Hedge funds elevated bearish bets forward of Friday’s blowout US jobs report, banks say

By Carolina Mandl

NEW YORK (Reuters) – World hedge funds added extra bets towards U.S. shares over the past week by means of Jan 9, forward of a blowout U.S. jobs report that sparked a sell-off on Wall Avenue, Morgan Stanley (NYSE:MS) and Goldman Sachs mentioned in notes on Friday.

The U.S. Labor Division’s carefully watched employment report on Friday confirmed job development accelerated to 256,000 jobs in December, essentially the most since March, whereas the unemployment fell to 4.1%.

The warmer-than-expected jobs knowledge despatched shares spiralling, sending the S&P 500 down 1.54% on Friday and erasing all its 2025 features.

Morgan Stanley mentioned portfolio managers elevated shorts – or bets shares will fall – in sectors similar to staples, software program, financials and healthcare within the days forward of the roles report, whereas they offered lengthy positions in communication companies.

Nonetheless, the financial institution mentioned hedge funds purchased European and Asian shares over the identical interval.

Goldman Sachs additionally mentioned quick positions outpaced lengthy additions to portfolios, however it noticed this development in all areas, led by North America and Europe.

“We have seen a rotation the place managers have been taking earnings, promoting their longs, after which including to shorts,” mentioned Jon Caplis, CEO of hedge fund analysis agency PivotalPath. He mentioned the transfer can be associated to the Federal Reserve’s extra hawkish tackle rate of interest cuts and massive knowledge releases, similar to the buyer worth index on Wednesday.

One exception was the expertise, media and telecommunications sector (TMT), Goldman Sachs mentioned, as hedge funds added it on the quickest tempo in three months.

Shares within the expertise sector have been among the many hardest hit on Friday, down 2.23%, behind financials and actual property. Huge tech firms begin to report earnings after Martin Luther King Jr. Day on Jan 20.

As two of the most important international prime brokers, Goldman Sachs and Morgan Stanley monitor the portfolios of their hedge fund shoppers to point positioning and movement developments.