MW Third time lucky? Citi changes its S&P target once more after index hits 6,000.

By Jamie Chisholm

A revived AI trade and $1 trillion of buybacks will help lift the stock market

It was by just a fraction, but the S&P 500 closed last week above the 6,000 mark again. Another 2.4% advance and the Wall Street benchmark will be back in record territory.

Unsurprisingly, the stock market's 20.4% surge off the mid-April low has left a succession of analysts executing some swift U-turns. S&P 500 SPX targets for 2025 from early in the year were slashed several weeks ago and are now being pushed up again.

Scott Chronert and the team at Citigroup are the latest to turn more bullish. At one point they had an end-of-2025 S&P 500 target of 6,500. That was cut to 5,800 on concerns trade tensions would damage growth. In a new note published late Friday, they argue for 6,300.

That 5% upside from here recognizes the danger of policy shocks, but assumes the market will continue to accept that the worst of the tariff angst is in the rear view mirror, as trade deals are stuck and some White House actions are curtailed by the courts.

"Trading moves aside, we expect investors will tend to look through shorter term policy noise in aggregate," says the Citi team. "Consensus GDP growth expectations for next year have also bottomed, moving higher in recent weeks as the out-year labor market outlook also improves on the margin."

The less bad economic backdrop allows Citi to raise its full year S&P 500 earnings per share to $261 from the previous $255, though that's below the $270 they were forecasting heading into this year.

And better sentiment amid less perceived risk will allow the S&P 500 to maintain a price-to-earnings multiple of 21, helped by corporations adapting to the uncertain policy environment, Citi reckons.

"Longer term, existing and future...technology enhancements should lessen historic earnings sensitivity to business/economic cycles, thus supporting higher multiples relative to history," says the bank.

Such a valuation will be supported by two factors in particular. First, Citi thinks the AI trade is regaining momentum and that this will be reflected in sturdy aggregate capital expenditure.

"[P]ersistence of capex spending intentions has mostly held thus far this year, despite the policy uncertainty. This provides some comfort to structural fundamental growth expectations," says Citi.

Next are buybacks, which according to Citi have increased on a net basis, and which may come to an aggregate $1 trillion this year. "This aligns with a call we made earlier in the year that equity market volatility around policy concerns and investment spending question marks could translate into an increase in aggregate and net buyback activity," they say.

The Citi team argue that their price target vacillations reflect "the volatility path that has come with Trump administration policy uncertainty," but they believe that analysts, companies and investors alike are becoming more used to this.

"With some experience behind, we are comfortable that fundamental volatility will be less than policy volatility," they say.

"As we turn to the second half, '26 earnings improvement on the other side of '25 policy implications on fundamentals will be a key determinant. We allow for mid single digit 2H [second half 2025] gains from here, implying an ongoing mantra to buy pullbacks more so than chasing rallies," Citi concludes. Their S&P 500 target for mid 2026 is 6,500.

Markets

U.S. stock-index futures (ES00) (YM00) (NQ00) are mixed as benchmark Treasury yields BX:TMUBMUSD10Y dip. The dollar index DXY is lower, while gold (GC00) is trading around $3,321 an ounce.

   Key asset performance                                                Last       5d      1m     YTD      1y 
   S&P 500                                                              6000.36    1.50%   6.02%  2.02%    12.22% 
   Nasdaq Composite                                                     19,529.95  2.18%   8.93%  1.13%    13.99% 
   10-year Treasury                                                     4.482      3.20    0.80   -9.40    1.60 
   Gold                                                                 3338.5     -1.99%  2.98%  26.49%   43.41% 
   Oil                                                                  64.62      2.51%   4.29%  -10.09%  -17.40% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

U.S. economic data due Monday include wholesale inventories for April, released at 10:00 a.m.

Apple $(AAPL)$ begins its World Wide Developers Conference at its Cupertino headquarters.

Tesla shares $(TSLA)$ are lower. Baird analysts cut the EV maker to neutral, citing concerns over robotaxis and Chief Executive Elon Musk's political ties.

Qualcomm $(QCOM)$ is paying $2.4 billion to acquire Britain's Alphawave IP (UK:AWE).

Robinhood Markets shares (HOOD) are down 5% after the trading portal failed to be included in the S&P 500.

The U.S. and China will hold trade talks in London on Monday.

China's May exports to the U.S. fell by the most since 2020. A separate report showed China's consumer prices fell 0.1% over the 12 months to May, the fourth consecutive month of deflation.

The Federal Reserve is now in its blackout period ahead of the two day policy meeting starting on June 17.

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The chart

It is generally the case that the correlation between stocks increases at times of market stress- for example when a negative event is seen impacting the overall economy - and decreases when investors are more relaxed. But it's unusual to see such a divergence between realized correlation and implied correlation, as is the case now.

"This disparity suggests that the market anticipates a significant decline in correlations," says Michael Kramer of Mott Capital management. "However, the actual trend suggests otherwise, as the realized correlation continues to rise, implying correlations are not only elevated, but still strengthening. It suggests there's a high degree of complacency in the market," Kramer says.

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   TSLA    Tesla 
   NVDA    Nvidia 
   GME     GameStop 
   PLTR    Palantir Technologies 
   AAPL    Apple 
   AMZN    Amazon.com 
   TSM     Taiwan Semiconductor Manufacturing 
   RKLB    Rocket Lab 
   AMD     Advanced Micro Devices 
   MLGO    MicroAlgo 

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June 09, 2025 06:39 ET (10:39 GMT)

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