You are wrong on your assumption about T-bills. These are considered a safe haven asset. Getting 2.27% is better than zero or negative. Also they are liquid so you can always get out easily. A long only portfolio manager has a relative benchmark he is trying to beat. So with the S&P heading south, cash is king.
Typically, a couple of the following will be happening:
1) Raising cash (if already owning stocks). I.e. selling stock and putting the money into a money market fund. If have cash, put in money market fund.
2) Selling calls against the position. This partially offsets the loss from the stock going down.
3) A long only portfolio manager who can't use derivatives would do #1 and has a list of stocks that he/she likes with price entry points. If the stock reaches that point then they will buy some. Right now things keep going down and so there is little incentive to buy if you can buy it tomorrow at a lower price. For example AAPL might be too expensive at 210 based upon p/e, dividend yield, but at 170 it might be a buy.
4) A long/short portfolio manager is currently worried that his long short trade is working and most likely is reducing risk if risk is based upon volatility.
5) A long only manager who is required to be at least xx% invested most likely would move to what is considered defensive plays and out of aggressive plays (i.e. shift from high beta stocks to low beta stocks such as tech to big pharma/utilities). He would also move out of more speculative plays into more slow and steady wins the race types.