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Analysts remain 'unusually bullish' about S&P 500 stocks despite downturn: FactSet

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Recession calls are permeating Wall Street, Corporate America is laying off workers to prepare, and the S&P 500 is in a bear market.

Despite this downbeat outlook, analysts remain the most confident about the companies they cover in more than a decade.

According to data from FactSet, stocks in the S&P 500 continue to have an "unusually high" percentage of Buy or equivalent ratings, exceeding most periods since 2011 even amid current macro headwinds.

The percentage of companies with a Buy ratings from analysts represents 56.9% the 10,708 ratings on stocks in the S&P 500, as of June 17. Only 5.4% have a sell rating.

This bullishness towards individuals companies persists as the S&P 500 index tipped into a bear market earlier this month.

The number of Buy ratings has slightly retreated from its February peak of 57.4%, but still comprises a historically high share of analyst ratings.

Barring a wholesale shift in analyst sentiment, June will mark the 15th straight month in which the percentage of Buy ratings on S&P 500 stocks finishes above 56%. Before the recent surge in analyst ratings that began in 2021, the month-end percentage of Buy ratings hadn't topped 55% since September 2011.

The 5-year average month-end percentage of Buy ratings for S&P 500 companies is 53.3%.

At the sector level, Information Technology (XLK), Energy (XLE), and Communication Services (XLC) stocks comprise the highest share of Buy ratings at 65%, 64%, and 61%, respectively. Meanwhile, analysts appear least optimistic about Consumer Staples (XLP), which has the lowest percentage of Buy ratings at 39%.

Alphabet (GOOGL), Microsoft (MSFT), and S&P Global (SPGI) were among the companies viewed most positively by Wall Street, with 98%, 95%, and 95% of analysts covering these companies, respectively, maintaining a Buy rating on shares.

A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 16, 2022.  REUTERS/Brendan McDermid
A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 16, 2022. REUTERS/Brendan McDermid

Although analysts have slightly tempered their expectations for second quarter earnings, they have continued to increase earnings estimates for companies in aggregate for the full calendar year and for 2023, per FactSet data.

And some strategists have argued that earnings forecasts are too high given the current economic environment, including Morgan Stanley's Mike Wilson.

"Over the past several months, we've been highlighting the declining trend in earnings revision breadth," Wilson wrote in an early June note to clients. "We thought it would turn outright negative during Q1 earnings season and that's where we are. However, it's been a slow bleed toward 0%. This is why forward 12 month EPS estimates continue to grind higher for the S&P 500."

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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