(Bloomberg) -- Traders are pouncing on the most liquid instruments in the investing world to navigate the equity market turmoil spurred by the Federal Reserve’s newfound hawkish resolve. 

With the S&P 500 extending its selloff from a recent record to more than 10%, trading is spiking across exchange-traded funds from leveraged strategies tracking technology shares to those betting on market volatility. 

Two hours into Monday trading, the SPDR S&P 500 ETF Trust (ticker SPY), the world’s largest ETF, saw turnover reaching $40 billion -- 170% higher than its 30-day average at that time of a day. Volume in the tech-heavy Invesco QQQ Trust Series 1 (QQQ) was similarly elevated, while that for the ProShares Ultra VIX Short-Term Futures (UVXY), surged to 340% above its daily average. 

While past spikes in ETF volume have presaged an end to drawdowns, all bets are off as policy makers gear up to pare unprecedented monetary accommodation extended in the dark days of the pandemic. 

Transactions in instruments tracking large swaths of the market tend to rise when investors react to broad economic policy trends.

“ETF volumes have been dominating of late,” said Alon Rosin, Oppenheimer & Co.’s head of institutional equity derivatives. “Investors are simply using the most liquid instruments to pare down long exposures.”

Stocks extended declines Monday ahead of this week’s Fed policy meeting, during which the central bank is expected to signal a March hike in interest rates and balance-sheet reduction later this year to help fight inflation. Russia-Ukraine tensions further exacerbated the risk-off mood. 

The Nasdaq 100 slumped 3.6% as of 11:55 a.m. in New York, poised for the fifth straight session declining 1% or more. That’s a streak not seen since the 2008 global financial crisis. The tech gauge is down 15% since the start of the year and on course for the worst January on record. 

The latest tumble follows mayhem on Friday when the Nasdaq 100 plunged to finish the week down almost 8%, its worst performance since the March 2020 crash. QQQ, which tracks the gauge, saw a record $51 billion changing hands.

SPY was the most active product Friday, with more than 200 million shares changing hands. The ProShares UltraPro QQQ (TQQQ), a fund that aims to treble the daily performance of the Nasdaq 100, and UVXY, which bets on market volatility, ranked the second- and third-most traded. Both posted volume of more than 140 million shares, respectively. 

“Clearly people think a change is in the air,” said Bloomberg Intelligence ETF analyst Eric Balchunas. “Everyone is in a reposition mode, which means using ETFs to tweak allocations and adjust for the rate hike regime.” 

All told, ETF volume jumped Friday to 26% of the total exchange transactions, the highest proportion since April 2020, data compiled by Susquehanna International Group show. 

To Chris Murphy, co-head of derivatives strategy at Susquehanna, investors are flocking to liquid instruments to weather the market turmoil -- a sign of capitulation that may set the stage for an eventual recovery. In the options market, for instance, a record number of put contracts changed hands Friday as traders rushed for downside protection.  

ETF trading volumes peaked in early March 2020, weeks before the bear market’s trough. A similar pattern occurred in February and December of 2018. 

“It’s another bottom indicator to add to the list, but the market doesn’t seem to care,” Murphy said. 

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