U.S. Equity Market Overview

Investing.com — U.S. equities experienced slight net selling last week, especially on Friday due to options expiry and index rebalancing, as noted in a Goldman Sachs report.

However, positive flows partly offset this trend in subsequent sessions, particularly on Thursday.

Macro Products

Macro Products, encompassing indexes and ETFs, saw the largest net buying in over three months, primarily driven by short covering, with long buying playing a minor role.

U.S.-listed ETF shorts decreased by 2%, largely due to coverings in Large Cap Equity and Tech ETFs, although this was somewhat offset by shorting in Energy and Small Cap Equity ETFs.

Single Stocks Pressure

Conversely, Single Stocks faced significant selling pressure, with short to long sales at a ratio of 4 to 1. According to Goldman Sachs, stocks were net sold in four out of the last five sessions, with Thursday being the only exception.

Sector Performance

The most net sold sectors included Information Technology, Energy, and Financials, while Communication Services and Materials experienced the most buying.

Materials stocks, bolstered by China’s new policy easing and fiscal spending pledges, enjoyed their strongest net buying since June 2022, particularly in Chemicals, Metals & Mining, and Containers & Packaging.

Energy was the poorest-performing U.S. sector, significantly impacted by falling crude oil prices. Hedge funds net sold Energy for a sixth consecutive week, doing so at the fastest rate since June 2022, with short sales surpassing long buys at a 6 to 1 ratio.

Market Insights

The S&P 500 hit record highs last week as investors reacted positively to the initiation of the Federal Reserve’s rate-cutting cycle, encouraging U.S. growth data, and signs of mild inflation. China ADRs, Bitcoin-sensitive stocks, and global copper stocks saw the largest gains, whereas GLP-1 exposure, regional banks, and small caps lagged.

Long-only investors concluded the week flat, while hedge funds were net sellers by $1.5 billion, with both groups rotating into cyclical stocks and China ADRs, utilizing large-cap tech as a funding source.

Goldman wrote, “Outside of demand in ADRs, sector skews remained benign. Max pain trade is index higher led by cyclicals over defensives.”

Future Predictions

Looking to the future, there’s a consensus that the S&P 500 could pull back before the U.S. election, potentially rallying to 6,000 by year-end. Goldman Sachs suggested the market “could rip higher sooner than most expect.”