Feb. Short Report: US Stocks Under Fire

March 17, 2011

Short-sellers turned on U.S. equities in February, as the broad sell-off in financial markets began taking shape.

 

The most widely traded U.S. equity ETFs came under increased pressure from short-sellers last month, as political turmoil in the Middle East took the wind out of the sails of an equity market that had been rising steadily with the help of the Federal Reserve’s easy monetary policy.

The flip side of that phenomenon was a drop in short interest in commodities-related ETFs, including gold and energy, according to data compiled by IndexUniverse. Shorts also dropped in the most heavily traded emerging markets ETF, relieving some of the heavy pressure that had built up in January.

The months-long run-up in U.S. stock prices hit a wall in February, as financial markets turned their attention from the relatively benign resignation of Egyptian President Hosni Mubarak on Feb. 11 to protracted violence in Libya, home to between 2 and 3 percent of world crude oil output. Investors sought safe havens, such as precious metals, or looked for hot areas of the markets, such as energy.

Short interest in the SPDR S&P 500 ETF (NYSEArca: SPY), the biggest exchange-traded fund in the world, jumped 17 percent in February, after edging down the month before. The percentage of the ETF’s shares short relative to total outstanding longs as of Feb. 28 rose to 41 percent from about 36 percent.

The small-cap iShares Russell 2000 ETF (NYSEArca: IWM) meanwhile saw a jump in short interest of 16 percent, on top of an 11.5 percent increase in January. The percentage of IWM’s float short rose to 106 percent from about 94 percent in the prior month.

As our “Big Bets” table shows below, the PowerShares QQQ Trust (NasdaqGM: QQQQ) rounded out the trend in rising shorts, with short interest rising 23.5 percent last month after dropping almost 3 percent the month before.

 

Big Bets
Ticker Name % Float Short 1 Month % Change $Short ($, M)
SPY SPDR S&P 500 41.39 17.26 39,472.12
IWM iShares Russell 2000 106.31 16.31 17,348.00
QQQQ PowerShares QQQ 21.00 23.57 5,352.25
EEM iShares MSCI Emerging Markets 11.36 -4.53 4,162.28
IYR iShares Dow Jones U.S. Real Estate 110.14 4.40 3,696.57
XRT SPDR S&P Retail 531.52 -8.07 3,230.95
XOP SPDR S&P Oil & Gas Exploration & Production 188.19 1.78 2,693.39
GLD SPDR Gold 4.80 -3.98 2,636.06
XLE Energy Select SPDR 22.90 -3.42 2,507.30
DIA SPDR Dow Jones Industrial Average Trust 20.25 -16.80 2,009.76

 

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