The Wall Street Journal-20080212-Nasdaq Short-Selling- Bearish Stock Bets Decline on Nasdaq

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Nasdaq Short-Selling: Bearish Stock Bets Decline on Nasdaq

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NEW YORK -- Short-selling activity fell at the Nasdaq Stock Market in late January amid a solid drop in prices of technology shares.

For the two-week period ending Jan. 31, the number of short-selling positions not yet closed out at the Nasdaq -- so-called short interest -- fell 0.7% to 8,625,902,812 shares from 8,686,053,949 shares in mid- January.

Marketwide, the short ratio, or number of days' average volume represented by the outstanding short positions at the exchange, fell to 3.1 from 3.6 in mid-January.

Investors who "short" shares borrow them and sell them, betting the price will fall and they will be able to buy the shares later at a lower price for return to the lender. In general, the higher the short interest, the more investors expect a downturn.

The tech-stock-focused Nasdaq Composite Index slid more than 1% during the period covered by the latest short-interest report as recession fears spread among stock investors. Such declines tend to boost the value of most bearish bets. Short interest can decline during market pullbacks, however, if sellers are booking profits on their previous bets or if they believe the decline isn't due to last for long.

The next Nasdaq short report will appear on Feb. 28 in The Wall Street Journal. The next report on New York Stock Exchange shorting will appear Feb. 23.