Before the Bell: American Airlines Sours, Warner Bros Drops HBO Name From Max, the Most Squeezable Shorts

Premarket action on Thursday had the three major U.S. indexes trading higher. The Dow Jones industrials were up 0.01%, the S&P 500 up 0.1% and the Nasdaq 0.23% higher.

Seven of 11 market sectors closed lower on Wednesday. Consumer cyclicals (−1.54%) and communications services (−0.89%) posted the day’s biggest losses. Industrials (0.33%) and energy (0.11%) had the largest gains. The Dow closed down 0.11%, the S&P 500 down 0.41% and the Nasdaq down 0.85% on Wednesday.

Two-year Treasuries fell by eight basis points to end Wednesday at 3.95%, and 10-year notes dropped two basis points to close at 3.41%. In Thursday’s premarket, two-year notes were trading at around 3.98% and 10-year notes at about 3.42%.

Wednesday’s trading volume was above the five-day average. New York Stock Exchange losers outpaced winners by 1,617 to 1,380, while Nasdaq decliners led advancers by about 7 to 4.

The Bureau of Labor Statistics will release the March producer price index (PPI) before markets open on Thursday. Economists expect an increase of 0.1% month over month, higher than the January-to-February decrease of 0.1%. Core PPI, excluding energy and food, is expected to increase by 0.2%, compared to no increase in February. Year over year, February’s total CPI was 4.6% higher, and core CPI rose 4.4%.

This week’s report on new claims for unemployment benefits also will be released Thursday morning. Economists anticipate an increase in new claims from 228,000 in February to 236,000 in March.

Among S&P 500 companies, Bio-Techne Corp. (NASDAQ: TECH) led Wednesday’s winners with a gain of 4.4%. Bio-Techne is a holding company for biotech and clinical diagnostic brands. The stock has added about 10% to its share price over the past five trading sessions. Note that institutional investors hold more than 97% of the company’s float and that Bio-Techne had no big news to drive the gain. The company will report quarterly earnings on May 3.

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Dish Network Corp. (NASDAQ: DISH) dropped 9.42% on Wednesday, the biggest loss among S&P 500 stocks. Analysts at Barclays lowered their price target on the stock, citing subscriber losses as the company tries to shift away from its satellite TV roots to become a broadband wireless provider. A good idea, perhaps, but extremely expensive.

American Airlines Group Inc. (NASDAQ: AAL) dropped 9.22% after forecasting lower-than-expected first-quarter profit, blaming high labor and fuel costs. United Airlines Holdings Inc. (NASDAQ: UAL) said much the same thing a month ago, and its shares dropped 6.5% on Wednesday. Since United’s weak forecast, its stock is down nearly 5%, while American’s shares are down nearly 8% in the same period.

Another of Wednesday’s big losers was Warner Bros. Discovery Inc. (NASDAQ: WBD). The company’s stock dropped 5.83% following an announcement that its near-legendary HBO brand is being dropped from its HBO Max streaming service, and the streamer will now be called simply Max. They paid CEO David Zaslav more than $246 million last year to toss away a brand that’s been around for 50 years because Zaslav, who took over as CEO after a merger with the Discovery network, wants to boost viewers and subscribers to Discovery’s reality shows? Do subscribers pay to watch “Succession” or “Beat Bobby Flay?” Which one is associated with HBO? Who even knows that the Food Channel is partly owned by Discovery? Who even cares?

Ihor Dusaniwsky and Matthew Unterman of S3 Analytics have released their first-quarter wrap-up of short sellers’ profits and losses. Losses mounted in the quarter, with short sellers losing $62.6 billion on average short interest of $940 billion. Added to a $43.5 billion loss in the fourth quarter of 2022, the six-month total of $106.1 billion represents the loss of about 30% of short sellers’ profits in the first three quarters of 2022. According to the S3 analysts, “64% of every dollar shorted in the first quarter was an unprofitable trade.”

The most profitable shorts during the quarter were SVB Financial Group, First Republic Bank (NYSE: FRC) and Signature Bank (NYSE: SBNY). SVB shorts made a profit of $1.06 billion, for a gain of 121% based on average short interest in the stock. First Republic shorts pocketed $704.5 million, a gain of 151%, and Signature Bank short sellers gained $643 million, or 154%. Note that the odds that the longs on SVB and SBNY will realize their mark-to-market profits are minute.

The least profitable short trades were Tesla Inc. (NASDAQ: TSLA), Nvidia Corp. (NASDAQ: NVDA) and Apple Inc. (NASDAQ: AAPL). Recall that tech stocks bounced sharply higher in the first quarter. Tesla shorts lost $7.7 billion, more than half the average short interest in the stock, Nvidia shorts lost $5 billion, about 62% of the short bets, and Apple shorts dropped $4 billion, about 24% of average short interest in the iPhone maker.

In a separate press release, S3 names its most squeezable U.S. stocks. A short squeeze happens when short sellers are forced to cover their bets that the stock will fall because the stock price is going up. When the shorts cover, the price goes even higher.

S3’s squeeze score is a blend of short sellers’ higher financing costs, rising unrealized losses and higher short-side volatility. The firm has identified 18 stocks with squeeze scores of 100. The top five are Coinbase Global Inc. (NASDAQ: COIN), CarMax Inc. (NYSE: KMX), GameStop Corp. (NYSE: GME), MicroStrategy Inc. (NASDAQ: MSTR) and AMC Entertainment Holdings Inc. (NYSE: AMC).