Barclays Capital said it is more constructive about U.S. corporate earnings for 2011, citing increased confidence in financial sector margins and lower economic uncertainty, and raised its full-year price target for the S&P 500 index <.SPX> to 1,450 from 1,420.
The brokerage expects that a lower cost of capital, along with a significantly improved public policy outlook largely attributable to the outcome of the midterm elections, would boost business confidence for both small and large businesses.
This will improve the rate of recovery in capital spending and labor investment, the brokerage said in a note dated February 25.
It also raised its ratings on U.S. industrials, financials and healthcare while downgrading discretionary.
The brokerage said despite the recent spike in oil price, U.S. equities is reaching a position in which positive feedback is more than able to offset headwinds, backed by an accommodative monetary policy.
(Reporting by Rachel Chitra in Bangalore; Editing by Sriraj Kalluvila)