(Bloomberg) -- The world’s biggest exchange-traded fund posted its worst monthly outflow in its near three-decade history with investors selling the Monday stock rebound en masse.
The $407 billion SPDR S&P 500 ETF Trust (ASX:SPY), known by its ticker SPY, in January saw its biggest redemption since launching in 1993, according to data compiled by Bloomberg, underscoring weeks of turmoil in U.S. large-cap companies.
Some $6.96 billion exited Monday alone -- the largest daily outflow in almost four years -- as the S&P 500 jumped 1.9%.
The January exits were not contained to the S&P 500 fund. The $191 billion Invesco QQQ Trust Series 1 (QQQ), which follows the Nasdaq 100 Index of tech names, posted its largest investor exodus since the dot-com collapse as about $6.2 billion fled.
The Monday SPY flow is a sign that a cohort of traders may be taking advantage of the recent stock bounce to pare broad-market positions via liquid trading vehicles. Futures for the main U.S. equity gauges were fluctuating on Tuesday morning in New York.
“Investors are worried the rally could be a head fake,” said Athanasios Psarofagis, an ETF analyst with Bloomberg Intelligence. “These feel like sell-into-strength flows.”
U.S. stocks have endured a volatile start to the year, as investors adjust expectations for inflation and the pace of monetary tightening in the world’s largest economy. Rising bond yields have spurred traders to re-evaluate shares at near-record prices.
Despite a late bounce, the S&P 500 closed the month down 5.3%. In turn, trading volumes have surged to a record by value in the ETF market. The biggest vehicles like SPY have become ever-more prized for their liquidity, which means short-term inflows and outflows can be elevated.
Even as investors soured on large-cap funds, equity ETFs overall in the U.S. recorded net inflows in January of about $23 billion, the data show. Much of that cash went toward funds with international exposure, as well as more targeted trades.
The Financial Select Sector SPDR ETF (NYSE:XLF) and Vanguard Value ETF (VTV) were among the flow leaders with $3.9 billion and $2.3 billion, respectively.
“People are being more targeted,” said Psarofagis. “For instance, energy has been one of the best sectors since the top and you won’t get much of that in broad-based indexes.”
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