(Bloomberg) – On Monday around 1 pm in New York, just as US stocks were hit by the worst trading session in months, Google searches for the “Dow Jones” skyrocketed.
When the closing bell sounded, the Dow Jones Industrial Average had recovered some of its biggest losses and the next day posted its best performance in a month.
This week is a lesson for everyone on Wall Street who thought the day trading army had receded: They bought stocks at the fastest pace on record, investing about $ 2.2 billion in stocks on Monday alone, according to Vanda Research.
Even as the stimulus check giveaway fades and the stay-at-home era reaches its peak, the Reddit-powered, Robinhood-powered retail crowd remains a force to be reckoned with – their immersion purchases set the stage for it to be. the S&P 500 hit a record. Friday.
“The post-Covid bull market continues to reward retail investors for taking equity risks,” said Mike Bailey, research director at FBB Capital Partners. “I hope the retail money keeps flowing.”
After another bounce on Friday, the Dow just posted its fourth weekly gain in five, climbing 1.1% on the period to a record high. Earnings optimism sent the S&P 500 back into familiar rally mode. It added almost 2% in the period.
A DataTrek Research study suggests that Google searches for the Dow are a tell-tale sign of retail shopping sprees ahead, a pattern that unfolded this week.
“Over the years, we’ve found this to be the most widely used search term in America for anything related to the stock market,” Nicholas Colas and Jessica Rabe wrote in a note. “The data here shows that yes, retail investors took note of Monday’s decline (which peaked at 1pm in New York, as noted) and were more engaged just after Tuesday’s open.”
However, disappointing US employment data on Thursday and the rise in delta virus variants are signs that the post-lockdown economic recovery will demonstrate an uphill battle for policy makers, and fears of growth highs are apparently the reason global markets crashed on Monday.
And even in the retail stock purchase data, the market bears can see plenty of reasons for caution. Vanda, which tracks trading platform traffic and order flows, estimates that it invested $ 482 million in the SPDR S&P 500 ETF Trust (SPY ticker) on Monday, the highest amount on record.
That suggests the daily trading contingent lacked the confidence to pick individual stocks, while the reopening-linked stocks saw a 40% drop in buy orders versus the June 28 selloff.
“Institutional investors were shedding the shares but found little interest from the retail crowd, which made the sell-off even more violent,” strategists Ben Onatibia and Giacomo Pierantoni wrote in a weekly note.
Meanwhile, even as all signs suggest that corporate earnings growth will exceed expectations, it appears that large investors are seeing a pullback in key business vehicles. SPY, Invesco QQQ Trust Series 1 (QQQ) and iShares Russell 2000 ETF (IWM) have seen more than $ 7.5 billion in combined outflows in the week through Thursday, according to data compiled by Bloomberg.
Short interest in the small-cap ETF is close to the highest since September, based on the percentage of shares on loan, according to data from Markit Ltd., suggesting that investors are betting against companies closely tied to the national business cycle.
Regardless, retail investors have plenty of spare ammo to salvage the stock rally again, with DataTrek estimating around $ 400 billion in dry powder.
“Unlike some institutional investors who might find themselves hungry for new funds, most retail investors enjoy an income stream (payroll, dividends, rentals, etc.),” wrote Onatibia and Pierantoni de Vanda. “So we wouldn’t be surprised to see strong retail buying going forward, but your appetite to buy something riskier than index funds and blue chips seems limited for now.”
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