Written by Carolina Mandel
NEW YORK (Reuters) – Global hedge funds added more bets against U.S. stocks over the past week through Jan. 9, before a strong U.S. jobs report sparked a sell-off on Wall Street. Morgan Stanley (NYSE:) and Goldman Sachs said in remarks on Friday.
The closely watched US Labor Department employment report on Friday showed job growth accelerating to 256,000 jobs in December, the most since March, while unemployment fell to 4.1%.
Hotter-than-expected jobs data sent stocks higher, sending them down 1.54% on Friday and erasing all their gains in 2025.
Portfolio managers increased short positions — or bets that stocks would fall — in sectors such as commodities, software, financial services and health care in the days leading up to the jobs report, while selling long positions in telecommunications services, Morgan Stanley said.
However, the bank said hedge funds bought European and Asian stocks during the same period.
Goldman Sachs also said that short positions outpaced long additions to portfolios, but it saw this trend in all regions, led by North America and Europe.
“We saw a rotation where managers were taking profits, selling their long positions, and then adding to short positions,” said John Caples, CEO of hedge fund research firm PivotalPath. The move is also tied to the Federal Reserve’s more hawkish stance on interest rate cuts and big data releases, such as Wednesday’s CPI, he said.
The only exception was the technology, media and telecommunications (TMT) sector, which hedge funds added at the fastest pace in three months, Goldman Sachs said.
Technology sector stocks were among the hardest hit on Friday, down 2.23%, behind financial and real estate stocks. Big tech companies begin reporting earnings after Martin Luther King Jr. Day on January 20.
As two of the world’s largest prime brokers, Goldman Sachs and Morgan Stanley track their hedge fund clients’ portfolios to indicate positioning and flow trends.