NEW YORK: Hedge funds betting against stocks in the technology sector rushed to unwind those trades in the first half of February as markets rallied, data from Goldman Sachs and JPMorgan & Chase prime brokerage units showed on Thursday.

"The short covering in U.S. tech stocks from Jan 31st to Feb 15th is the second largest in magnitude over any 12-day period in the past decade," Goldman Sachs wrote in a note reviewed by Reuters.

The bank said the move was surpassed only by the meme stock frenzy two years ago, when retail investors worked jointly to dismantle shortsellers bets against stocks such as videogame retailer Gamestop and movie theater operator AMC Entertainment Holdings.

JPMorgan also said in a daily note to clients that communication services and information technology stocks had led the short covering in its books on Thursday.

Overall, JPMorgan said multi-strategy and equity quantitative hedge funds had led the short covering, while equity long-short funds had been ahead in bets against stocks.

The technology-heavy Nasdaq is up 2.7% this month, while the S&P 500 information technology index has gained almost 4%; each is almost 14% higher this year. Amid stock rises in February, hedge funds were forced to unwind their bets against the shares.

On Thursday, however, Wall Street ended sharply lower after data showed unexpectedly strong inflation and a drop in weekly jobless claims. (Reporting by Carolina Mandl in New York; Editing by Bradley Perrett)