LONDON (Reuters) — Hedge funds last week “aggressively” bought US stocks at the fastest pace in two years, Goldman Sachs said, with traders jumping into a stock rally fuelled by hopes that the Federal Reserve’s interest-rate pause might stick.
In the week up to Nov. 3, global funds bought up US equities in the largest five-day buying spree since December 2021, Goldman’s prime brokerage trading desk said in a note dated Friday.
This left some caught in a squeeze, the bank said, when short positions became too expensive to hold as stock prices rose. Many got tangled up trying to flee crowded trades that became losing positions, it added.
All three major U.S. stock market indexes soared into Friday after a multi-session rally — five consecutive days for the S&P 500 and six for the Nasdaq — to post their biggest one-week percentage gains of 2023 so far.
Hedge funds’ long positions in information technology stocks reached the largest in eight months, said Goldman Sachs. A long position reflects an expectation that prices of the stock will rise, whereas a short bet expects they will fall.
Speculators favoured tech for long positions, including software companies. They were also bullish towards consumer discretionary companies such as restaurants and fashion, which offer products and services that people buy but don’t need, according to Goldman.
FILE PHOTO: A screen displays the trading information for Goldman Sachs on the floor of the NYSE in New York
Health care and financial stocks were net sold, the note said. The largest chunk of hedge fund buying centered on North America, while Europe and Asia — apart from Japan — were net short positions.
October saw fund managers dump $3 billion of China equities sharply, according to a Morgan Stanley report citing data from fund flow tracker EPFR.
(Reporting by Nell Mackenzie; editing by Dhara Ranasinghe and David Evans)
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