Feb 20 (Reuters) - UBS Global Research on Tuesday raised its year-end forecast for the benchmark S&P 500 index to 5,400, marking the highest projection among major global brokerages.

The latest forecast indicates an upside of about 8% to the index's last close of 5,005.57.

The brokerage had raised its forecast previously to 5,150 in January on growing bets of the U.S. Federal Reserve cutting interest rates this year, a decline in inflation and resilient earnings expectations.

But earlier this month hot consumer prices and producer prices reports renewed fears of a pick-up in inflation after months of cooling that could potentially further delay interest-rate cuts.

"Higher (U.S.)inflation tends to be a positive for stock prices. Stronger inflationary pressures represent increased pricing power, a benefit to margins," UBS said, adding that economic data been strong since the start of the year.

The brokerage raised its earnings-per-share estimate for the benchmark index to $240 from $235 for 2024, implying a 9.1% growth compared to consensus estimate of 10.5%.

The benchmark index has seen on strong rally to breach the 5,000 mark, boosted primarily by the Magnificent 7 stocks and optimism around artificial intelligence.

Traders are betting on a 53.1% chance for the Fed to cut rates by 25 basis points in June, according to the CME FedWatch tool.

UBS also revised its ratings for a couple of sub-sectors of the S&P 500 index. It upgraded the financials sector (.SPSY) , opens new tab to "overweight" from "neutral", supported by the resurgence in deals and easing lending standards.

UBS also downgraded the health care sector (.SPXHC) , opens new tab to "neutral" from "overweight."

https://www.reuters.com/markets/us/ubs-lifts-sp-500-year-end-target-5400-highest-among-top-global-brokerages-2024-02-20/