Home Editor's Picks Investors turn less bullish on S&P 500 amid inflation, geopolitical risks- Citi

Investors turn less bullish on S&P 500 amid inflation, geopolitical risks- Citi


Investing.com– Investors were seen sharply scaling back bullish positions on U.S. stock indexes over the past week, specifically the S&P 500 and the Nasdaq 100, as sentiment was battered by signs of sticky inflation and rising geopolitical tensions, Citi analysts said in a note. 

Bullish positioning on the S&P dropped by $12.3 billion, with overall net positions now remaining only mildly positive on the index, Citi said. This was also in part driven by a sharp increase in new short positions over the past week. 

The shift in sentiment comes after Wall Street indexes logged two straight weeks of steep losses, as fears of higher-for-long interest rates and rising geopolitical tensions in the Middle East battered sentiment. 

Weak risk appetite also saw investors collect profits from a stellar run-up in Wall Street through the first quarter, as technology stocks rallied. But the sector was now the worst hit with profit-taking. 

“Positioning for the S&P is now only marginally bullish while Nasdaq has turned neutral on the back of flows which were predominantly led by new shorts and continued de-risking of longs,” Citi analysts said in a note.

They also said that current positioning levels could potentially “amplify any further sell-off.” 

The S&P 500 was trading down nearly 4% over the past month, while the Nasdaq 100 was down over 5%. They were still trading positive for the year-to-date, but had culled a bulk of their gains. 

Chipmakers, such as index heavyweight NVIDIA Corporation (NASDAQ:NVDA), were the worst hit by the recent sell-off, after disappointing earnings and outlook from ASML Holding NV (AS:ASML) and TSMC (NYSE:TSM), which are considered to be bellwethers for the semiconductor industry. 

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Still, Wall Street found some stability on Monday, recovering from sharp losses as weaker valuations in the technology sector attracted bargain buyers.

A slew of key earnings from the tech sector are due this week, with four of the “Magnificent seven” set to report first-quarter results in the coming days.

Earnings are largely expected to drive the next leg of movement for Wall Street, as investors will be gauging whether major companies can justify a stellar run-up in valuations through the first quarter.

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