Piper Jaffray has led the bullish charge on Wall Street for several years when it comes to stocks. But now that the S&P 500 index has slid 10 percent from its record high, Piper analysts are having second thoughts.
They have trimmed their year-end forecast for the S&P 500 to 2,135 from 2,350 previously, CNBC reports. The former figure still represents an 11 percent increase from Monday morning's level 1,924, so perhaps Piper will cut its target further.
"We no longer believe the odds are in our favor for the S&P 500 to reach 2,350 by year-end, since history shows that recoveries from pullbacks/corrections have generally taken about two to four months to materialize," Craig Johnson, a technical market strategist at Piper,
wrote in a commentary obtained by CNBC before the market opened Monday.
He sees important support levels for the S&P 500 at 1,905 and 1,820. A drop below the latter level "would alter the longer-term uptrend of the broader market," Johnson said. The index hit a low of 1,867 Monday morning.
The market has inspired little confidence Monday, with the S&P 500 plunging as much as 5.3 percent before rebounding to trade down 2.5 percent for the day. Energy and commodity-related companies have particularly hit the skids.
The trailing price-earnings ratio for the S&P 500 dropped to 16.76, the lowest level since an almost-10 percent correction for the index back in September-October pullback. At that point the P-E ratio hit 16.50, its lowest level since January 2014.
"GDP growth in the U.S. and eurozone economies just isn’t strong enough to prevent a global disinflationary shock from accumulating," Thomas Thygesen, SEB’s head of cross-asset strategy,
told Bloomberg.
“People have realized there could be further weakness in the Chinese currency. They don’t seem in control of the situation and we could see feedback loops that haunt the U.S.”
The U.S. economy grew a mediocre 2.3 percent in the second quarter, and the eurozone expanded only 1.3 percent. The Atlanta Federal Reserve's forecasting model puts U.S. growth at just 1.3 percent for the third quarter.
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