The stock-market trading desk at Goldman Sachs Group Inc. is being flooded with calls from investors trying to get a sense of how much deeper Thursday’s technology selloff can go.
Yet, actual buyers are nowhere to be found.
On Wednesday, Goldman’s equities trading desk had one of its busiest sessions of the year, according to John Flood, the bank’s head of Americas equities execution services. “Today is the exact opposite,” he wrote in a note to clients on Thursday. “Our phones are exploding with asks for color. Unfortunately we aren’t seeing much.”
The long-only investment community is frozen again, Flood said. Investors aggressively cut risk ahead of the midterm elections, but were caught off guard by Wednesday’s rally and drawn back into the market. Hedge funds are now selling some of the artificial intelligence hyperscaler stocks they bought in the previous session.
What Goldman isn’t seeing is buyers stepping in to support the market, Flood wrote. Brokers with significant retail exposure are reporting a second consecutive day of pronounced selling imbalances, according to Goldman clients.
The pressure is coming from the top down, with investors using broad market instruments to reduce exposure. Trading volume in the SPDR S&P 500 ETF was running 160% above the 20-day average, the Invesco QQQ exchange-traded fund was twice its average volume, the VanEck Semiconductor ETF’s volume was 150% above average, and trading in DRAM stocks was up 75%, according to Flood.
“This feels like a lot,” he wrote. “It is always darkest before dawn.”
The technology selloff is being driven by the Democrats’ wins in the midterm elections and the implications for the AI trade that has been driving the market higher for the past three years. Voters were strongly opposed to building data centers in their communities, and Democrats who now control both houses of Congress are expected to hold hearings questioning the development of AI.
What started as a rotation out of semiconductor stocks morphed into a broad rout, with all 11 sectors in the S&P 500 Index in the red. The information technology sector led the declines, tumbling as much as 7%. The tech-heavy Nasdaq 100 Index fell 5.9%, erasing more than $2 trillion from its value, while the Philadelphia Stock Exchange Semiconductor Index, better known as the SOX, was down more than 10% and on pace for its worst day since the Covid pandemic hit in March 2020.
Written by: Natalia Kniazhevich @Bloomberg
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