Premarket action on Monday had the three major U.S. indexes trading mixed. The Dow Jones industrials were up 0.19% and the S&P 500 up 0.13%, while the Nasdaq was 0.06% lower.
After U.S. markets closed Friday, PacWest Bancorp (NASDAQ: PACW) announced that it was cutting its dividend from $0.25 to $0.01 per share beginning with the May 31 payment. Shares had risen by more than 80% for the day, more than offsetting a 50% drop on Friday. The stock traded up another 35% in Monday’s premarket session.
As of Friday’s close, PacWest shares have lost 75% since the beginning of 2023. At around $7.80 early Monday, the shares are up 210% over their 52-week low of $2.48 set last Thursday.
Some of the bank’s good fortune is due to short covering. And who can blame shorts for letting their bets ride? Short sellers posted mark-to-market gains of nearly $380 million on Thursday alone, betting against PacWest, First Horizon Corp. (NYSE: FHN) and Western Alliance Bancorp. (NYSE: WAL). Short sellers have reaped paper profits of some $816 million on just these three banks since the beginning of the year, according to a Reuters report.
Yet, shorts are getting crowded in PacWest. According to Fintel data, the borrow fee on short sales was 5.72% on May 1; on May 8, the borrow fee remained at 15.38%, a level it reached on Friday. Including so-called dark pool volume, nearly 48% of PacWest stock was sold short. Nearly 35% of First Horizon’s shares were shorted, but the borrow fee was 0.25% Monday morning. Western Alliance’s borrow fee is 5.1%, down from 9.47% on Thursday, after the bank announced Friday that it had not begun reviewing strategic options, including a sale. About 55% of Western Alliance’s was sold short.
AMC Entertainment Holdings Inc. (NYSE: AMC) announced in a tweet Saturday that it has reached an agreement with shareholders who have sued to stop the conversion of AMC’s Preferred Equity shares (NYSE: APE) into common stock prior to a reverse 10-for-1 stock split. Shareholders have until May 31 to file objections, and the settlement hearing is set for the end of June, but, in a letter to AMC shareholders, the Delaware Chancery Court said that the court “will not be issuing a ruling on the settlement at the hearing, but will be issuing a written decision at a later date.”
After bitcoin exchange Binance halted withdrawals for a second time late Sunday, Bitcoin fell below $28,000 early Monday morning. Binance, the world’s largest crypto exchange, stopped allowing withdrawals Sunday morning after the bitcoin blockchain was “overwhelmed with pending transactions and sky-high fees,” according to Coindesk. Withdrawals resumed after about two hours. Bitcoin’s high for the past 12 months is $34,604.
The second temporary halt came later Sunday evening due to a “large volume of pending transactions,” according to a Binance tweet.
Here is a look at how the markets fared on Friday.
All 11 market sectors closed higher on Friday. Energy (2.75%) and technology (2.71%) posted the day’s best gains. Utilities (0.66%) and consumer staples (0.89%) had the day’s smallest gains. The Dow closed up 1.65%, the S&P 500 up 1.85% and the Nasdaq up 2.25% on Friday.
Two-year Treasuries jumped 17 basis points to end Friday at 3.92%, and 10-year notes added seven basis points to close at 3.44%. In Monday’s premarket, two-year notes were trading at around 3.94% and 10-year notes at about 3.43%.
Friday’s trading volume was below the five-day average. New York Stock Exchange losers outpaced winners by 2,549 to 438, while Nasdaq decliners led advancers by nearly 3 to 1.
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