Bank of America said in a client research note on Tuesday that its clients seized the opportunity to buy the dip last week as the S&P 500 saw its worst performance since March 2023, dropping by 4.2%.
According to the bank, clients were net buyers of U.S. equities, with inflows totaling $2.4 billion.
This marked the largest inflows in nine weeks, driven primarily by purchases of single stocks. In contrast, exchange-traded funds (ETFs) saw their second consecutive week of outflows, as inflows focused solely on large-cap stocks.
BofA's retail and hedge fund clients reversed their previous trends of selling, becoming net buyers after two and four weeks of outflows, respectively.
Meanwhile, BofA said institutional clients continued to sell equities for the third straight week.
They revealed that corporate buybacks also surged to their highest level since late June, contributing to what BofA describes as a "record year" for buybacks as a percentage of the S&P 500 market cap.
The technology and communication services sectors led the inflows, with tech stocks experiencing their largest inflow since June.
Furthermore, communication services are said to have continued to attract investor interest, extending its buying streak to 23 consecutive weeks.
However, outflows were recorded in sectors such as real estate, industrials, and materials, with industrials seeing outflows in eight of the last nine weeks.
ETF activity painted a different picture, according to BofA. While single stocks saw strong inflows, ETFs across eight of 11 sectors recorded outflows.
Technology ETFs experienced the largest outflows, while utilities ETFs saw the largest inflows. BofA recently upgraded utilities to overweight due to their income and quality attributes amid expected volatility.
BofA notes that despite overall ETF outflows, the trend for utilities has started to turn positive since spring, and single stocks in the sector are also beginning to see inflows.