LIVE MARKETS-Retail investors step back as Middle East tensions rattle markets
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RETAIL INVESTORS STEP BACK AS MIDDLE EAST TENSIONS RATTLE MARKETS
Escalating Middle East tensions are beginning to change retail investors' behavior in U.S. equities, with individuals turning into net sellers of single stocks earlier this week for the first time in more than 27 months.
Mom-and-pop traders sold net $20.6 million worth of single U.S. stocks on Monday, which was the first day of recorded net selling since November 2023, according to data from Vanda Research.
"On a broader basis, the trend since the start of March has been one of gradually receding retail participation, alongside systematic deleveraging and only modest buying from long-only and hedge fund investors on the other side," Vanda Research said in a note.
Retail buying activity has slowed after surging earlier this year as global markets have been whipsawed since the U.S.-Israeli and Iranian conflict stoked volatility and boosted crude oil prices.
J.P. Morgan flagged in a note last week that the oil spike has kept retail investors on the sidelines, with data showing the total amount of money invested in U.S. markets by retail traders having plunged about 43% since the Middle East conflict began.
"In recent weeks, our customers seemed to be on a bit of a buyers' strike. Among our most active names, gross activity remained relatively robust but there was a distinct lack of net buying," said Steve Sosnick, chief market strategist at trading platform Interactive Brokers.
However, dip buyers were back on Tuesday with retail traders lapping up more than $850 million worth of U.S. stocks on a day when the S&P 500 .SPX closed 0.3% lower, Vanda data showed.
Citadel Securities said in a note earlier this week that the average net notional traded on its platform has been more than three times higher on S&P 500 down days versus up days so far this year, with the spread widening further in March as retail investors began selling into strength.
(Shashwat Chauhan)
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