6,000. That points to a gain of 9.5% for the broad market index. The call came as stock futures were opening the week lower with traders eying surging rates and oil prices. But Goldman thinks ultimately earnings growth will lift markets further before the year is out. “Our forward EPS estimates reflect a steady macro outlook,” chief U.S. equity strategist David Kostin wrote, noting he sees 2024 and 2025 S & P 500 earnings growth of 8% and 11%, respectively. “The macro backdrop remains conducive to modest margin expansion, with prices charged outpacing input cost growth.” Kostin also pointed to several earnings boosters going forward, including: a moderation in “idiosyncratic charges” that have weighed on certain companies this year; and a recovery in the semiconductor cycle boosting tech profits. The major averages struggled for most of last week, as investors weighed the size of future rate cuts from the Federal Reserve. After the release of a much stronger-than-expected September jobs report on Friday, traders have removed the possibility of another half percentage point rate cut. They now see an 87% chance of a quarter-point reduction, according to the CME Group’s FedWatch tool. The S & P 500 is in the red for October so far. Third-quarter earnings season begins later this week. Analysts polled by FactSet expect S & P 500 earnings grew for a fifth straight quarter. Overall, they see expansion of 4.2% from the year-earlier period. Elsewhere on Wall Street this morning, Wells Fargo downgraded Amazon to equal weight from overweight. In June 2023, “we saw Amazon on the cusp of significant positive inflections in both key business lines: [Amazon Web Services] and North America Retail. These calls have played out,” analyst Ken Gawrelski wrote. “Amazon is likely still a solid margin expansion story over the long term,” he added. “But as Amazon management has said multiple times, margin expansion won’t be linear. We, and market consensus, likely became a bit exuberant in our extrapolation of margin expansion trends in 2023 and early ’24 to ’25 and beyond forecasts.”