{"id":14206,"date":"2025-04-27T12:25:28","date_gmt":"2025-04-27T12:25:28","guid":{"rendered":"https:\/\/finderica.com\/?p=14206"},"modified":"2025-04-27T12:25:28","modified_gmt":"2025-04-27T12:25:28","slug":"credit-a-short-squeeze-for-the-stock-markets-big-two-day-bounce","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=14206","title":{"rendered":"Credit a &#8216;short squeeze&#8217; for the stock market&#8217;s big two-day bounce"},"content":{"rendered":"<div id=\"RegularArticle-ArticleBody-5\" data-module=\"ArticleBody\" data-test=\"articleBody-2\" data-analytics=\"RegularArticle-articleBody-5-2\"><span class=\"HighlightShare-hidden\" style=\"top:0;left:0\"><\/span><\/p>\n<div class=\"InlineImage-imageEmbed\" id=\"ArticleBody-InlineImage-108134886\" data-test=\"InlineImage\">\n<div class=\"InlineImage-wrapper\">\n<div>\n<p>Traders work on the floor at the New York Stock Exchange on April 22, 2025.<\/p>\n<p>Brendan McDermid | Reuters<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"group\">\n<p>A key force at the center of the stock market&#8217;s massive two-day rally is the frantic behavior of short sellers covering their losses.<\/p>\n<p>Hedge fund short sellers recently added more bearish wagers in both single stocks and securities tied to macro developments after the whipsaw early April triggered by President Donald Trump&#8217;s tariff rollout and abrupt 90-day pause, according to Goldman Sachs&#8217; prime brokerage data.<\/p>\n<p>The increased short positions in the market created an environment prone to dramatic upswings due to this artificial buying force. A short seller borrows an asset and quickly sells it. When the security decreases in price, they buy it back more cheaply to profit from the difference.<\/p>\n<p>It can backfire when the security suddenly rallies and short sellers are forced to buy back their borrowed stocks rapidly to limit their losses, a Wall Street phenomenon known as a short squeeze.<\/p>\n<p>If the market appeared to be rallying on no real tangible news Tuesday other than some walking back of comments on China and the Federal Reserve by Trump, credit this phenomenon.<\/p>\n<p>&#8220;Squeeze risk is real today,&#8221; John Flood, a managing director at Goldman Sachs, said in an early note to clients Wednesday.<\/p>\n<p>Flood echoed the sentiment of many traders who have said the market appeared coiled for a relief rally because so many hedge funds were caught on the wrong side of this bet.<\/p>\n<\/div>\n<div>\n<div class=\"Collapsible-proliveCollapsableContainer\" role=\"button\" tabindex=\"0\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"256\" height=\"256\" viewbox=\"0 0 256 256\" aria-labelledby=\"title desc\" role=\"img\" focusable=\"false\" preserveaspectratio=\"xMinYMin\" class=\"Collapsible-stockChartIcon\"><title>Stock Chart Icon<\/title><desc>Stock chart icon<\/desc><g transform=\"translate(1.4065934065934016 1.4065934065934016) scale(2.81 2.81)\"><path d=\"M 87.994 0 H 69.342 c -1.787 0 -2.682 2.16 -1.418 3.424 l 5.795 5.795 l -33.82 33.82 L 28.056 31.196 l -3.174 -3.174 c -1.074 -1.074 -2.815 -1.074 -3.889 0 L 0.805 48.209 c -1.074 1.074 -1.074 2.815 0 3.889 l 3.174 3.174 c 1.074 1.074 2.815 1.074 3.889 0 l 15.069 -15.069 l 14.994 14.994 c 1.074 1.074 2.815 1.074 3.889 0 l 1.614 -1.614 c 0.083 -0.066 0.17 -0.125 0.247 -0.202 l 37.1 -37.1 l 5.795 5.795 C 87.84 23.34 90 22.445 90 20.658 V 2.006 C 90 0.898 89.102 0 87.994 0 z\" transform=\" matrix(1 0 0 1 0 0) \" stroke-linecap=\"round\"><\/path><path d=\"M 65.626 37.8 v 49.45 c 0 1.519 1.231 2.75 2.75 2.75 h 8.782 c 1.519 0 2.75 -1.231 2.75 -2.75 V 23.518 L 65.626 37.8 z\" transform=\" matrix(1 0 0 1 0 0) \" stroke-linecap=\"round\"><\/path><path d=\"M 47.115 56.312 V 87.25 c 0 1.519 1.231 2.75 2.75 2.75 h 8.782 c 1.519 0 2.75 -1.231 2.75 -2.75 V 42.03 L 47.115 56.312 z\" transform=\" matrix(1 0 0 1 0 0) \" stroke-linecap=\"round\"><\/path><path d=\"M 39.876 60.503 c -1.937 0 -3.757 -0.754 -5.127 -2.124 l -6.146 -6.145 V 87.25 c 0 1.519 1.231 2.75 2.75 2.75 h 8.782 c 1.519 0 2.75 -1.231 2.75 -2.75 V 59.844 C 41.952 60.271 40.933 60.503 39.876 60.503 z\" transform=\" matrix(1 0 0 1 0 0) \" stroke-linecap=\"round\"><\/path><path d=\"M 22.937 46.567 L 11.051 58.453 c -0.298 0.298 -0.621 0.562 -0.959 0.8 V 87.25 c 0 1.519 1.231 2.75 2.75 2.75 h 8.782 c 1.519 0 2.75 -1.231 2.75 -2.75 V 48.004 L 22.937 46.567 z\" transform=\" matrix(1 0 0 1 0 0) \" stroke-linecap=\"round\"><\/path><\/g><\/svg><\/p>\n<div class=\"Collapsible-proLivePlayerCloseOrExpand\"><\/div>\n<\/div>\n<p><iframe title=\"S&amp;P 500\" src=\"https:\/\/www.cnbc.com\/appchart?symbol=.SPX&amp;range=5D&amp;type=mountain&amp;embedded=true&amp;%24DEVICE%24=undefined\" height=\"460\" scrolling=\"no\" style=\"border:0;width:100%\"><\/iframe><\/p>\n<p>S&amp;P 500<\/p>\n<\/div>\n<div class=\"group\">\n<p>Short covering was on display Tuesday and Wednesday as stocks shot up on signs of easing tensions on trade even though no concrete deals have been reached yet. Treasury Secretary Scott Bessent said Wednesday &#8220;there is an opportunity for a big deal here&#8221; on trade issues between the U.S. and China.<\/p>\n<p>The 30-stock\u00a0Dow Jones Industrial Average\u00a0surged another 1,100 points Wednesday at its highs following a 1,000-point gain to end a four-day losing streak. The\u00a0S&amp;P 500\u00a0is up 3.5% week to date after back-to-back winning sessions.<\/p>\n<p>Trump&#8217;s quick reversal on Federal Reserve Chair Jerome Powell also fueled the positive sentiment. Trump said he has &#8220;no intention&#8221; of firing Powell, after saying the central bank chief&#8217;s &#8220;termination cannot come fast enough&#8221; just a few days ago.<\/p>\n<p>But the rally was quickly fading, with the Dow up just 500 points at midday Wednesday. The fading short squeeze boost evident at the open could be a reason for the pullback off the highs.<\/p>\n<p>Also, Goldman&#8217;s Flood said hedge funds have not gone from short-covering to outright buying on the long side, a sign that the rally doesn&#8217;t have high conviction behind it.<\/p>\n<p>&#8220;I am closely monitoring to see if HF covers in macro and singles start to evolve into long buys,&#8221; Flood said. &#8220;Also want to see longer duration investors step in and buy names they view as fair value. We have not seen any of this type of action, yet.&#8221;<\/p>\n<\/div>\n<div class=\"group\">\n<div class=\"RelatedContent-relatedContent\" id=\"RegularArticle-RelatedContent-1\">\n<div class=\"RelatedContent-container\">\n<div class=\"RelatedContent-nonCollapsibleContent\">\n<h2 class=\"RelatedContent-header\">Don\u2019t miss these insights from CNBC PRO<\/h2>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p><a href=\"https:\/\/www.cnbc.com\/2025\/04\/23\/credit-a-short-squeeze-for-the-stock-markets-big-two-day-bounce.html\" target=\"_blank\" rel=\"noopener\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Traders work on the floor at the New York Stock Exchange on April 22, 2025. Brendan McDermid | Reuters A key force at the center of the stock market&#8217;s massive two-day rally is the frantic behavior of short sellers covering their losses. Hedge fund short sellers recently added more bearish wagers in both single stocks<\/p>\n","protected":false},"author":1,"featured_media":14207,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[196],"tags":[242,225,238,175,1545,1219,222,5876],"class_list":{"0":"post-14206","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-finance-news","8":"tag-big","9":"tag-bounce","10":"tag-credit","11":"tag-markets","12":"tag-short","13":"tag-squeeze","14":"tag-stock","15":"tag-twoday"},"_links":{"self":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/14206","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=14206"}],"version-history":[{"count":0,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/14206\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/media\/14207"}],"wp:attachment":[{"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=14206"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=14206"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=14206"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}