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(Bloomberg) – Around 1 p.m. in New York on Monday, as US stocks were in the throes of the worst trading session in months, Google searches for the “Dow Jones” increased.
By the closing bell, the Dow Jones Industrial Average had recouped some of the biggest losses and the next day posted its best performance in a month.
This week is a lesson for anyone on Wall Street who thought the day-trading army had retreated: they recovered stocks at the fastest time ever, shedding an estimated $ 2.2 billion in stocks on Monday alone. , according to Vanda Research.
Even as the stimulus check fades and the stay-at-home era culminates, the Reddit-fueled, Robinhood-fueled retail crowd remains a force to be reckoned with – their cash purchase set the stage for that. the S&P 500 hits a record Friday.
“The post-Covid bull market continues to reward retail investors for taking an equity risk,” said Mike Bailey, director of research at FBB Capital Partners. “I would expect the retail money to keep flowing.”
After another rebound on Friday, the Dow Jones has just recorded its fourth weekly gain in five, up 1.1% over the period to reach a record. Profit optimism brought the S&P 500 back into a familiar rally mode. It added almost 2% over the period.
A study from DataTrek Research suggests that Google searches for the Dow Jones are a telltale sign of upcoming retail buying frenzy – a pattern that unfolded this week.
“Over the years, we’ve found it to be the most widely used US search term for anything related to the stock market,” Nicholas Colas and Jessica Rabe wrote in a note. “The data here shows that yes, retail investors took note of Monday’s drop (peaking at 1 p.m. in New York City, as reported) and were the most engaged just after Tuesday’s opening.”
Still, disappointing US employment data on Thursday and the rise in delta virus variants are signs that economic recovery from the lockdown will be an uphill battle for policymakers amid fears of spike in growth. apparently being the reason world markets plunged on Monday.
And even in retail stock purchase data, the market bears can see plenty of reasons to be cautious. Vanda, which tracks traffic on trading platforms and order flows, estimates that it paid $ 482 million into the SPDR S&P 500 ETF Trust (SPY ticker) on Monday, the highest amount on record.
This suggests that the day-trade contingent lacked the confidence to pick individual stocks, while reopening-related stocks saw their buy orders drop 40% from the June 28 close.
“Institutional investors ditched the shares but found little interest from retailers, making the sell even more violent,” strategists Ben Onatibia and Giacomo Pierantoni wrote in a weekly note.
Meanwhile, while all signs point to corporate earnings growth exceeding expectations, it looks like big investors are retreating from major trading vehicles. SPY, the Invesco QQQ Trust Series 1 (QQQ) and the iShares Russell 2000 ETF (IWM) recorded more than $ 7.5 billion in combined outings during the week through Thursday, according to data compiled by Bloomberg.
Short-term interest in the small-cap ETF is near its highest since September, based on the percentage of shares loaned, according to data from Markit Ltd., suggesting that investors are betting against companies closely linked to the national economic cycle.
Still, retail investors have plenty of spare ammunition to save the stock rally again, with DataTrek estimating around $ 400 billion in dry powder.
“Unlike some institutional investors who might find themselves running out of new funds, most retail investors benefit from an income stream (salary, dividends, rentals, etc.),” wrote Onatibia and Pierantoni at Vanda. “Therefore, we would not be surprised to see strong retail buying in the future, but their appetite to buy something riskier than index funds and blue chips seems limited at this time.”
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