S&P 500 profits will increase 1 percent for the first three months of 2013, down from the 2.5 percent forecast for the fourth quarter, according to more than 10,000 analyst estimates compiled by Bloomberg.

Margin at NYSE firms, a measure of loans by brokers to finance equity purchases, increased for four straight months to $327 billion in November and was 22 percent higher than a year earlier. While the value of margin loans expands as stocks rise, borrowing has outpaced the benchmark’s gain by about 10 percentage points, data compiled by Bloomberg show.

Bets among hedge funds and other large speculators that S&P 500 futures will climb reached $10.3 billion at the beginning of January, close to a four-year high, according to data compiled by Bloomberg and the U.S. Commodity Futures Trading Commission.

Short Bets

Professional investors abandoned bets that stocks would decline last month, as the most-shorted shares staged the best rally in a year relative to the S&P 500. The 20 stocks with the highest short sales rose an average of 5.1 percent in December, compared with 0.7 percent for the full gauge, the widest gap since January 2012, according to data compiled by Bloomberg.

A gauge of hedge-fund bullishness, which measures how much they’re betting on rising shares, rose to 47.3 at the end of 2012 from 43.9 a year ago and is near the one-year high of 48.1 in August, according to a survey by Washington-based ISI. A reading below 50 still suggests a bias toward short bets.

About $9.3 trillion has been restored to the value of American equities since March 2009 as the S&P 500 climbed 118 percent, according to data compiled by Bloomberg. Over that period, the HFRX Equity Hedge Index has fallen short of the benchmark gauge for U.S. shares by an average of 10 percentage points a year, the data show.

‘Catch Up’

“Many managers are just behind their benchmarks and as a means to catch up they’re trying to utilize leverage,” Dan Veru, chief investment officer at Palisade Capital Management LLC in Fort Lee, New Jersey, said in a phone interview last week.

“You’ve got to earn your keep because you’re commanding a premium price for that underperformance,” said Veru, whose firm oversees $3.6 billion. “You’re underexposed to equities and you have to put your money to work quickly if you want to catch up.”