Hedge Funds Shift to Bearish Stance Amid Yield Spikes

Hedge funds have increased their bearish bets on stocks as bond yields rise following the downgrade of the United States' credit rating. Global hedge funds added 4.6 short positions for each long position, partially unwinding their short bets from July. The recent market rally triggered by better-than-expected corporate earnings was interrupted after Fitch downgraded the US ahead of an expected increase in Treasury supply. Both the S&P 500 and Nasdaq Composite experienced their biggest weekly declines since March. Hedge funds are mainly placing bearish bets through indexes and exchange-traded funds, rather than specific stocks. Investors are more bearish on North America and Asia, particularly Japan, while being more bullish on Europe.