Record Outflows From U.S. Tech Stocks. Institutions Sell 14.4 Billion, Is a U.S. Stock Bear Market Imminent?

TradingKey - Last week, the S&P 500 index fell 2.6%, recording its largest single-week decline since May 2025. Meanwhile, capital is flowing out of U.S. equities. Data from Bank of America strategist Jill Carey Hall shows that clients sold a net total of $14.4 billion in U.S. stocks last week (excluding net ETF inflows), with outflows from individual stocks reaching a record $14.2 billion.

From a sector performance perspective, selling pressure was primarily concentrated in large-cap stocks, particularly in the technology sector. BofA data shows that 8 out of 11 S&P sectors were in a net selling position; outflows from tech stocks reached the highest level since the bank established its database in 2008, and as a percentage of market capitalization, marked the largest capital outflow since early 2014.

According to BofA data, this round of selling was dominated by institutional investors, who recorded their largest capital outflow since mid-March following five consecutive weeks of buying; net selling by private clients last week also reached its highest level since November 2024.

While large-cap stocks were being pared back, capital flowed into small-cap and mid-cap stocks, while the industrials, real estate, and utilities sectors also attracted inflows, with real estate recording net inflows for six consecutive weeks. Equity ETFs extended their streak of net inflows to 11 weeks, recording a modest $300 million inflow last week, led by healthcare ETFs, while technology and financial ETFs faced the largest sell-offs, highly consistent with the flow direction of individual stocks. This series of changes indicates that market risk appetite is shifting toward defensive assets.

The performance of the options market also strongly aligns with this conclusion. Mandy Xu, Head of Derivatives Market Intelligence at Cboe Global Markets, noted that as of June 9, the one-month skew—a measure of demand for downside protection on the S&P 500—has been pushed from its one-year low to the 72nd percentile of observations, meaning current market fear exceeds 72% of the time over the past year.

Xu stated that last Friday's sell-off made traders realize the presence of risk, as the market lacked measures to hedge against downside risks. The reversal at the index level now suggests that investors recognize the potential for further market declines. Last Friday, the S&P 500 fell 2.6% as unexpectedly strong non-farm payroll data heightened market expectations for a Federal Reserve interest rate hike later this year.

Another phenomenon is that retail investors are increasing their put option holdings while remaining long. A CNBC report showed that of the $3.7 billion in premiums traded for Invesco QQQ Trust options this Tuesday, approximately $2.5 billion was in put options. Chris Murphy, Co-Head of Derivative Strategy at Susquehanna International Group, pointed out that the market is concerned not about risks from AI stocks, but rather about the risks of rising interest rates.

However, Wells Fargo analyst Ohsung Kwon stated that although both the Nasdaq and S&P have seen significant declines recently, they were primarily driven by positioning adjustments rather than fundamental factors. He believes this does not signal the start of a sustained correction but may simply be a slowdown in the stock market's rally. Brian Garrett, Head of Equity Execution in the Cross-Asset Sales division at Goldman Sachs, believes the market will stand on a firmer foundation after the volatility.