Short Interest In Nasdaq Stocks Hits New High --- Increase Is 13th in a Row, Comes Amid Fed Boost In Short-Term Rates
NEW YORK -- For the 13th consecutive month, short interest on the Nasdaq Stock Market set a record, jumping 2.8% to 701.8 million shares in mid-February from mid-January's 682.4 million.</br></br>The continued climb this month in uncovered short positions, a generally bearish indicator, comes partly in the wake of the Federal Reserve Board's Feb. 4 short-term interest rate boost that so unsettled markets.</br></br>For the previous 12 months, investors had placed growing bets that Nasdaq stocks -- many of them with rich price-earnings multiples -- were set for a fall. Now that the Fed's rate rise has ushered in a correction in the stock market, investors seem to be saying that they expect share prices to retreat further, market professionals believe.</br></br>"It's not a surprise to me mthat Nasdaq short interest hit another record in {February} because there are more stocks today that are overvalued than there were a month ago," said Stan Trilling, senior vice president with PaineWebber in Los Angeles.</br></br>A short sale is a bet that a stock will tumble. An investor sells borrowed shares, knowing that they must eventually be replaced for return to the lender. If the replacement shares cost less than those sold earlier, the short seller makes a profit. Short interest is the total of shares sold short at any given time and not yet covered.