Wells Fargo Sentiment Gauge Flashes First Buy Signal Since June 2025, Sees S&P 500 Rally

Wells Fargo's market sentiment indicator has turned "buy" for the first time since June 2025, signaling investors may be excessively pessimistic and that stocks offer value after recent pullbacks, said chief equity strategist Ohsung Kwon. Historically, the S&P 500 has risen 89% of the time in the three months following such a signal, with an average gain of 6.5%, the team said. As of Monday's close, the S&P 500 was just 1.6% below its record high, though AI-linked shares have sold off harder. The Philadelphia Semiconductor Index has fallen 14% since October 6 amid renewed chip demand concerns. Major AI companies report earnings this week and next. Kwon expects leadership to shift toward large cloud providers and infrastructure software firms, with semiconductor stocks range-bound. He downgraded tech to "neutral" from "overweight" in September, citing growing opposition to data center construction ahead of midterm elections. He cautioned that slower earnings growth and an unfavorable liquidity environment warrant prudence. Higher AI capital spending could force more bond issuance, squeezing financing for emerging cloud players. Capital discipline is likely to become the key stock driver.