Bloomberg News

Goldman Sachs Cuts S&P Forecast to 1,250 on Europe Concern

September 15, 2011

(Updates with closing prices in fifth paragraph.)

Sept. 15 (Bloomberg) -- Goldman Sachs Group Inc.’s David Kostin slashed his year-end forecast for the Standard & Poor’s 500 Index by 11 percent to 1,250, citing continued uncertainty in the global markets due to Europe’s debt crisis.

Kostin, the equity strategist at the firm, previously predicted the benchmark equity index would climb to 1,400. This was Kostin’s second S&P 500 forecast reduction in the past two months, following his shift from 1,450 on Aug. 5.

“The unstable macro environment is likely to persist for the foreseeable future because Europe currently lacks both the institutional structure and policy tools to solve the festering sovereign debt crisis,” the New York-based strategist wrote in a report dated yesterday. “Investors believe a nontrivial probability exists that the crisis will trigger a global financial dislocation similar to 2008.”

Investors have fled risky assets since July amid concern European officials may fail to contain the region’s debt crisis and the U.S. economy will slip into a recession, sending yields on 10-year Treasuries to a record low and pushing the S&P 500 down as much as 18 percent from its April high. Goldman Sachs is the third Wall Street firm to cut its forecast for stocks this week, following Wells Fargo & Co. and Barclays Plc.

Kostin kept his estimates on earnings by companies in the S&P 500 at $96 a share this year and $102 in 2012. The index rose 1.7 percent to 1,209.11 at 4 p.m. New York time, the fourth straight day of gains amid optimism Europe is working to tame the credit crisis. The European Central Bank said today it will lend dollars to euro-area banks in a series of three-month loans to ensure they have enough of the U.S. currency through the end of the year.

--Editors: Jeff Sutherland, Joanna Ossinger

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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