S&P 500 Short Sales Hit 2 1/2-Month High Amid Health-Care Bets By Rita Nazareth
July 11 (Bloomberg) -- Bets against the Standard & Poor's 500 Index rose to the highest since April last month as investors shorted more shares of health-care, technology and financial companies, including Pfizer Inc., Microsoft Corp. and Bank of America Corp. Short interest on the S&P 500 increased to 10.01 billion shares as of June 30, a gain of 2.4 percent from two weeks earlier, according to data compiled by U.S. exchanges and Bloomberg yesterday. That's the most stock sold short since April 15. Wagers against health-care shares rose 8.1 percent, the most among 10 industries, to 962.8 million. Traders have increased wagers that stocks will decline as economic data dashes hopes that the recession is easing. Reports in the past month have shown home sales trailed estimates while consumer confidence plunged. The S&P 500 has retreated 7.1 percent since reaching a seven-month high on June 12. "There's just a lot of bearishness," said James Paulsen, who helps oversee $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. "It reflects the brutal recession we're in. There's a dominance of doubt and short interest is just a reflection of that." U.S. stocks fell for a fourth week, the longest decline since March, after the Reuters/University of Michigan index of consumer sentiment dropped more than economists estimated. The economy shrank 5.5 percent in the first quarter and 6.3 percent in the fourth quarter of 2008, the worst six months since 1958, according to data compiled by Bloomberg. Technology Bears Bets against technology companies increased 4.1 percent to 1.57 billion shares as of June 30, while short interest for financial institutions advanced 1.8 percent to 3.23 billion. 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. Investors are betting against health-care companies as President Barack Obama proposes an industry overhaul to extend coverage to uninsured Americans. "There's a lot of concern about the government's health- care package and how businesses are affected," said David Goerz, who oversees $17 billion as chief investment officer at Highmark Capital Management in San Francisco. Short interest on Pfizer, the world's biggest drugmaker, rose 16 percent to 235.3 million shares. The company is buying Wyeth in a deal expected to close by the end of the year, according to data compiled by Bloomberg. Traders betting that Wyeth stock will rise to Pfizer's offer may be buying Wyeth shares and shorting Pfizer stock in an arbitrage. `Sharp Appreciation' Bets against Microsoft, the world's largest software maker, surged 23 percent to 86.8 million, while bearish wagers on Bank of America advanced 14 percent to 109.1 million. Financial and technology companies in the S&P 500 have surged 78 percent and 39 percent, respectively, since the index sank to a 12-year low on March 9. Those are the biggest gains among 10 industries in the gauge. "It's not surprising that short interest would rise for technology and financials after such a sharp appreciation," Goerz said. Bets against raw-materials producers fell 4 percent to 314.6 million. Wagers against Freeport-McMoRan Copper & Gold, the world's largest publicly traded copper producer, sank 14 percent to 25 million. http://www.bloomberg.com/apps/news?pid=20601213&sid=a2p0Uy4smWSA
