Short interest in consumer discretionary stocks hits highest level since 2020

After appearing to peak in mid-May, short interest in consumer discretionary stocks resumed its rise through the end of May as the worst inflation in more than 40 years promised to rein in U.S. household spending.

Short interest in the consumer discretionary sector rose to 5.51% at the end of May, its highest level since the end of December 2020, according to data from S&P Global Market Intelligence. Short interest measures the percentage of outstanding shares held by short sellers.

Short sellers make money when a stock declines by selling borrowed shares and buying them later at a lower price.

Most-shorted sector

At the end of May, consumer discretionary continued to be the most-shorted sector, as it has been since August 2021 when it replaced healthcare at the top of that list.

Short interest in every sector increased from the end of April to the end of May except for energy, which fell from 3.55% to 3.51%.

Bear market loser

The S&P 500's consumer discretionary sector has fared the worst of any of the large-cap indexes sectors since the beginning of the year, falling by 31.4% as of June 15.

The S&P 500 officially entered bear territory, defined as falling 20% from its high, on June 13. The index is down 20.5% from the start of the year as of June 15.

Targeted sector stocks

Ten of the top 20 most-shorted stocks at the end of May were consumer discretionary stocks.

Big 5 Sporting Goods Corp. was the most-shorted consumer discretionary stock, with nearly 36% short interest.

Most-shorted stocks

Heron Therapeutics Inc., a healthcare stock, was the most-shorted stock on major U.S. exchanges at the end of May with over 36% short interest.

Short interest in Redbox Entertainment Inc., which operates self-service kiosks where consumers can rent or buy DVDs and Blu-ray Discs, increased from 9.5% in mid-April to 32.3% at the end of May. It was the fourth-most-shorted stock as of the end of May.