By Caroline Mandl
NEW YORK (Reuters) – Global hedge funds increased their bets on U.S. stocks over the past week through Jan. 9, ahead of an explosive U.S. jobs report that triggered a sell-off massive on Wall Street. Morgan Stanley (NYSE:) and Goldman Sachs said in notes Friday.
The U.S. Labor Department’s closely watched jobs report released Friday showed job growth accelerated to 256,000 jobs in December, the highest figure since March, while unemployment fell to 4.1%.
Hotter-than-expected jobs data sent stocks soaring, sending them down 1.54% on Friday and erasing all of their 2025 gains.
Morgan Stanley said portfolio managers had increased short selling – or bets that stocks would fall – in sectors including commodities, software, financials and healthcare in the days leading up to the release of the jobs report, while selling long positions in communications services.
The bank nevertheless indicated that hedge funds had bought European and Asian stocks during the same period.
Goldman Sachs also said that short positions outpaced long additions to portfolios, but this trend was seen across all regions, led by North America and Europe.
“We saw a rotation where managers were taking profits, selling their long positions, then adding short positions,” said Jon Caplis, CEO of hedge fund research firm PivotalPath. He said the move was also linked to the Federal Reserve’s more hawkish approach to cutting interest rates and releasing big data, such as the Consumer Price Index on Wednesday.
One exception is the technology, media and telecommunications (TMT) sector, Goldman Sachs said, because hedge funds added to it at the fastest pace in three months.
Stocks in the technology sector were among the hardest hit on Friday, down 2.23%, behind financial and real estate stocks. Big tech companies start reporting their results after Martin Luther King Jr. Day on January 20.
As two of the world’s largest brokerages, Goldman Sachs and Morgan Stanley track their hedge fund clients’ portfolios to indicate positioning and flow trends.
