RPT-WRAPUP 1-Short interest edges up on US exchanges mid-Sept
09/24 08:18 PM
(Repeats to add WRAPUP 1 tagline)
NEW YORK, Sept 24 (Reuters) - Short interest edged higher on both the Nasdaq and New York Stock Exchange in mid-September, the exchanges said on Wednesday, suggesting that bearish sentiment in the stock markets held steady.
Short interest rose 0.9 percent on Nasdaq from late August to mid-September, while increasing 0.04 percent on the New York Stock Exchange.
"Although there is a modest increase in shares sold short, the confidence of the short sellers is lessening," said Dylan Wetherhill, president and founder of short interest tracking web site ShortSqueeze.com.
"Short sellers have been the traders to follow in this market and they are showing signs that the market may be at a tradable bottom."
Investors who sell securities "short" profit from betting stocks will fall. Short-sellers borrow shares and then sell them, waiting for the price to fall so they can buy them back for less, return them to the lender and pocket the difference.
Overall short-sale activity held steady in mid-September, with financial stocks accounting for the bulk of increases in short positions.
Short interest rose about 40.4 percent for Lehman Brothers (LEHMQ:$0.2250,$0.0875,63.64%) in the period that immediately preceded its bankruptcy filing on Sept 15, and 12.2 percent for Washington Mutual (WM:$2.26,00$-0.94,00-29.38%) , which has been looking for a suitor, as investors feared it could also be felled by mortgage losses.
The benchmark Standard & Poor's 500 <.SPX> fell 2.1 percent from late August to mid-September, as the government takeover of mortgage lenders Freddie Mac (FRE:$1.89,00$0.57,0043.18%) and Fannie Mae (FNM:$1.74,00$0.43,0032.82%) , Lehman Brothers' failure and the mounting problems of insurance giant American International Group (AIG:$3.31,00$-1.69,00-33.80%) spooked investors.
On Tuesday, AIG signed a definitive agreement with the federal government to receive an $85 billion loan in exchange for a 79.9 percent stake.
In response to the market turbulence last week, the U.S. Securities and Exchange started a list of stocks that cannot be shorted. The list now includes 900 companies across a broad spectrum of industries.
As of Sept 15, Nasdaq short interest rose to 10.07 billion shares from 9.98 billion shares on Aug. 29. Over the same period, NYSE short interest increased to 17.695 billion shares from 17.688 billion shares.
The Nasdaq's short ratio, or the average number of days it would take to cover the outstanding short positions, decreased to 5.22 days from 5.4 in late August. (Reporting by Phil Wahba, additional reporting by Emily Chasan, editing by Richard Chang)
