Wall Street rises as materials and crypto stocks offset continued bond sell-off
Investing.com -- HSBC and investment research firm Yardeni Research raised their year-end S&P 500 price targets, a move primarily driven by stronger-than-expected earnings growth demonstrated in the ongoing first-quarter results season.
HSBC lifted its year-end 2026 S&P 500 target to 7,650 from 7,500, revising its 2026 index earnings per share (EPS) estimates up by 8% to reflect the latest quarterly results. The bank now expects 2026 EPS growth of 20%, or $325, with tech and the Magnificent 7 remaining the primary drivers.
Yardeni was even more bullish, raising its year-end target to 8,250 from 7,700 after consensus earnings expectations had outpaced even its own upbeat forecasts.
"We’ve never seen consensus earnings expectations rise so quickly for the current and coming years as they have in recent months," Yardeni wrote. "The result has been an earnings-led meltup in the stock market."
Yardeni raised its 2026 and 2027 EPS estimates to $330 and $375, respectively, from $310 and $350.
Both firms flagged the narrowness of the current rally as a risk and an opportunity. HSBC noted that most stocks remain below their 52-week highs despite the index hitting records, suggesting room for further gains if market participation broadens.
The bank outlined several scenarios under which the S&P 500 could breach 8,000, including a tech re-rating driven by AI/tech IPOs setting higher valuation benchmarks, a catch-up in laggard sectors as geopolitical tensions ease, broader AI efficiency gains lifting margins across industries, and a return to a "Goldilocks" macro backdrop as long-term rates decline.
“We see each of these potential paths adding between 100–700 pts to the S&P 500,” HSBC strategists Nicole Inui and Alastair Pinder wrote.
Tech’s dominance in the index makes sentiment around the sector one of the biggest swing factors, they said.
“We also see long-term rates as key. While the market has partially decoupled from long-term rate moves, the rate environment may become increasingly important as tech companies look to finance capex,” the strategists added.
Tech and the Magnificent 7 now account for more than half of the S&P 500’s market cap and more than 40% of index earnings, though valuations have de-rated from prior peaks, with the six largest members of the group trading at an 8% discount to their five-year average.
Yardeni raised its subjective probability of a continuation of what it calls the "Roaring 2020s" to 80% from 60%, folding in its previous 20% meltup scenario.
The firm kept its recession and bear market odds at 20%, arguing that "any meltdown will be a buying opportunity and won’t trigger a recession or bear market similar to the 1999-2000 Tech Bubble and Tech Wreck."
