Bank of America, Citi disagree on equity market direction

While investors await details to emerge from trade talks being held in London between the US and China this week, the US stock market is seeing moderate optimism on Monday as indices drift higher to start the week. At the time of writing, the Dow Jones Industrial Average (DJIA), S&P 500 and NASDAQ Composite are all trading between 10 and 50 basis points higher.

US President Donald Trump has sent US Trade Representative Jamieson Greer, Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick to London to handle the negotiations, and early reporting says that the US intends to get China to ease its export restrictions on rare earth minerals, while China is intent on forcing the US government to relax their export curbs on semiconductor components.

That latter motive helped Nvidia (NVDA) advance more than 2% in Monday's morning session before reducing to a less than 1% gain by the afternoon. However, Trump's Director of the National Economic Council, Kevin Hassett, said that curbs on Nvidia's leading AI chips would not be open for discussion.

Boeing (BA) stock is leading the Dow Jones on Monday. The first 737 Max was delivered to China early on Monday after the company halted deliveries in April following Trump's trade war with the Asian nation. Shares of BA are up 3.8% at the time of writing.

The Baltic Exchange dry bulk sea freight index reached its highest level in nearly seven months as global trade gets back on track after Trump's April and May tariff scare. Importers in the US also know that come July 9, tariffs in the US could once again reverse higher if countries fail to enact trade agreements with the Trump administration.

BofA and Citi view the summer trade differently

Bank of America (BofA) and Citi appear to be moving in different directions as they judge the second half of the year. Citi analysts came out with a 6,300 end-of-year call on the S&P 500, which would mean a roughly 5% gain from here. Raising their earnings target for the index, the Citi client note expects that the index will then rise to 6,500 by the middle of 2026.

Citi also raised its earnings target for the index from $255 to $261, though the figure is still below the $264 consensus, on its bullish view of US large caps. Specifically, Citi analysts think the Mag 7 stocks will impress in the back half of the year.

While acknowledging that the S&P 500 is historically expensive, the analyst surmise that the index will be able to hold onto a 21 forward P/E ratio.

Bank of America is instead letting clients know that it is a good time to hedge their portfolios, as several chart indicators offer potential bearish reversals. Paul Ciana, a technical strategist at BofA, says that the NASDAQ 100 (NDX) is now approaching its all-time high at 22,222, which should offer resistance, as well as the TD Sequential indicator flashing two trend exhaustion signals.

NDX daily index chart

In addition, the daily chart shows the Relative Strength Index (RSI) moving lower despite rising price action from NDX. This is called RSI Divergence and typically suggests a coming bearish reversal.