Hedge Funds Boost S&P Shorts to Decade High Before CPI, Earnings

Hedge funds are reloading on bearish wagers on US equities, betting the latest market retreat will persist amid worsening economic data and corporate earnings.

Large speculators, mostly hedge funds, saw their net short positions in S&P 500 e-mini futures increase to roughly 321,000 contracts as of Tuesday, according to data from the Commodity Futures Trading Commission. That’s the most bearish reading since November 2011 following the downgrade of the US’s sovereign credit rating.

Data from JPMorgan Chase & Co.’s prime broker unit showed a similar pattern, with the firm’s hedge fund clients last week raising bearish wagers against exchanged-traded funds and financial shares.

Rising bearishness is also evident on the long side of the book. After chasing a rally in technology shares, hedge funds have turned into sellers, unwinding their long positions in the industry at the fastest pace in 15 months, according to Goldman Sachs Group Inc.’s prime broker unit.

Skepticism has grown over the durability of 2023’s equity advance as data on manufacturing and services has added to fears an economic recession could come soon. And with the widely-watched inflation data due Wednesday and banks on Friday kicking off what’s forecast to be the worst earnings season since the depths of the pandemic crisis, bears are doubling down on their bets.