HSBC has raised its year-end target for the benchmark S&P 500 index to 7,650 from 7,500 on Monday, citing resilient earnings growth.
U.S. stocks have surged to record highs in recent weeks, driven by strong optimism around AI investments and expectations of robust earnings growth, setting aside concerns that high oil prices related to the Middle East conflict are fueling inflation.
The S&P 500 capped April with its largest monthly percentage gain since November 2020.
The brokerage’s new target implies about 3.4% upside to the index’s Friday close of 7,398.93 points.
HSBC expects 2026 earnings per share growth of about 20% or $325 for the index, with so-called “Magnificent Seven” megacap technology firms continuing to drive a large share of gains.
First-quarter S&P 500 earnings are on track to climb almost 29% year over year, with much of that fueled by Wall Street’s AI-related heavyweights, according to LSEG I/B/E/S.
“While earnings remain supportive, sentiment is on shakier ground,” HSBC strategists said, adding that the recent rally has been relatively narrow in breadth.
Most stocks are still trading below their 52-week highs, suggesting scope for further upside if participation broadens, they said.
The strategists added that the index could surpass 8,000 points if stronger tech valuations - potentially driven by high IPO valuations - coincide with a recovery in lagging sectors, wider AI-led earnings gains across industries, and a favourable economic backdrop.