Bank of America raised its year-end S&P 500 target to 7,400 from 7,100.
- BofA strategist Savita Subramanian said stocks are “overdue for a pullback.”
- Subramanian warned that equities are entering a “seasonally weak period.”
- BofA said the S&P 500 has experienced only one 5% pullback this year, below its typical annual average.
The stock market was taking a double hit Monday from growing concerns around the AI trade and another jump in oil prices, while BofA raised its S&P 500 target to 7,400 with a warning that stocks may be “overdue for a pullback.”
In a note to investors cited by TheFly, BofA equity and quantitative strategist Savita Subramanian lifted her year-end S&P 500 target from 7,100 to 7,400. The new target still implies roughly 3% downside from current levels, underscoring the bank’s cautious near-term view despite the higher full-year forecast.
Subramanian said stocks are entering a “seasonally weak period” and due for a correction. She noted that the S&P 500 has experienced only one 5% pullback this year, compared with an average of roughly three per year, according to BofA. It added that a correction of at least 10% typically occurs about once a year, but the last such decline came in spring 2025.
The warning comes as markets prepare for the Federal Reserve’s policy meeting on Wednesday. CME FedWatch data showed a roughly 87% probability of a quarter-point rate hike.
AI Concerns Add Pressure
The market was already under pressure Monday, with Nasdaq-100 futures falling as much as 1.8% in early trading.
The SPDR S&P 500 ETF (SPY) dropped as much as 0.80%, the SPDR Dow Jones Industrial Average ETF (DIA) slipped 0.24%, and the Nasdaq-100 tracking Invesco QQQ Trust (QQQ) moved 1.8% lower. QQQ was among the top trending tickers on Stocktwits, where retail sentiment trended in the ‘extremely bearish’ zone over the past day.
Semiconductor stocks were hit particularly hard. Direxion Daily Semiconductor Bull 3X Shares (SOXL) fell about 14%, marking its second double-digit decline since August 18.
The pressure followed a weekend of renewed debate around the pace of AI development. SpaceX (SPCX) CEO Elon Musk, OpenAI CEO Sam Altman and Anthropic CEO Dario Amodei all raised concerns about aspects of the AI boom. Altman also suggested OpenAI could delay an IPO to focus on safety.
Oil Adds Another Layer of Risk
Oil prices provided another source of pressure Monday, with West Texas Intermediate crude for October delivery up about 2.75% near $103 a barrel. Brent crude for November gained roughly 2.7% to above $107.
The moves pushed United States Oil Fund (USO) about 2% higher, while ProShares Ultra Bloomberg Crude Oil (UCO) gained around 0.7%. SPDR Gold Shares (GLD), meanwhile, fell about 1.5%.
Wall Street Remains Bullish On S&P 500
Despite the near-term risks, Wall Street remains broadly bullish on the S&P 500. Barclays last week raised its year-end target to 7,950 from 7,800, citing a “standout earnings season” and “AI-driven earnings durability,” while noting that higher rates could keep valuations in check.
HSBC raised its target to 8,100 from 7,650, while Fundstrat’s Tom Lee has an 8,000 target.
That leaves BofA’s 7,400 target well below several major Wall Street forecasts, even after Subramanian raised her projection.
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