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Short sellers pare back bets as US equities rally

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Short sellers pare back bets as US equities rally

Short sellers cut their bets against all U.S. stock sectors over the past four months as equity prices rose.

Average short interest in the S&P 500 was 2.25% in mid-February, down 11 basis points from mid-October 2022 when the S&P 500 hit a recent low, according to the latest S&P Global Market Intelligence data.

Short interest, which measures the percentage of outstanding shares held by short sellers, fell across all sectors from mid-October 2022 to mid-February, as the S&P 500 rallied about 16% over the same stretch.

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Short interest in consumer staples registered the sharpest fall among sectors, with a 3.36% level as of mid-February, down 254 basis points from mid-October.

Sellers continued to target the consumer discretionary sector, still betting that persistently high inflation will continue to dig into consumer demand. Short interest in consumer discretionary stocks was at 5.61% in mid-February, well above the next most-shorted sector, healthcare, which had short interest of 3.99%.

Most-shorted companies

Silvergate Capital Corp. remained the most-shorted U.S. stock as of mid-February, with short interest of nearly 62%. Bed Bath & Beyond Inc. was the second most-shorted stock, at more than 55% short interest.

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Energy in focus

Short sellers mostly continued to target the energy sector amid falling commodity prices. Short interest in the energy sector was at 3.57% in mid-February, down from 4% in mid-October 2022.

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Sellers have largely bet against integrated oil and gas stocks, a subsector that had 7.03% short interest as of mid-February.

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Within the energy sector, Vertex Energy Inc. was the most-shorted stock with 31.7% short interest. Aemetis Inc. was next with 19% short interest.