Analysts Get More Bearish as Rally Rolls On

Updated from 3:41 p.m. ET to reflect market close, additional analyst commentary from S&P Capital IQ.

NEW YORK ( TheStreet) -- Wall Street analysts are historically a bullish lot but the 20%-plus surge in the major U.S. equity indices since early October has eroded some of that optimism of late.

According to FactSet Research, the total percentage of buy ratings for S&P 500 companies has dropped to 51% as of March 1 vs. 54% on Dec. 31. The slack was picked up by hold ratings, which went to 44% from 42%, and sell ratings, now 5% vs. 4% at year-end. Those percentages are based on a total of 11,035 ratings on S&P 500 companies, FactSet said.

This was the second month in a row that analysts reduced their buy ratings, while increasing hold and sell ratings. Seven of the 10 sectors within the index saw a decrease in buy ratings with the financials, a market leader so far this year, hit hardest with a 5% decline.

Not a monumental shift in sentiment by any stretch -- and a logical byproduct of the rally -- but it's worth nothing because similar conditions set in roughly around this time last year.

"The percentage of Buy ratings at month end hasn't been this low and the percentage of Hold ratings hasn't been this high since the end of March 2011, which was one month prior to the start of a 17% decline in the price of the S&P 500 from April 30 through September 30," wrote John Butters, senior analyst at FactSet.

Interestingly, the target prices of analysts have climbed higher even as they've tempered their recommendations. FactSet said 369 of the 500 companies in the S&P 500 -- 74% -- have seen an increase in their mean target price since the start of 2012.

That's pushed the bottoms-up price target for the S&P 500 to 1503.03, up 3.3% so far this year. The targets of sell-side analysts are referred to as "bottoms-up," while those of investment strategists and economists are designated as "top-down." The top-down target is currently 1410, 6.6% below the bottoms-up target.

"The last time the month-end bottoms-up target price for the index was this high was August 2011 (1509.62), which was one month prior to a 21% increase in the price of the S&P 500 from Sept. 30, 2011 through Feb. 29, 2011," Butters noted.

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