Short interest in financials stocks, as well as the real estate space, ticked up over the last two months amid continued upheaval in the banking sector.

Short interest in the financials sector had risen by 21 basis points since the end of February, about two weeks before the collapse of Silicon Valley Bank. The sector remained the least shorted on US exchanges at 1.68% at the end of April, below the 2.39% average for the S&P 500 and well below the 5.74% short interest in the consumer discretionary sector, which has been the most shorted sector since September 2022, according to the latest S&P Global Market Intelligence data.

Short interest, which measures the percentage of outstanding shares of a given company or industry held by short sellers, remained relatively steady from mid-April to the end of the month, rising slightly in five sectors and falling slightly in six sectors.

Since the end of February, short interest increased in nearly all sectors, with the biggest jump in real estate, where short interest climbed 26 basis points to 3.35%. Only utilities saw short interest fall over this time, falling 15 basis points to 2.33%.

Sector breakdown

Within the financials sector, short sellers keyed in on consumer finance in particular. That subsector had short interest of 5.58% at the end of April as the Federal Reserve continued to ratchet up interest rates. The benchmark rate is now about 5% and is expected to stay at this level or higher for at least the rest of the year. Mortgage real estate investment trusts and commercial and residential mortgage finance stocks saw the next highest short-interest levels at 3.89% and 3.83%, respectively.

Most-shorted stocks

Upstart Holdings Inc. was the most-shorted financial stock at the end of April, with 27.40% short interest. Upstart is a lending platform that works with banks and credit unions to provide consumer loans using artificial intelligence to predict creditworthiness. The company's stock has fallen nearly 95% since its October 2021 peak as expectations of consumer loan defaults have increased.

The second-most shorted financial stock, Trupanion Inc., a pet insurance provider, had 26.77% short interest at the end of April. Trupanion's stock has fallen 87% from its December 2021 peak.

Carvana Co. was the most-shorted stock overall at the end of April, at 46.10%. Its shares have fallen nearly 97% since their August 2021 peak.