GameStop’s surge has struck fear into anyone caught on the wrong side of its ascent. But those bearish positions probably aren’t big enough to lay low the larger universe of investment funds.
That’s the view of Barclays strategists led by Maneesh Deshpande. By plotting the value of bearish equity bets versus the whole market’s capitalisation, they found that short sales have actually dwindled during the past year to the lowest level since at least 2008. Moreover, those most-heavily shorted companies targeted by day traders this year had bearish wagers amounting to less than 0.001 per cent of the $43 trillion market.
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There s truth in this as far as it goes – but it goes only so far as to cover perhaps a few-dozen stocks with extremely high short interest, and does not imply the broad market is ripe for these short-squeeze stampedes to be a strong or lasting driver of the investment outlook.
A couple of flawed premises are at work in the simple David-vs.-Goliath angle. For one thing, neither hedge funds nor short sellers have ruled the Wall Street playground by any stretch in recent years. Quite the opposite, in fact.
And the current market has an unusually low short base relative to overall market value, which if anything implies less of a cushion of entrenched bearishness to fuel index gains from here.
All three major averages dropped more than 3% this week, posting their worst week since October. For January, the blue-chip Dow and the S&P 500 fell 2% and 1.1%, respectively, suffering their first negative month in four. The tech-heavy Nasdaq eked out a 1.4% gain on the month.
Shares of GameStop jumped 67.9% after Robinhood said it would allow limited buying of the stock and other heavily shorted names after restricting access the day before. Robinhood raised more than $1 billion from its existing investors overnight, in addition to tapping bank credit lines, to ensure it had the capital required to allow some trading again in volatile stocks like GameStop.
Invesco QQQ Trust (QQQ) are all nearly 2% lower just after 12:30 PM EST.
While there has been significant hype around the highly efficacious studies for the Moderna and Pfizer vaccines, which have been rolling out over the last couple of months, JNJ said its one-dose vaccine demonstrated a more tepid 66% effectiveness in protecting against the coronavirus.
The effectiveness of Johnson and Johnson’s vaccine varied based on location. The vaccine was 72% effective in the United States, 66% in Latin America, and 57% in South Africa after a month, the company said. Meanwhile, the vaccine provided complete protection against coronavirus-related hospitalizations. Disappointed investors sold the stock, causing shares of JNJ to decline 3.6% and contributing to a loss in the
Day-trader obsession with hated stocks takes over options market
By Katherine Greifeld Bloomberg,Updated January 27, 2021, 9:59 a.m.
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(Bloomberg) The Reddit-led hunt for heavily shorted stocks is migrating to the options market.
The most-hated stocks have scorched the naysayers, with a Goldman Sachs Group Inc. basket set for its best month since at least 2008. Thatâs been accompanied by a âdramatic shiftâ in options activity toward heavily-shorted securities such as GameStop Corp., BlackBerry Ltd. and Palantir Technologies Inc., according to Barclays Plc analysts.
Frenzied buying of short-dated call contracts has exacerbated the pain for the bears. Normally dealers selling the bullish options buy the underlying stock as a hedge. With enough volume and thereâs been plenty that can drive the stocks higher, making the calls in-the-money. While retail traders had previously favored large-cap tech stocks, the pivot into smaller companies has