Markets suffered one of the sharpest selloffs in months last week, driven by technical unwinds, institutional deleveraging, and weakening retail investor demand. A $2.7 trillion options expiration event drained liquidity, exacerbating downside volatility. The S&P 500 dropped -1.3%, the Nasdaq 100 tumbled -3.7%, while small-cap stocks dropped -1.8%. The selloff was more pronounced than it seems, given there was a big rebound in stocks late Friday.
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Goldman Sachs projected up to $67.66 billion in forced equity selling under a “down tape” scenario, intensifying the pressure. At the same time, retail investors, who had been steady buyers for 28 consecutive days earlier in the year, abruptly reversed course, turning net sellers in four of the last five days. The combination of institutional repositioning and retail exhaustion forced the S&P below critical technical levels, breaking both its 50-day and 100-day moving averages—historically a sign of further downside risk.
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This past week, the S&P 500 sectors saw mixed performance, with Financials (+2.8%) leading the gains, followed by Real Estate (+2.1%), Healthcare (+1.7%), and Consumer Staples (+1.3%) as investors leaned toward defensive and income-generating sectors. Industrials (+1.1%), Materials (+0.7%), and Energy (+0.1%) also posted modest gains. On the downside, Information Technology (-4.0%) saw the steepest decline, dragging the market lower, while Telecom (-2.6%) and Consumer Discretionary (-2.1%) also faced selling pressure. Utilities (-1.5%) struggled as well, possibly reacting to shifting interest rate expectations. The divergence in sector performance suggests a rotation out of growth and into lower volatility and value-oriented stocks.

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