Investing.com – Investors were seen sharply trimming their bullish positions on U.S. stocks, especially U.S. indexes and indices, last week as sentiment was dented by signs of persistent inflation and rising geopolitical tensions, Citi analysts said.
According to Citi, the bullish position on the S&P index has fallen by $12.3 billion, with overall net positions on the index currently remaining only moderately positive. This was due in part to a sharp increase in new short positions over the past week.
The change in sentiment came after Wall Street indexes posted two straight weeks of sharp losses as concerns about long-term rising interest rates and rising geopolitical tensions in the Middle East dented sentiment.
Weak risk appetite also led investors to profit from a stellar first-quarter run on Wall Street as technology stocks rose. But now this sector has been hit the hardest by profit booking.
“The S&P is currently only marginally bullish, while the Nasdaq has turned neutral on flows that were primarily driven by new short positions and continued de-risking of long positions,” Citi analysts wrote in a note.
They also said current positioning levels could potentially “amplify any further sell-off.”
Over the past month, the S&P 500 is down nearly 4% and the Nasdaq 100 is down more than 5%. They were still trading higher since the beginning of the year, but they gave up most of their gains.
Chipmakers such as index heavyweight NVIDIA Corporation (NASDAQ:) have been hit hardest by the recent sell-off following disappointing earnings and guidance from ASML Holding NV (AS:) and TSMC (NYSE:), which are considered market leaders. for the semiconductor industry.
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However, 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 expected this week, with four of the Magnificent Seven set to report first-quarter results in the coming days.
Earnings are expected to drive the next phase of Wall Street’s move as investors evaluate whether large companies can justify stellar first-quarter valuation increases.