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Short sellers step back from consumer discretionary

Consumer discretionary companies with the highest short interest
Reproduced from S&P Global; Chart: Axios Visuals

Short sellers are distancing themselves from consumer discretionary stocks after backing away from consumer staples as of late August, according to S&P Global Market Intelligence.

Why it matters: The findings may come as a bit of a surprise, given that retailers reliant on selling consumer discretionary goods have lowered their forecasts and are addressing inventory issues.

  • Some short sellers may believe inflation has peaked, S&P says.

Details: Short interest in consumer discretionary stocks traded on U.S. exchanges represented 5.1% of all outstanding shares as of mid-August — a decline of 52 basis points since June 30.

  • It's also the lowest short interest in the sector since mid-February, S&P adds.
  • Home furnishing retail, department stores and automotive were the most shorted categories within consumer discretionary, at 13.89%, 10.35% and 9.39% respectively.
  • The most shorted stock in the sector is no surprise: 38.6% of Bed Bath & Beyond's shares are sold short.

Of note: "Short interest in Bed Bath & Beyond has risen steadily this year, from 28.46% at the end of December," S&P says.

Yes, and: Consumer discretionary remains the most shorted sector overall, beating out health care, which has short interest of 3.93%, and energy, which has short interest of 3.77%.

The big picture: "The average short interest for S&P 500 stocks was 2.22% as of mid-August, down from 2.31% in mid-July," S&P says.

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