S&P Revises Outlook ; Raises Price Target for its Benchmark Index to 1270

Standard & Poor’s raised on Thursday the price target for its benchmark index S&P 500 (SPX) to 1270 from an earlier projection of 1215.

According to the firm, the index should hit the new target by the end of 2010. The firm in its analysis noted however, that stocks are overdue for a 10% correction into autumn or the first quarter of 2011. The revision of the index represents a 7% gain from its current level.

CNBC: “We still believe that the stock market is close to peaking and believe the risk far outweighs the reward at this point,” the firm said in a research note. “Stocks are extremely extended on both a price and time basis, and in our view a pullback or correction could begin at any time.”

“We continue to see extreme readings from many sentiment indicators with put/call ratios falling to levels not seen in several years,” S&P said. “At the same time, many indices as well as individual stocks are overbought on both a daily and weekly basis, suggesting to us that the majority of gains have been seen for at least the intermediate term.”

The firm also said that current valuations compared to earnings do not seem high, projecting a lull in the market before the index starts uptrending again.

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