Investing.com — U.S. equities were slightly net sold overall last week, with the bulk of the selling occurring last Friday during options expiry and index rebalancing, Goldman Sachs noted in a recent report. However, this was partly offset by more positive flows in the following sessions, particularly on Thursday.
Macro Products, which include indexes and exchange-traded funds (ETFs), experienced the largest net buying in over three months, fueled primarily by short covering, with long buying playing a smaller role, the report reveals.
U.S.-listed ETF shorts fell by 2%, driven by covers in Large Cap Equity and Tech ETFs, though this was partly offset by shorting in Energy and Small Cap Equity ETFs.
In contrast, Single Stocks saw significant selling pressure, dominated by short sales and long sales at a ratio of 4 to 1. According to Goldman Sachs, stocks were net sold in four out of the past five sessions, with Thursday being the only exception.
The most net sold sectors included Information Technology, Energy, and Financials, while Communication Services and Materials attracted the most buying.
Materials stocks, supported by China’s new policy easing measures and fiscal spending pledges, saw their strongest net buying since June 2022. Subsector gains were concentrated in Chemicals, Metals & Mining, and Containers & Packaging (NYSE:).
Energy, hit hard by declining prices, was the worst-performing U.S. sector. Hedge funds net sold Energy for the sixth consecutive week, doing so at the fastest pace since June 2022, with short sales outpacing long buys by a ratio of 6 to 1.
The reached new all-time highs last week as investors responded positively to the start of the Federal Reserve’s rate-cutting cycle, strong U.S. growth data, and continued signs of mild inflation. China ADRs, Bitcoin-sensitive equities, and global stocks posted the largest gains, while GLP-1 exposure, regional banks, and small caps lagged.
Long-only investors ended the week flat, while hedge funds were net sellers by $1.5 billion. Both groups showed a rotation into cyclical stocks and China ADRs, using large-cap tech as a source of funds.
“Outside of demand in ADRs, sector skews remained benign. Max pain trade is index higher led by cyclicals over defensives,” Goldman wrote.
Looking ahead, the consensus view is that the S&P 500 could sell off before the U.S. election but rally to 6,000 by year-end. However, Goldman Sachs suggests the market “could get rip higher sooner than most want it.”
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