US stocks hold onto gains as interest rate cut hopes persist

Shares of Affirm ( AFRM ) rose as much as 13% Tuesday morning on news that the company’s buy now, pay later features will be integrated into Walmart’s (WMT) self-checkout lines.

Shoppers can already use Confirm to distribute payments for merchandise purchased on Walmart.com, at the company’s drive-thru centers, its Vision Centers, and in regular checkout lines with cashiers.

In other words, this is an additional product update to a solution that’s already been offered to the vast majority of Walmart shoppers. If Affirm’s partnership with a retailer is going to lead to any business results—more sales, more customers, etc.—those results are already being achieved.

But this update pushing the stock higher shows how challenging this market has become for many investors stuck in 2022-era positions that are still in place. Information from Fenviz appears About 21% of Affirm shares are shorted, meaning short sellers have piled in bets that the stock will fall. For context, most companies have 1% or less of their shares sold short.

When short sellers end up wrongly positioned when the market moves against them, they can often be pressured out of these positions even if their fundamental views have not fundamentally changed.

It confirmed a stock decline of more than 90% from its highs in late 2021 to its lows earlier this year. Traders saw the name as likely to bear the brunt of the impacts from rising interest rates and fears of a consumer slowdown. The stock fell proportionately.

But times have changed, whether in markets or the economy.

There are signs that playing conditions such as confirmation have improved for the BNPL. Usage of these offers rose 40% over last year on Cyber ​​Monday, according to Adobe Analytics.

And the stock’s movement in the past few months — shares are up 180% since Nov. 1 and shares are up nearly 500% this year — show clear signs of traders pushing out of bearish positions.

When product updates drive a company’s stock by double-digit percentage points and the stock is significantly shorted, these moves are likely less about a material upgrade in the market’s view of the company’s final DCF value and more about positioning in a trend-changing market. quickly.

Because even though Affirm is not a member of the Magnificent Seven nor are the other 493 stocks in the S&P 500, these shifts have spillover effects across sectors, styles and sizes.