Analyst sees S&P 500 at surprise number at end of year

The Standard & Poor's 500 Index will rise 12 percent to 1,490 by the end of 2011 after “sharp pullbacks” as corporate profits and a weak dollar outweigh the credit-crisis “hangover,” Dahlman Rose & Co. said. Companies in the S&P 500 will earn $99 a share for 2011, according to Brian Rauscher, the New York-based chief portfolio strategist at Dahlman Rose, in initiating his price and earnings estimates for the benchmark gauge. The average of 13 analyst forecasts compiled by Bloomberg is for the S&P 500 to end the year at 1,404, with per-share profit of $95.61. “We expect the U.S. equity markets to chop higher for the remainder of 2011,” Rauscher said in a note dated May 18. “The tepid fundamental backdrop and continued hangover from the credit crisis will likely be trumped by the continuation of supportive liquidity and financial conditions, a weak U.S. dollar and further gains in U.S. corporate profits.” The S&P 500 fell 0.6 percent to 1,335.77 as of 11:40 a.m. in New York. The gauge has advanced 6.2 percent this year as the Federal Reserve purchased assets to boost the economy and corporate earnings have beaten estimates. An index measuring the U.S. dollar against six other currencies has retreated 4.4 percent so far in 2011 amid concern that stimulus measures are weakening the currency. Rauscher initiated energy, materials, consumer-staples and health-care industry groups at “overweight” in the note. He rated industrials, telecommunications and utilities companies “neutral,” and recommended underweighting consumer- discretionary, technology and financial shares. --Bloomberg News--