The weeklong rally from last weekâ€™s lows has taken a bite out of the $93.7 billion of mark-to-market profits, +11.12%, short sellers have earned since the beginning of October. Over the last week the S&P 500 index increased by 3.31%, the Nasdaq by 4.3% and the Russell 3000 by 3.23%. The S3 Blacklight platform tracks over 8,000 U.S. domestic equity shorts worth over $825 billion, which incurred mark-to-market losses of $23.3 billion, or -2.86%, over the last week.
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Like Black Friday shoppers, investors are discounting prior performance and looking forward to the holiday shopping season to decide which retailors to put on their naughty or nice lists. Most of the larger retailers posted impressive previous quarter sales but investors are looking closely for signs for potential holiday misses. Retailers such as Target Corp (TGT), Kohlâ€™s Corp (KSS) and TJX Cos (TJX) are looking at profit margin rates and profit guidanceâ€™s that may not meet expectations as they ramp up e-commerce, shipping and remodel stores to lure in buyers. Several retailers are having revenue and operational difficulties with L Brands (LB) cutting its dividend, Lowes (LOW) closing down two home improvement subsidiaries and its Mexican retail operation and Sears (SHLDQ) filing for bankruptcy.
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Hong Kong\China short sellers have been actively shorting into the declining Hong Kong and Chinese markets and generated $17.3 billion in mark-to-market profits, +18.0%, as the Hang Seng Index declined 16.7% and the CSI 300 Index declined by 25.8% in 2018. Short sellers continue to increase their positions as their profits build, adding $1.7 billion in new shorts throughout the year. Hong Kong\China with $80 billion in short interest is the second most shorted country behind the U.S. ($911 billion) and ahead of Japan ($73 billion) and the U.K. ($66 billion.)
Alibaba Group Holding Ltd. (BABA) reported strong 3rd quarter results with revenues up 56% to 83.03 billion Yuan and net income up 34% to 24.07 billion Yuan. Earnings rose 25% to $1.63/share, but unlike revenues and net income, were slightly below analystâ€™s expectations according to Thomson Reuters. The Chinese internet e-commerce giant also stated that it is buying a 33% stake in its payment affiliate Ant Financial.
Chinese e-commerce retailer Alibaba Group Holding Ltd (BABA US) reported 1st quarter earnings that beat analystsâ€™ expectations handily. Both revenues and net income outperformed with CNY earnings per share up 62% year-on-year and CNY revenues up 56% year-on-year. Besides its ad driven e-commerce business, Alibabaâ€™s digital media, entertainment and streaming businesses as well as cloud computing business also showed strong growth and profitability. Alibabaâ€™s stock price is up 8% this week.
Chinese e-commerce giant Alibaba Group Holding Ltd. (BABA US) is up 27% for the year at $103.30 and nearing its historical high of $109.36. The company reported stellar 1st quarter 2017 fiscal results where it beat EPS and revenue estimates handily and its secondary businesses of digital media and cloud computing are beginning to contribute a greater percentage to gross revenues as its footprint expands.