US stock sell-off wipes out $3.7T as forced selling builds

U.S. stocks have lost approximately $3.7 trillion in market value during Thursday’s sell-off, as retail selling spread to hedge funds and asset managers before automated trading strategies deepened the losses. Summary Retail investors’ net selling ranked behind only two sessions during the March 2020 pandemic shock. Nomura estimated $7 billion in potential dealer selling for each further 1% market decline. Volatility-control funds faced an estimated $61 billion reduction in stock exposure as market turbulence grew. Goldman Sachs estimated technology-focused hedge funds lost more than 4% during Thursday’s trading session. According to Bloomberg’s Nov. 6 account, Wall Street took roughly 24 hours to reverse its initial welcome of the U.S. midterm election results. Investors first bought stocks as election uncertainty cleared and oil prices fell, before reassessing what Democratic control of Congress could mean for data center expansion. The report described a succession of sellers entering the market, with individual investors moving first and professional funds following. As prices fell and volatility climbed, strategies tied to market movements faced pressure to cut their holdings. US stock sell-off accelerates as institutional buyers retreat Within the first half hour of Thursday’s session, retail investors began taking profits, according to the account. Hedge funds and long-only asset managers subsequently joined the selling, turning the early retreat into a much larger decline. Vanda Research’s figures placed the day’s retail net selling behind only two sessions during the pandemic turmoil of March 2020. Its strategist Viraj Patel described retail investors and systematic strategies actively selling while institutional buyers stepped back. You might also like: Pi Network is moving more rewards onchain. When can holders sell? Long-only managers, which generally hold assets in anticipation of rising prices, were among the sellers identified in the report. Hedge funds and quantitative strategies supplied further selling pressure as the session progressed, leaving fewer buyers willing to absorb the retreat. The Nasdaq 100 recorded its largest decline since March 2020, Bloomberg reported. Stocks linked to the infrastructure behind artificial intelligence were among the hardest hit as investors reconsidered the political outlook for new projects. Options positioning adds pressure as prices fall Nomura strategist Charlie McElligott estimated that options dealers’ negative gamma exposure could generate approximately $7 billion in additional selling for every 1% market decline during Thursday’s trading. His estimate described a mechanism through which falling prices could require dealers to sell more as they adjusted their hedges. The figure represented sensitivity to further market moves, rather than a confirmed amount already sold. Volatility-control strategies faced another adjustment. The report put their estimated required reduction in stock holdings at $61 billion, based on market conditions at the time of the calculation. Leveraged exchange-traded funds faced an estimated $47 billion in stock sales through rebalancing.