S&P 500 Falls 4.4% as Selloff Spreads to Technology Stocks
Key Facts
The S&P 500 fell 4.4% in Thursday’s session, November 5, its worst daily decline since the April 2025 “Liberation Day” tariffs, according to the Associated Press. The drop came amid a wave of selling across Wall Street led by stocks of companies tied to building AI data centers. In a session marked by broad losses, technology-focused long-short equity funds fell more than 4%, according to Goldman Sachs estimates cited by Reuters. The losses brought these funds’ year-to-date returns back to levels near zero. Their gains had peaked at 24% in June, meaning Thursday’s decline erased a large share of the positive performance they had accumulated during the year.
Pressure extended to hedge fund managers outside technology-focused strategies. Core global long-short equity funds fell an average of 1.3% in Thursday’s session, while multi-strategy funds lost 1.4%, according to Goldman Sachs data reported by Reuters. The figures show that the selloff was not limited to technology funds, even as the heaviest pressure was concentrated in AI-related stocks. Reuters also reported that the global technology-led selloff erased year-to-date gains at many hedge funds. The losses prompted some managers to cut risk and reduce investment teams, signaling that the decline’s impact extended from asset valuations to portfolio management and operating costs.
Thursday’s session followed a difficult October for technology stocks and hedge funds. The Nasdaq 100 fell 6.6% in October, its biggest monthly decline in 18 months, according to Reuters. JPMorgan estimated that global hedge funds lost 3% in the same month. With Thursday’s losses added, pressure mounted on fund managers who had been trying to recover the year’s gains after October’s decline. Amid broader market moves, South Korea’s Kospi index fell 5.3% in the November 5 session, according to the Associated Press, reflecting the selloff’s spread to Asian markets.
A Goldman Sachs official linked a number of hedge funds ending up on the losing side of the market move to the timing of risk reduction ahead of the U.S. midterm elections. He said, “Broad risk reduction ahead of the midterm elections left many hedge funds chasing Wednesday’s relief rally, only to find themselves on the wrong side a day later.” He added that funds had returned to selling mega-cap stocks. This explanation places Thursday’s move in the context of investors shifting between reducing risk exposure and chasing the previous session’s rally. Stocks of companies tied to building AI data centers were at the forefront of the selloff, according to the Associated Press.
Moves in other assets showed U.S. Treasury yields declining during the session. The 10-year yield fell to 4.84% on November 5, from 4.90% late on Wednesday, November 4, according to the Associated Press. In the U.S. stock market, the Invesco QQQ Trust ended the session at $647.05, down 6.49%, according to the price table published on Investing.com. The fund’s performance, tracking large U.S. stocks, puts the severity of the session’s losses in the context of pressure on technology shares. This coincided with the broader declines affecting indexes and investment funds.
PivotalPath warned this week of rising overlap among the positions of the 10 largest multi-manager hedge fund platforms, according to Reuters. The company said it had observed “a high and growing degree of overlap” among these platforms, which could mean that unwinding positions puts pressure on the same securities. The report cited market participants as expecting further layoffs if losses continue. Some managers had already begun reducing investment teams and cutting risk as the selloff erased year-to-date gains at many hedge funds. The warnings come after Thursday’s losses, as investors watch whether pressure on portfolios with similar positions will persist.