Bloomberg’s Lu Wang and Melissa Karsh had the story two days ago.
From “Hedge Funds Slashing Equity Exposure at Fastest Pace Since 2014” posted Wednesday afternoon:
Fund managers covered their money-losing short sales while trimming bullish bets for a fourth straight session Tuesday. Over that stretch, their total outflows from the market reached the highest level since October 2014, data compiled by Goldman Sachs Group Inc.’s prime-brokerage unit show.
Whether it’s forced selling to cover losses on short sales or simply the fate of high-beta bets in a rout, stocks that hedge funds have shown enthusiasm for in the past led the way down Wednesday. The Goldman Sachs Hedge Industry VIP ETF (ticker GVIP), tracking their most-popular stocks, tumbled 4.3% for the worst day since September. All but one of its members ended in the red…
“If you’re getting killed on your shorts and need to close those out and reduce overall exposure, you’re going to go first to big winners that have done well,” said George Pearkes, global macro strategist at Bespoke Investment Group LLC.
Most-shorted shares backfired again Wednesday, with a Goldman Sachs basket of such stocks jumping 9%. The group has rallied more than 50% in January, poised for deliver the worst month for bears on record.
The broad market, however, was bleeding. The S&P 500 dropped 2.6% on Wednesday for its worst day since October. Tech giants, which hedge funds had rushed to buy before their earnings, wavered. Apple Inc. snapped a six-day winning streak. (emphasis mine) Tesla Inc. dropped 2.1%, trimming its 2021 gain to 22%.
Thanks to friend-of-the-blog Mark Visnic for the pointer.
Mark’s take: Until hedge funds right-size their risk this price action we are seeing in Apple could continue. AAPL would have been down much more if it had reported anything less.
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