After hitting a record high just one day earlier, U.S. stocks experienced a broad and heavy sell-off on Thursday, with growth and speculative sectors hit the hardest. Major indices fell across the board, breaking through key technical support levels and signaling a potential shift in market momentum.
By the close of Thursday’s session, the Dow Jones Industrial Average had dropped 1.65%, retreating from its recent record high. The S&P 500 tumbled 1.7%, falling below its 21-day moving average and approaching its 50-day moving average. The tech-heavy Nasdaq Composite Index plunged 2.3%, also breaking through its 21-day moving average but finding some support at the 50-day mark. The Russell 2000 index, which tracks small-cap stocks, performed the worst, sinking 2.8% and decisively falling below its 50-day moving average to a two-month low.
High-flying growth stocks were among the hardest hit in the sell-off. Market favorites such as Tesla, Palantir, Broadcom, Robinhood, and AI chip giant Nvidia all saw significant declines.
The driving forces behind the three-year bull market appear to be shifting. According to the latest client fund flow data from Bank of America, hedge funds and other institutional clients have been the largest net sellers of individual stocks and exchange-traded funds since the start of 2025, offloading more than $67 billion in total. Many professional investors are treating the record-breaking rally as an opportunity to take profits.
In stark contrast, retail investors have remained a pillar of support for the market. Since the post-pandemic recovery in 2020, individual investors have consistently been the most steadfast “buy-the-dip” participants, Bank of America noted. This strategy has paid off handsomely amid the S&P 500’s repeated new highs this year. During recent market pullbacks, continued inflows from retail investors have allowed them to outperform many institutional players, who have remained cautious due to uncertainty over interest rates and geopolitical tensions ranging from trade wars to conflicts in Gaza, Ukraine, and Iran.
However, this pattern may be evolving. Bank of America pointed out that after the market’s sustained surge, retail investor enthusiasm has shown early signs of fatigue. This shift first became apparent in the first week of November, when hedge funds and other large investors recorded their biggest net sales of tech stocks in two years amid growing concerns over inflated valuations.
