A slew of weak economic data last week fueled fears of a recession, but Goldman Sachs said Monday the U.S. is still not close to a downturn.

The double whammy of an accelerated slowdown in manufacturing and services sparked a deep sell-off in stocks last week. A key gauge of the U.S. manufacturing sector showed the in September, while the services sector grew . However, Goldman said the weakness in manufacturing may have bottomed.

"This downturn in manufacturing has been one of the longest on record and may start to stabilize, if not improve, somewhat soon," Goldman chief global equity strategist Peter Oppenheimer said in a note. "Our economists remain of the view that growth has slowed but is not close to recession. ... Assuming no recession, it is too early to expect this equity bull market to end in our view."

Investors have been grappling with an ongoing earnings decline this year as the escalated U.S.-China trade war continues to weigh on businesses. The S&P 500's earnings are expected to decline another 4.1% in the third quarter, according to FactSet, which could be the first time the benchmark has reported three straight quarters of slowdown since 2016.

"While avoiding a recession should support risky assets, the upside is somewhat limited by the prospects for continued relatively modest profits growth," Oppenheimer said.

Goldman sees the S&P 500 to climb to 3,100 by year end, a 5% gain from Friday's close of 2,952.01.

The poor data last week could also be a catalyst for the Trump administration to push for a trade truce this week, which would be bullish for stocks, according to Mislav Matejka, J.P. Morgan's head of global and U.S. equity. The U.S. and China resume their high-level trade talks on Thursday in Washington.

"Given that trade uncertainty appears to have been the key driver of ISM weakness, this could end up pushing the US administration towards a truce with China, especially in light of the recent political developments," Matejka said in a note Monday.

—CNBC's Michael Bloom contributed reporting.