Goldman Sachs warns: Behind the big dump in US stocks lies a hidden panic of "extreme hedging".

John Flood, a partner at Goldman Sachs, pointed out that the dramatic reversal of U.S. stocks on Thursday highlighted that Nvidia's stellar performance did not provide traders with the expected "risk-off" signal; instead, it prompted them to urgently build defenses to avoid further losses.
The U.S. stock market's early gains on Thursday quickly evaporated. The S&P 500 index surged 1.9% in the first hour of trading but turned to a decline before 1 PM local time — marking the largest intraday volatility since the market turmoil in April, erasing more than $2 trillion in market value from its peak that day, and closing below the 100-day moving average for the first time in months. The fear index VIX soared above 26. "The market is now filled with old scars," wrote Flered in a report to clients, "and the market is extremely focused on hedging 'crowding risk'; investors have entered a pure profit and loss protection mode."