Nasdaq, Tech Stocks With Massive Selling Risk: Citi By Investing.com

U.S. tech stocks could come under significant pressure as investors continue to de-risk their portfolios ahead of new economic data, Citi strategists said in a note on Tuesday.

According to the Wall Street firm, investors have reduced risk in most markets over the past four sessions.

In the US, indices started to rise again as investors liquidated short positions. However, despite the stabilization of prices, the risk reduction trend has persisted.

Next week will bring several key updates on US inflation and growth, with the consumer price index (CPI) scheduled for release on Wednesday, followed by retail sales, industrial production and jobless claims data on Thursday.

In , recent relations have brought the net notional positioning close to neutral. However, the net positioning in the remnants extended to a normalized +3.2.

“This has taken the negative note in the market to unprecedented levels, and in the event of any negative economic data, there will be significant pressure on these long positions (average loss of 7.6%) to unwind,” the strategists wrote.

“This, in turn, could amplify any downward movement from here in the near term,” they added.

Specifically, the Nasdaq faces $22.5 billion in long positions that are at risk of potential unwinding, with average positions remaining in losses below 20,050, Citi points out.

Exchange-traded fund (ETF) flows have already turned negative for , although they remain unchanged for the S&P 500.

Elsewhere, the European market is also facing a decline ahead of the upcoming US inflation report, leading to an extended net short position in . However, Citi strategists note that these shorts are only moderately extended, with less pressure on profits, making positioning less critical than in the Nasdaq.

In China, bear positioning is intensifying in the index due to long relationships and new short ones, while the index has become more neutral. Despite significant short positioning in A50, average returns remain low, reducing the immediate risk of profit taking.

Japanese stocks were hit by the unwinding of the yen trade, but net positioning in (NKY) remains slightly long with relatively low short positions. While NKY has seen some selling, most of the de-risking appears to have occurred earlier, with gross exposure halving since January, Citi points out.