Short sellers begin to bet on the slowdown of the US economy

Elon Musk becomes Twitter’s largest single shareholder 1:04 New York (CNN Business) — The view from Wall Street is terribly depressing. Agents are placing big bets against retailers as recession fears gain traction. Investors are becoming more skeptical of energy stocks after rising oil prices, according to S&P Global Market Intelligence. And investors are also turning their back on health care investments as interest rates start to rise. Short sellers are beginning to bet on the slowing economy, and against a number of sectors that have performed well recently. These are the sectors where short interest is increasing. Consumer Stocks Pessimistic investors shy away from consumer stocks, in part because they worry that rising prices will eventually cause an economic slowdown, even a recession. “The consumer discretionary sector remained the largest short seller in mid-March, largely due to the impact of rising inflation on demand for non-essential goods,” according to S&P. Short interest levels, the percentage of shares held by investors who are betting a stock will go down, rose to 5.24% for consumer discretionary stocks. It is the highest level since mid-January 2021. Big 5 retailers Sporting Goods, Citi Trends and Camping World Holdings were among the top-selling consumer stocks shorted in mid-March, according to S&P. Also the manufacturers of electric vehicles Arcimoto and Workhorse Group. Oil stocks Investors aren’t just nervous about consumers. They also seem to think that soaring oil prices will taper off soon, which could hurt their profits and boost energy company stock prices. Chevron shares, for example, are up almost 40% this year, making them the best performers in the Dow. “Short interest in the energy sector, which has taken off on bets that historically high oil prices are unlikely to last, rose to 3.91% in mid-March, its highest level since mid-October 2020,” S&P added. S&P did not list the specific energy companies short sellers are targeting, but oil and drilling equipment firms Transocean, Nabors and Helmerich and Payne had a high level of short interest, according to an analysis of companies reported by CNN. Business conducted using Refinitiv stock selection tools. Also in this case are oil and gas companies like Warren Buffett/Berkshire Hathaway’s new darling, Occidental Petroleum, EQT, Southwestern Energy and Chesapeake. Still, some wonder whether investors betting against oil will be hurt if the conflict between Russia and Ukraine doesn’t end soon. “Oil prices will certainly continue their upward path making oil companies more profitable in the coming quarters,” Swissquote senior analyst Ipek Ozkardeskaya said in a recent report. “Increasing bets on short selling also means a growing risk of a ‘short squeeze’, in which investors who bet on falling prices decide to close their positions, and closing a short position means buying back stocks,” he added, noting that “short squeezes” have pushed stocks like GameStop and AMC higher since the start of 2021. Healthcare stocks Healthcare stocks are also in the crosshairs of dovish investors. The sector has benefited as a result of the covid-19 pandemic, but as more people get vaccinated, boosted and have access to new pills that can treat coronavirus patients, healthcare companies may become less attractive. . Many investors have flocked to healthcare stocks because they see the sector as a safe, defensive bet if the economy slows. But health care stocks may also lose some appeal among conservative investors looking for a solid dividend yield at a time when interest rate hikes by the Federal Reserve are likely to make Treasuries more attractive. long term. Diagnostics companies Quest and PerkinElmer, drugmaker Jazz Pharmaceuticals and medical equipment maker Tandem Diabetes are among the best-selling healthcare stocks, according to Refinitiv. Banks Staying Out Curiously, short sellers aren’t hanging around bank stocks. Investors appear to expect further interest rate hikes to lift financial sector lending returns. According to S&P data, the financial services sector saw the least increase in short interest until mid-March. “Financials was the lowest short seller, likely due to bets that the banking sector will benefit from multiple interest rate hikes by the Federal Reserve this year and next,” S&P said. According to futures that track interest rate projections, traders are pricing in more than 80% of the chance that short-term rates will be between 2.5% and 2.75% at end of 2022. This is an increase from the current level of 0.25% to 0.5%. The big banks will start reporting their first quarter results next week. JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley will publish their results the week of April 11.

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