Battered U.S. retail investors bought latest dip, Vanda Research says

[February 26, 2022]    By John McCrank

NEW YORK (Reuters) - U.S. retail investors bought stocks during Thursday’s selloff, even as many of their favorite names have been battered by worries over geopolitical strife and a hawkish Federal Reserve that looks set to keep volatility elevated.

A street sign for Wall Street is seen in the financial district in New York, U.S., November 8, 2021. REUTERS/Brendan McDermid

Individual traders bought a net $1.5 billion on Thursday, as the S&P 500 extended its declines to an intraday year-to-date loss of nearly 14% on worries over Russia's invasion of Ukraine before surging higher later in the day, according to data from Vanda Research.

“We believe that retail investors played a key role in driving the sharp rebound in equities yesterday,” Giacomo Pierantoni, head of data at Vanda Research, said in a note. The benchmark index rose 2.24% on Friday, cutting its year-to-date losses to 8%.

Earlier data showed that buying by retail investors ebbed in the latest week, with flows falling by 50% to $1.8 billion in the week to Wednesday, according to JPMorgan.

The year-to-date decline in the S&P 500 and the 12.5% drop in the Nasdaq have masked far larger declines in many of the stocks and ETFs that retail traders have favored in recent months.

Analysts said the crisis in Ukraine would likely keep volatility elevated as investors digest the implications of the biggest attack against a state in Europe since World War Two.

"It's one more volatility-inducing event on top of a backdrop that already offers plenty of opportunities for volatility," said Steve Sosnick chief strategist at Interactive Brokers.

As of Thursday, the most popular stocks among Interactive Brokers' customers, on a five-day moving average, include many of the names that have taken a beating in the market this year.

The most active names with net buys included Tesla Inc, down 23.4% year-to-date; Advanced Micro Devices Inc, down 15.9% year-to-date; Meta Platforms Inc, down 37.4% year-to-date; and Roku Inc, down 38.8% year-to-date, among others.

With many retail investors' favorites in the red in 2022, the average punter's portfolio is close to dipping into the negative as well, analysts at Vanda said in a separate note.

As Russia's aggression toward Ukraine has intensified, retail investors have also been focused on potential winners and losers from the crisis.

Areas of interest among retail traders have been the United States Oil Fund LP ETF, which last week had the second- highest weekly net buying flow by retail investors since April-May 2020 period, along with energy stocks, VIX ETFs and gold ETFs, they said.

The top pick among retail investors in the past week, as tracked by JPMorgan, was ProShares UltraPro Short QQQ ETF, which bets against the Nasdaq 100 index and has risen 38.6% year-to-date.

(Reporting by John McCrank in New York; Additional reporting by Medha Singh in Bengaluru; Editing by Ira Iosebashvili and Matthew Lewis)

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