LIVE MARKETS-Wells Fargo ups S&P targets sees growth ahead with industrials in focus

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WELLS FARGO UPS S&P TARGETS, SEES GROWTH AHEAD WITH INDUSTRIALS IN FOCUS

As Wall Street braces for the Federal Reserve's policy decision tomorrow, Wells Fargo Investment Institute (WFII) has redrawn its investment roadmap including an increase to its 2025 and 2026 targets for the S&P 500 .SPX.

In a note released Tuesday morning, WFII upgraded the U.S. industrials sector to 'favorable' from 'neutral', citing improving fundamentals and tailwinds from infrastructure spending and reshoring trends.

The move reflects optimism around manufacturing activity and capital investment, which have shown signs of recovery amid easing supply chain pressures.

The brokerage also turned more bullish on the broader economy and equity markets.

It raised its 2025 U.S. GDP growth forecast to 2.0% from 1.3%, citing "strong labor market dynamics and easing inflationary pressures."

That optimism spilled into its S&P 500 outlook, with the 2025 year-end target range lifted to 6,600–6,800 from 6300-6500 and its 2026 expected range climbing to 7,400–7,600 from 6900-7100.

The S&P 500 and the Nasdaq marked record closing highs on Monday, helped by robust gains in Tesla TSLA.O and Alphabet GOOGL.O, with the latter zooming past $3 trillion in market valuation for the first time.

Conversely, the healthcare sector was downgraded to 'unfavorable' from 'neutral', with WFII pointing to regulatory headwinds and margin pressures. The brokerage noted that while healthcare remains a defensive play, valuation concerns and policy uncertainty have weighed on its near-term prospects.

The report also highlighted recent CPI data, which showed signs of moderating inflation. While core inflation remains sticky, energy and goods prices have eased, supporting real wage growth and consumer confidence. WFII noted that the Federal Reserve's policy stance remains data-dependent, but the current trajectory suggests a soft landing is increasingly plausible.

Employment indicators remain robust, with job growth steady and unemployment near historic lows. WFII emphasized that labor market strength is a key pillar of its upgraded economic outlook.

Markets are anticipating a total of about 68 basis points in monetary policy easing by end-2025, according to data compiled by LSEG.

(Rashika Singh)

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