Goldman Sachs Lowers Year-End 2011 S&P 500 Forecast to 1,450
Goldman Sachs Group Inc. (GS) lowered its year-end forecast for the Standard & Poor’s 500 Index to 1,450 from 1,500 and reduced its 2012 earnings projection, citing weakening economic estimates.
S&P 500 companies will post combined profit of $104 a share next year, compared with Goldman Sachs’s prior estimate of $106, according to David Kostin, the New York-based equity strategist. He maintained his 2011 earnings forecast for the S&P 500 of $96 a share.
“Our adjustments reflect a combination of developments including recently lowered GDP growth estimates by our economists in the U.S. and Asia and a significant increase in our Brent oil price forecast,” Kostin wrote today in a note to clients.
Goldman Sachs is forecasting U.S. real gross domestic product growth of 2.6 percent in 2011 and 3.2 percent in 2012, while it predicts global expansion will be 4.4 percent and 4.8 percent, respectively. The New York-based bank estimates that the price of Brent crude will reach $120 by the end of this year and $140 in 2012.
The S&P 500 fell 3.2 percent from an almost three-year high on April 29 through yesterday amid concern about Europe’s debt crisis and weaker-than-forecast economic data. Still, the benchmark gauge rose 5 percent since the end of 2010 on government stimulus measures and higher-than-forecast profits.
The U.S. economy grew at a 1.8 percent annual rate in the first quarter, less than forecast, reflecting a smaller gain in consumer spending than previously calculated. The revised rise in GDP was the same as estimated last month and compared with a 3.1 percent gain in the prior quarter, Commerce Department figures showed. The median forecast of economists surveyed by Bloomberg News called for a 2.2 percent increase.
Before today, the average estimate of 13 strategists tracked by Bloomberg called for the S&P 500 to rise 6.5 percent in the last seven months of 2010 to 1,406. Corporate profits in the benchmark index for U.S. equities may reach $104.73 a share in the next 12 months as consumer demand pushes sales up 13 percent, according to data from about 9,000 analysts compiled by Bloomberg. The income estimate rose 2.8 percent in the four weeks ended May 2.
To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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