The markets are loving hated stocks. That may not be a good thing

August 13, 2018

By Lu Wang

Waiting for new highs in stocks? Be careful what you wish for.

In a week when the SP 500 Index came within 0.5 percent of its January peak and then failed to hold its gains, a cohort of the most-hated stocks advanced to record levels, much to the dismay of bears.

The double whammy occurred as geopolitical tensions blended with corporate earnings to produce stock returns that caused pain for bulls and bears alike. The SP 500 erased what could have been a sixth weekly gain Friday as Turkey’s economic crisis worsened and U.S. President Donald Trump doubled steel and aluminum tariffs on the country.

Meanwhile, from 3D Systems Corp. to Match Group Inc., companies targeted by short sellers extended weekly gains as better-than-expected earnings defied skeptics. A Goldman Sachs basket of most-shorted stocks jumped 5.6 percent in the five days through Friday, reaching levels not seen since at least 2008.

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