Charles Schwab Corp (SCHW) cut its commissions on US listed equities, ETFs and options to $0 yesterday which caused the 40 stocks we follow in the Investment Banking & Brokerage Sector to fall an average of -3.65%. The stocks with the largest declines were TD Ameritrade (AMTD)Â Â Â -25.36%; E*TRADE Financial (ETFC) -16.60%; Charles Schwab Corp (SCHW) -9.83%; Ladenburg Thalman Financial (LTS) -9.69%; and Interactive Brokers Group (IBKR) -9.48%.
Short sellers in the sector, which were more heavily weighted to the pure brokerage stocks, were up $288.2 million in mark-to-market profits, +6.15% on the day. The four largest U.S. brokerage stocks were in the top five most profitable short trades in the sector.
Short interest in the overall Capital Markets sector has been increasing steadily in 2019 with total short interest up 27% for the year. Total short interest in the Capital Markets Sector is $20.44 billion, up $4.40 billion in 2019.
Short interest in the Investment Banking & Brokerage Sub-Industry increased at a slightly slower pace than the overall Capital Markets Sector. Short interest is $4.68 billion, up $828 million, or +21%, in 2019. The largest shorts in the sector are:
The Investment Banking and Brokerage Sector is down again today on analystsâ€™ price target cuts to all the major brokerages and an announcement by TD Ameritrade (AMTD) that they will also eliminate commission charges on their trading platform. Shorts in the sector are up another $72 million, or +1.57% in morning trading, with the big four brokerages up an additional $18 million in mark-to-market profits bringing their two-day total profits up to $209 million, up 15.35%.
We should see continued short selling in these brokerage stocks as momentum short sellers join value short sellers in this short-term price weakness and short interest which has been declining since the 2nd quarter trend back towards year-to-date highs.
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Managing Director Predictive Analytics, S3 Partners, LLC
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