Short Selling Against S&P 500 Drops to Lowest Level in 12 Months

Wagers against the Standard & Poor’s 500 Index fell to a one-year low as short sellers slashed bets that phone and consumer discretionary stocks, including Qwest Communications Inc. and Abercrombie & Fitch Co., will retreat.

Short interest on the S&P 500 dropped to 7.29 billion shares, or 4.15 percent of shares available for trading, as of Dec. 15, down 2.9 percent from two weeks earlier, according to data compiled by U.S. exchanges and Bloomberg. For phone companies, it slid 12 percent to 440.9 million, and fell 8.7 percent to 1.2 billion shares for consumer discretionary stocks.

"There’s been a lot of optimism in the market and it shows in many ways," said Richard Sichel, who oversees $1.5 billion as chief investment officer at Philadelphia Trust Co. "None of the main indicators make you want to move out of stocks other than for individual reasons."

The S&P 500, up 13 percent in 2010 through yesterday, increased 4.6 percent during the first two weeks of December. It has advanced 6.5 percent in December after losing 0.2 percent in November and posting a combined gain of 13 percent in September and October, the biggest increases during those months since 1998. The measure has rallied 20 percent since Fed Chairman Ben S. Bernanke suggested on Aug. 27 that he was prepared to purchase bonds to spur economic growth.

Short interest on Qwest, the Denver-based phone company that was acquired by CenturyLink Inc. earlier this year, tumbled 42 percent to 83.1 million shares, or 4.8 percent. Bets against Abercrombie & Fitch Co., the New Albany, Ohio-based teen- clothing retailer that has almost doubled in New York Stock Exchange trading since June, sank 35 percent to 6.9 million shares, or 8 percent, over the same period.

Sears Holdings Corp. and First Solar Inc. are the most shorted stocks in the benchmark index for U.S. equities. Short selling in Sears, the largest U.S. department-store chain, is at 32 percent of float, while it is 30 percent for First Solar, the world’s biggest maker of thin-film solar modules.

U.S. stock exchanges release data on short selling, or the sale of borrowed stock with the hope of buying it back at a lower price, every two weeks.


To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net.