Short interest in banks and thrift stocks fell in the month ended July 15, as investors turned to the sector as a safe haven in a turbulent market.
Short interest in bank stock on the New York stock exchange fell 2%, while short positions in all stocks on the Big Board fell only 1.6%. Short interest in bank stocks on the Nasdaq fell by 1.6%, while short interest in all stocks trading on Nasdaq, including many hard-hit technology companies, rose 4%.
"Banks are a place where some of the money that has been taken out of the technology sector has gone," said Michael Stead, portfolio manager of SIFE Trust Fund, a Walnut Creek, Calif.-based fund that invests in financial services stocks.
"As a result, short investors are reducing their positions in banks," he said. (See full tables on page 24.)
In the last month, the stock market has gone through wild gyrations, with tremendous volatility marking many trading days.
Investors have fled technology stock because of disappointing earnings, while banks, with solid dividends and steady earnings, have presented a secure harbor.
As the banking sector looks better, short investors have reduced their stakes.
Short interest is the outstanding volume of shares sold short - that is, borrowed and promptly sold. Short sellers are betting that the stock price will fall, so their short positions can be covered profitably with cheaper shares.
Among the banking stocks with the largest unit decreases in short interest are the money-centers and superregionals. These are the companies that have attracted the most investor interest, Mr. Stead said.
"Money-centers have benefited more from the steepening of the yield curve, and they have economies of scale that help them to outperform," he said.
Citicorp short interest fell 2.245 million shares, the largest unit decrease of any bank. Chase Manhattan Corp. short interest fell 769,191 shares, the fifth-largest unit decrease.