Morgan Stanley says S&P 500 may bottom at around 3,000 points

US stocks were set to fall much further than many pessimists anticipated with a recession likely to add to their losses, Morgan Stanley strategists said.

In a research note sent to clients, strategist Michael Wilson emphasised that analysts' estimates for company earnings were too high, while the equity risk premium was at its lowest since the run-up to 2008, Bloomberg reported.

That suggested that the S&P 500 could drop well past 3,500 to 3,600 points in the case of a mild recession, he said.

He added that the bottom might come at around the 3,000 point level.

Furthermore, he pointed out that while a peak in inflation would support bonds "it's also very negative for profitability".