Short Squeeze Turbocharges Equity Rally as Riskiest Stocks Soar

Investors could point to any number of reasons behind the stock market’s neck-breaking rally. A rapid unwind in bearish wagers gone wrong should be near the top of the list.

A Goldman Sachs Group Inc. basket of the most-shorted stocks jumped more than 13% this week, as traders rushed to close out positions in sectors like financials and industrials. The basket outperformed the S&P 500 Index by 9 percentage points, clocking its best week since 2023.