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Short sellers pocket $10 billion in profits despite S&P 500 surge

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2024-07-10

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During the second quarter of this year, short sellers capitalized on their strategy of betting against stocks, amassing a substantial $10 billion in paper profits despite the broader market's upward trajectory.

Data from S3 Partners indicates that short sellers, known for borrowing and selling stocks with the intention of buying them back at lower prices, achieved notable gains. These profits were bolstered by successful trades in sectors such as industrials, health care, and financials, which helped offset a marked $15.7 billion loss in technology stocks, as reported by Ihor Dusaniwsky, managing director of predictive analytics at S3.

“Their stock-picking prowess was evident this quarter,” noted Dusaniwsky, highlighting specific declines in stocks like IBM Corp. and Cloudflare Inc.

The ability of short sellers to profit amid a rising market underscores a trend where investors have concentrated heavily on a few large-cap technology stocks, while other sectors faced challenges. The S&P 500 Index saw a 3.9% increase in the quarter ending June 28, driven by a nearly 37% surge in Nvidia shares. Similarly, the tech-focused Nasdaq 100 Index rose by 7.8% over the same period.

“There’s a notable concentration in the market right now,” observed Quincy Krosby, chief global strategist at LPL Financial. “The focus remains on a select few names, raising questions about their continued dominance moving forward.”

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