Institutional investors kept unloading U.S. stocks as the S&P 500 climbed 1.4% last week, indicating some level of profit taking but mostly a high level of skepticism about the index’s recent rally.

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Bank of America Merrill Lynch equity and quant strategists observed the eight week in a row in which their firm’s clients were net sellers of U.S. stocks, which also now marks the longest selling streak since October to December 2010.

Institutional investors lead S&P 500 sales

More than one firm has noted the apparent skepticism that exists among investors who don’t appear to believe that the S&P 500’s rally is real and sustainable, and BAML’s observations seem to provide further confirmation here. Equity and Quant Strategists Jill Carey Hall and Savita Subramanian said their firm’s clients unloaded $1.4 billion worth of U.S. stocks last week.

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Although the latest sales streak is the longest in more than five years, it still has a runway to catch up with the sales streak observed among BAML clients in 2010, as at that time, the streak lasted 12 weeks. After the 2010 sales stretch, BAML clients were cumulative net buyers of U.S. stocks starting in the first quarter of 2011 and for that full year.

Single stocks sold, ETFs bought

Hall and Subramanian report that last week, they saw a similar situation to what they saw the previous week as hedge funds, institutional investors and private clients were net sellers with institutional clients being the biggest sellers. They found the biggest net sales in large-cap stocks but inflows in small caps.

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S&P 500

S&P 500

The BAML team also saw their firm’s clients snap up exchange-traded funds last week, although they sold single stocks in all ten sectors of the S&P 500. Financials and Consumer Discretionary stocks were the most-shunned last week, with ETFs being the only part that saw inflows. Last week’s Discretionary sales marked a sharp reversal from the buying observed since the middle of January.

They said Telecom has the longest net sales trend as BAML clients have sold stocks in the sector for the last four consecutive weeks. Health Care, Technology and Industrials stocks all recorded three weeks of sales, while sectors classified as cyclical and defensive have seen weeks-long net sales streaks. In aggregate, net sales of cyclicals have been higher though.

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No S&P 500 sector saw net buying in three major client groups

Hedge funds, institutional investors and private clients all unloaded stocks in the Consumer Discretionary, Staples and Energy sectors. Further, the BAML team said no sector in the S&P 500 recorded net buying by all three of these client types.

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They said pension funds sold U.S. stocks for the third consecutive week with ETFs and stocks in the Financials sector recording the most sales among this client group. Pension funds bought stocks in the Staples and Tech sectors the most out of all the ten sectors. Further, net sales in this group were mostly small caps.

Corporate buybacks in the S&P 500 still growing but decelerated

Hall and Subramanian also report that buybacks continue to grow, although they observed a meaningful deceleration last week. Currently buybacks are at the highest level they’ve been at in two years:

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S&P 500

They saw that buybacks among companies in the Materials sector were at record levels again and that companies in Materials, Discretionary and Industrials have boosted corporate buybacks by the most year over year.