• The benchmark index will fluctuate between 1,800 and 2,600 as negative economic data and a slow recovery for corporate profits stifle a rebound, according to the firm.
  • A collapse in corporate credit and chain-reaction of defaults could push the index to 1,400, the team added.
  • Watch the S&P 500 update live here .

The S&P 500's three consecutive days of gains placed it just above its near-term cap, Societe Generale analysts wrote Thursday.

The benchmark index rallied 17% from Tuesday to Thursday as investors bet on the Senate's $2 trillion stimulus plan to usher in much-needed economic relief. Yet Societe Generale's new target range for the S&P 500 sees it fluctuating between 2,600 and 1,800 as the coronavirus continues to wreak economic havoc.

Coronavirus fears have already prompted recession calls, a bear market, and a sudden stop to economic activity. Equities will struggle to move much higher than their current level as economic data trickles in and gives investors a sobering look at the outbreak's fallout, the team led by cross-asset analyst Sophie Huynh wrote.

Weekly jobless data released Thursday already shocked economists, with claims spiking to a record 3.3 million in the week ended March 21. In the event of a prolonged, L-shaped rebound, upcoming data from earnings reports, consumer surveys, and national releases will place significant downward pressure on the S&P 500, the bank said.

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If the coronavirus-driven downturn mirrors past recessions, the S&P 500's earnings could fall as much as 23% before recovering, according to Societe Generale. After accounting for the low interest rate environment, the analysts see the benchmark bottoming at 1,800 in the event of an economic recession. A pause to share buybacks and dividend payments will alsodrag on price recoveries.

The S&P 500 could tank further to 1,400 its lowest point since 2012 if the recession spurs corporate default, they added.

"We don't exclude that it can go lower, especially if the credit stress continues, actually triggering a domino effect in bankruptcies, with policymakers' bandage being insufficient," the analysts said.

Investors should buy stocks when the index sits between 1,800 and 2,100 and hold equities until it breaches 2,400, the bank advised. Any position while the S&P sits above 2,400 is "contingent on the medium term and recovery shape," the analysts added.

The S&P 500 closed Thursday at 2,630.07, down about 19% year-to-date and 22% from its February 19 peak.

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