BofA Clients Sell Communication Services Stocks at Record Pace After Meta Plunge

Bank of America clients sold U.S. equities for a second consecutive week, driven by a record exodus from communication services stocks following a sharp post-earnings decline in Meta Platforms. The selling in single stocks amounted to $3.5 billion last week, according to a note from the bank.

Selling Driven by Retail, Hedge Funds

The $3.5 billion in single-stock sales followed record outflows of approximately $15 billion the week prior, BofA reported. The selling occurred as the S&P 500 index fell by 0.5% over the same period.

Retail clients and hedge funds were net sellers for the second straight week. In contrast, institutional clients were net buyers, which the bank noted came after significant tax-loss selling earlier in October. While clients shed individual stocks, they continued to purchase exchange-traded funds (ETFs), adding $2.3 billion for the second week in a row.

Record Outflows from Communication Services

The communication services sector experienced its largest weekly outflow since it was established as a GICS sector in September 2018. The bank highlighted that the sector was also the worst-performing of the week, with the sell-off largely attributed to Meta's market reaction.

Other sectors also saw net selling, including:

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• Industrials, which recorded its 13th consecutive week of outflows.
• Technology and Utilities.

Inflows were seen in seven of the 11 major sectors. Consumer Discretionary led the buying with its largest inflow since late August, followed by Financials and Health Care.

Shifting Factors and Corporate Buybacks

BofA's note also pointed to a rotation in investment factors as clients moved out of Momentum strategies and into Value and Cash Return strategies. The bank cited easing interest rates and rising "AI concerns" as potential drivers for the shift.

This trend was reflected in ETF flows, where four-week average flows into Dividend ETFs reached a nearly one-year high. Meanwhile, flows into Quality and Multi-Factor ETFs hit their highest level in the bank's recorded history for the metric.

Corporate buybacks accelerated for a fourth week but remained slightly below seasonal averages. BofA stated that on a rolling 52-week basis, buybacks as a percentage of the S&P 500's market capitalization are at their lowest point since August 2021.