BlockBeats news: On June 8, fueled by stronger-than-expected non-farm payroll data that heightened expectations for Fed rate hikes this year, the Nasdaq plunged 4.2% on Friday, with the semiconductor sector leading the decline and triggering global market volatility. However, Wall Street institutions such as Morgan Stanley and Citigroup believe this correction represents a healthy adjustment and does not signal the end of the bull market.
Morgan Stanley’s chief U.S. equity strategist, Mike Wilson, said that this sell-off is primarily driven by the semiconductor sector’s prior excessive gains and crowded trades. The Philadelphia Semiconductor Index had risen nearly 96% year-to-date, significantly deviating from its historical average and showing clear signs of overbought conditions. He believes the current correction helps cool market sentiment but will not undermine the fundamentals of the U.S. economy or corporate earnings.
Wilson noted that the U.S. ISM Manufacturing Index rose to 54, reaching its highest level since 2022, and the three-month average non-farm payroll growth stood at 166,000, both indicating continued strong economic resilience. His team maintains its year-end S&P 500 target of 8,000 and recommends investors reduce exposure to crowded momentum trades in favor of sectors such as consumer discretionary, regional banks, and transportation.
Meanwhile, Citigroup raised its S&P 500 target for end-2026 from 7,700 to 8,100 and increased its 2026 earnings per share forecast for S&P 500 constituents from $320 to $350, while providing its first-ever $400 EPS forecast for 2027.
Citibank believes that the AI investment boom and corporate earnings resilience will continue to support U.S. stock market performance, but it warns that AI capital expenditure growth may slow after 2027, potentially exposing markets to valuation adjustment pressures. However, this risk has not yet become the core trading narrative in current markets.