By Carolina Mandl

NEW YORK (Reuters) – Global hedge funds added more bets against U.S. stocks last week to Jan. 9, ahead of a blowout U.S. jobs report that sparked a sell-off on Wall Street, Morgan Stanley (NYSE: ) and Goldman Sachs said in notes Friday.

The U.S. Labor Department’s closely watched employment report on Friday showed job growth accelerated to 256,000 jobs in December, the most since March, while the unemployment rate fell to 4.1%.

Hotter-than-expected jobs data sent stocks spiraling, sending 1.54% on Friday and erasing all of its 2025 gains.

Morgan Stanley said portfolio managers added shorts — or shorted stocks — in sectors such as staples, software, financials and health care in the days before the jobs report. as they sell long positions in communications services.

However, the bank said hedge funds bought stocks in Europe and Asia during the same period.

Goldman Sachs also said that short positions exceeded long additions to portfolios, but this trend was seen in all regions, led by North America and Europe.

“We’re seeing a rotation where managers are taking profits, selling their longs, and then adding to their shorts,” said Jon Caplis, CEO of hedge fund research firm PivotalPath. He said the move is also related to the Federal Reserve’s more hawkish take on interest rate cuts and big data releases, such as Wednesday’s consumer price index.

One exception was the technology, media and telecommunications sector (TMT), Goldman Sachs said, as hedge funds added to it at the fastest pace in three months.

Stocks in the technology sector were among the hardest hit on Friday, down 2.23%, behind financials and real estate. Major technology companies began reporting earnings after Martin Luther King Jr. Day on January 20.

As two of the largest global prime brokers, Goldman Sachs and Morgan Stanley track their hedge fund clients’ portfolios to identify positioning and flow trends.