Short sellers upped positions as stocks recoiled, tech shorts rout winners: S3

(Reuters) - Wall Street’s short sellers stepped up bearish stock bets following the market’s recoil from record highs last week, reaping sizable profits from the fall in some of the high-profile technology names that were at the vanguard of the rally, according to Financial analytics firm S3 Partners.

The S&P 500, the Dow Jones industrial average and the Nasdaq all fell sharply since peaking last Wednesday. The Nasdaq fell just over 10%, the most of the three, to enter a technical correction as of Tuesday’s close. The three main indexes rebounded on Wednesday.

The decline in tech stock prices helped reduce short interest in the sector, according to Ihor Dusaniwsky, managing director of predictive analytics at S3. But he said there was active short selling during the fall to keep dollar positions constant, with short interest percent of float increasing for all three indexes over the three trading sessions since the markets topped.

“People were shorting into the weak market and increasing their exposure as the notional value went down due to the price moves,” he said.

In the broad Russell 3000, total short interest fell $50.3 billion, but overall short interest as a percent of float rose 0.05%. In the tech-heavy Nasdaq the figures were -$28.9 billion and +0.30%, respectively.

Overall, shorts posted $61.4 billion in net-of-financing, mark-to-market gains in the three days.

The biggest winners on the short side were some of the bigger year-to-date short-side losers, S3 data showed. They included Tesla, Apple and Alibaba as the top three. Microsoft, and Facebook were four, five and seven respectively and Netflix was the 15th most-profitable short since the highs.

Carnival Corp, Nikola Corp, Norwegian Cruise Line, Macy’s and American Airlines rounded out the five biggest short losers.

“You’re seeing shorts doing what they’re supposed to be doing - shorting into a down market, trying to recoup some of their losses,” Dusaniwsky said, adding they had been “bloodied” since the Nasdaq and Nasdaq 100 rallied off the post-COVID lows on March 23.

Reporting by Alden Bentley; Editing by Dan Grebler