Barclays (NYSE:BCS) slashed its 2020 year-end price target for the S&P 500 index (SPX) as the disruption to global supply chains and revenue erosion caused by the coronavirus outbreak continue to accelerate. The British investment bank also reduced its baseline earnings-per-share (EPS) estimates for the U.S. companies this year.
“Even if the virus is fully contained in short order, the repercussions of the shock to the Chinese economy that has already happened to the rest of the world will not be insignificant,” Maneesh Deshpande, Barclays’ head of equity derivatives strategy, said in a note Friday.
Barclays warns investors to be cautious as more and more high-profile companies, including Apple (AAPL), Mastercard (MA), and Microsoft (MSFT), are starting to warn about the impact of the coronavirus outbreak on their profit outlooks. The bank now sees the S&P 500 index ending the year at 3,000, which is about 9% below a previous forecast. Barclays also cut its 2020 S&P 500 earnings estimates to $162 per share, representing a 2% drop in profits.
“The drop in EM economic growth alone would lead to 2020 SPX earnings growth of ~ -2%, with the ripple through to other economies lowering it further,” Deshpande added.
The call is even more pessimistic than Goldman Sachs (GS) and JPMorgan’s (JPM) outlook on Thursday. Both banks slashed their 2020 S&P 500 baseline EPS estimates to $165 and $174, down from $174 and $180, respectively.
Index Price Action
The S&P 500 index has extended its nosedive for the seventh day on Friday, losing as much as 12% from its all-time high at rate never seen before.
As of writing, SPX was down 88 points, or 2.95%, to 2,890.94. The index that tracks the stocks of 500 large-cap U.S. companies is down 10.45% year-to-date, trading in a 52-week range of 2,722.27 – 3,393.52.