Stocks Are Going Up. Investors Are Selling.

Despite the S&P 500SPX –0.72% rallying 3.5% last week, analysts seemed to have soured on stocks last week, even though they closed the third quarter on a high note with 3.5% gains.

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During the past week, United States equity markets have seen an outflow of $3.2 billion, which was their biggest weekly outflow since October and their first in five weeks. Those figures are based on the trading activities of clients of BofA Securities, which have been tracked since 2011.

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According to a report published by BofA strategists on Tuesday, the largest outflows in recent weeks have come from small investors buying exchange-traded funds, not individual stocks. A major reason for the outflows was the fact that both institutional and private clients were buyers the week prior. It has been three consecutive weeks in which hedge funds have been net buyers. All three size segments of clients were selling equities, i.e., small, mid, and large.

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According to BofA Investment Management, the trend of buying dips in bank stocks appears to have ended for the time being. The sector has seen its first outflow in five weeks. Besides the cyclical and value-oriented sectors, other sectors experienced inflows, with the energy, industrials, and materials sectors leading the charge-all which have seen inflows in the past 10 weeks.

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It is worth mentioning, in the meantime, that growth stocks, led by the communication services and technology sectors, saw outflows last week.

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The BofA strategists wrote: "Of course, buybacks of corporate client shares slowed down this week, as well as the usual deceleration in the weeks leading up to earnings (which is typical in the weeks leading up to earnings). "