Bank of America cuts S&P 500 target to lowest on Wall Street, sees worst post-war recession in history

Published Thu, Apr 2 202010:17 AM EDT

Bank of America slashed its S & P 500 forecast to the lowest on Wall Street as the bank now expects the coronavirus pandemic to tip the U.S. economy into the deepest recession in the post-war era. The bank on Thursday cut its year-end target on the S & P 500 to 2,600 from 3,100, which would translate into a nearly 20% loss for the full-year 2020. The new outlook represents the most bearish view on Wall Street, according to the CNBC Market Strategist Survey that rounds up 16 top strategists' forecasts. "Amid the COVID-19 crisis, instead of a V-shaped recovery, we see risks that a lack of a synchronized health care response nationally results in weakened economic activity that drags out into 2H," Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America, said in a note Thursday. The updated outlook reflects the bank's U.S. GDP forecast of a 7.7% drop this year, which would mark the worst post-war recession in history. The firm also expects the S & P 500 earnings per share to tumble 29% this year as the pandemic wreaks havoc on corporate profits. The estimated slowdown is worse than the average recessionary earnings drop of 20%, the bank noted. "Companies will likely throw all ills into 2020 results with an obvious scapegoat, setting a clean slate for 2021," Subramanian said. "Our 2020 EPS outlook incorporates our economists' recession call, oil forecasts, and recessionary earnings in most industries, with cataclysmic losses in travel, restaurants and other industries directly impacted by social distancing." The consensus year-end target for the S & P 500 comes to 2,945 as of Thursday, representing a 9% loss for the year, according to the CNBC Market Strategist Survey. Meanwhile, the Street's S & P 500 earnings growth estimate for the full year has turned negative, according to Refinitiv. After suffering its worst first quarter on record, the S & P 500 is now sitting about 27% below its record high on February 19. The equity benchmark also tumbled into a bear market at the fastest pace ever. Investors continued to search for a market bottom as they digest the pandemic's dire toll on the economy. On Thursday, data showed the number of Americans filing for unemployment benefit totaled more than 6.6 million in the week ended March 28, following nearly 3.3 million filings the week prior. The unprecedented economic uncertainty has forced BMO, Oppenheimer and Canaccord Genuity to suspend their year-end targets on the S & P 500. Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.

A trader working at the New York Stock Exchange in New York, the United States.

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Bank of America slashed its S&P 500 forecast to the lowest on Wall Street as the bank now expects the coronavirus pandemic to tip the U.S. economy into the deepest recession in the post-war era.