Short sellers cut bets against most sectors, raise positions against materials

Short sellers reduced their bets against most sectors through May as equities roared to new all-time highs, but increased their positions against materials, industrials and information technology stocks.

Short sellers boosted their bets against the materials sector the most, increasing short interest 10 basis points (bps) to 3.10% at the end of May from 3% at the end of April, the highest level of short interest against the sector in years, according to S&P Global Market Intelligence data.

Short interest in industrials increased 9 bps from the end of April to 3.42% at the end of May, while short interest in IT stocks increased 7 bps to just over 4%, the data shows.

Meanwhile, short interest in the majority of the stock market declined, falling the most in the consumer discretionary sector, which saw a reduction of 30 bps to 5.46% at the end of May from 5.76% at the end of April. Consumer discretionary remained the most-shorted sector as sellers continue to bet that relatively high inflation will erode demand.

The decline in short interest took place as the S&P 500 rallied 4.8% from the end of April to the end of May.

Within the materials sector, PureCycle Technologies Inc. was the most-shorted stock with 23.8% short interest, up from 23.3% at the end of April. It was followed by Tantech Holdings Ltd., which saw its short interest climb to 22.9% at the end of May from 8.1% at the end of April, according to Market Intelligence data.

Commodity chemicals was the most-shorted materials industry at the end of May, with average short interest of 4.7%, up from 3.7% at the end of April.

Precious metals and minerals was the second-most-shorted at 4%, down from 4.2% at the end of April.

Overall, Smart for Life Inc. was the most-shorted stock at the end of May, with short interest of 51.4%, up from 45.4% at the end of April and 34.1% at the end of March.