News: UWM leads mortgage rally after Rocket-driven short squeeze.
(Reuters) – Mortgage lender UWM Holdings Corp surged more than 30% in early trading Wednesday, leading a second day of rally in stocks in the sector that caught the eye after brief pressure on Rocket Companies.
UWM, which floated a $ 16 billion deal with a blank check company last year, was one of the most talked about stocks on trade-oriented social media site Stocktwits, with more than doubled message volume in the company.
Traffic suggests it could become the mortgage stock of choice for many online retailers, replacing Rocket, whose market cap rose more than $ 34 billion to $ 82.6 billion in the last session.
UWM’s shares surged to $ 12 while Rocket, the parent company of mortgage lender Quicken Loans, gave up on any early gains when the market opened. It was down almost 23% when trading resumed after a brief stop due to volatility.
There was a lot of short interest in Rocket stocks this week, preparing them for a short squeeze on Tuesday. Brief pressure occurs when investors betting against a company’s stocks are forced to unwind after a rally to avoid further losses.
The surge in Rocket shares last session inflicted an estimated $ 813 million in losses on short sellers, data from financial analyst Ortex showed.
Rocket’s management dwarfed short sellers of the stock by announcing a special dividend of $ 1.11 per share.
Investor appetite for mortgage lenders this month contrasts sharply with their recent outlook for the sector. A string of canceled IPOs in recent months has indicated fears that the US housing market may have peaked.
Reporting by Aaron Saldanha in Bengaluru, additional reporting by Lance Tupper in New York; Adaptation by Anirban Sen and Arun Koyyur
Original Source © Reuters