Economists at the US banking giant Wells Fargo are suddenly hiking their year-end S&P 500 target.

Wells Fargo is now forecasting the S&P 500 will close out the year at 7,950, up from its previous prediction of 7,300, a nearly 9% increase, reports Reuters.

The bank’s economists site three main factors for the index hike forecast: stronger corporate earnings, the U.S.-Iran interim deal easing macroeconomic risks and a recent market pullback.

Wells Fargo says the recent sell-off in the market has cooled investor sentiment, setting the stage for further upside.

“Sentiment has reset, providing room for upside in the AI trade. Hyperscalers’ race to raise capital is also a big tailwind for semis and infra.”

In a note to investors, the brokerage increased this year’s prediction for the S&P 500 earnings per share (eps) to $340 from $315, a nearly 8% increase. Wells Fargo also raised its eps in 2027 to $390 from $365.

The economists say the significant risk in the market outlook is the general increase in the prices of goods and services.

Says Wells Fargo,

“We continue to see inflation as the biggest risk to stocks, but only if the Fed were to react. A potential ‘run it hot, inflate out’ policy is bullish, and we expect stocks will be the best inflation hedge in that backdrop.”

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A Bank of America strategist is sounding the alarm about the stock market, warning that equities are flashing signals that have often foreshadowed a 20% correction.

In an investor note, BofA’s head of US equity and quantitative strategy, Savita Subramanian, urges investors to “take profits,” warning that she’s seeing “too many red flags” in the market, reports Axios.

“Our bear market signposts — the triggers that typically precede an S&P 500 peak — suggest additional caution may be warranted. Today, 70% of our signposts are triggered, in line with the average observed in prior market peaks.”

Subramanian says the signposts are market condition gauges, including the investor assumption that companies will continue to generate profits at a strong pace in the coming years, as well as relaxed credit conditions. She also highlights that she’s seeing very high dispersion in the performance of stocks with high and low price-to-equity ratios, meaning high-valuation stocks are being rewarded, while low-valuation stocks are being left behind.

“Dispersion has been most pronounced within Tech, where the spread between the best/worst-performing quintiles’ median stock is a whopping +120 [percentage points], the highest since Feb. 2000, which reached +130 [percentage points] ahead of the market peak of March 24, 2000.”

Meanwhile, Morgan Stanley CIO Mike Wilson says he doesn’t believe that the stock market will enter bear territory. He says, “In our view, a correction was inevitable and ultimately healthy if this bull market is going to extend into year-end, which remains our baseline.”

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Bitcoin rose above $62,000 after the latest US inflation report gave traders enough relief to step back from a deeper test of the $60,000 level.

The move followed several days of pressure across crypto markets, where investors had been preparing for the possibility that a hotter inflation print would revive rate-hike concerns and push risk assets lower.

However, the report gave Bitcoin room to rebound, shifting the immediate question from whether the market would break down to whether the post-CPI bounce can hold.

Inflation lands close enough to expectations

The US consumer price index rose 4.2% in May from a year earlier, matching consensus expectations and marking its fastest pace in three years. Core CPI, which excludes food and energy, rose 2.9%, slightly above April’s 2.8% reading.

Ole Hansen, head of commodity strategy at Saxo Bank, said the report came in broadly in line with expectations and the figures supported the market’s focus on persistent inflation risks tied to higher energy prices and the prospect of higher-for-longer interest rates.

That distinction shaped BTC’s market reaction. Investors had been watching to see whether the jump in prices was mostly the result of higher gasoline costs and Middle East tensions or evidence that inflation was becoming more entrenched across services, rents, and supply chains.

A broader acceleration would have been harder for traders to dismiss. It would have strengthened the argument that the Fed may need to keep policy restrictive for longer or consider another rate increase if inflation expectations begin to move higher.

While the report did not give markets a clean all-clear, it also did not deliver the kind of shock that would have made a break below $60,000 more likely.

Bitcoin rebounds from a fragile setup

Bitcoin’s reaction was sharper because the asset entered the CPI release from a weakened position.

The largest cryptocurrency had been under pressure for weeks, with research firm 10x Research noting that Bitcoin was down $21,000 over 30 days. The slide had left traders focused on whether the $60,000 area would hold as support or become the next level to fail.

That weakness reflected a mix of macro and crypto-specific pressures.

Spot Bitcoin exchange-traded funds had seen demand cool after helping support earlier gains. Rising yields also made non-yielding assets less attractive, while investors reduced exposure to volatile trades ahead of the inflation report.

At the same time, market leverage had also been cut down. CryptoSlate previously reported that a severe liquidation wave recently wiped out more than $10 billion in bullish long positions across the market. That forced selling reduced the speculative depth that had helped absorb earlier declines.

The options market also showed caution before the CPI release. BIT Official said put options were commanding a significant implied volatility premium over calls, a sign that traders were paying more to protect against further downside.

That defensive setup helped fuel the rebound once the report failed to produce a major upside surprise. Traders who had prepared for a deeper selloff had less reason to keep pressing the downside after Bitcoin defended $60,000.

Still, the move above $62,000 does not by itself mark a full trend reversal. Bitcoin remains below levels reached earlier in the month, and the market’s recovery depends on whether buyers return beyond a short-term relief trade.

The Fed risk remains in place

The CPI report gave crypto markets room to breathe, but it did not settle the interest-rate debate.

Headline inflation at 4.2% remains more than double the Fed’s target. Even if much of the increase came from energy, policymakers may be cautious about easing policy while price growth remains elevated.

That leaves investors focused on the composition of future inflation data. If oil prices retreat and core inflation remains contained, markets may continue treating May’s increase as a temporary supply shock. If higher energy costs feed into services, wages, or retail prices, rate-hike expectations could return quickly.

The fixed-income market had already been preparing for that risk before the CPI report. US Treasury yields had moved higher as traders reassessed whether the Fed could cut rates at all in the near term.

That backdrop remains important for Bitcoin because the asset has increasingly traded as part of the wider risk complex. When yields rise and liquidity tightens, crypto tends to struggle. When rate pressure eases, Bitcoin can rebound quickly.

The post-CPI spike above $62,000 fits that pattern because the report simply reduced the immediate risk that inflation would force traders into a more hawkish view.

The next test moves toward $64,000

Bitcoin’s immediate task is to show that the move above $62,000 can extend beyond a CPI relief bounce.

Before the report, analysts had pointed to oversold technical conditions as a reason Bitcoin could recover if inflation came in softer than feared. The rebound suggests that some traders were positioned too defensively going into the release.

The next level to watch is near $64,000, where previous resistance could test whether buyers are willing to chase the move higher. A push toward that area would suggest the market is rebuilding confidence after defending $60,000.

A failure to hold the post-CPI gains would send a different message. It would show that the rally was mainly a reaction to a less-bad inflation report rather than evidence of renewed demand.

For a more durable recovery, Bitcoin will likely need support from several areas at once. ETF flows would need to stabilize, options positioning would need to become less defensive, and broader risk appetite across equities and credit would need to improve.

The CPI report gave Bitcoin one immediate win. It kept the $60,000 level intact and forced traders to reassess the downside risk that had built before the release.

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