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Before trading begins on Monday, exchange operator Nasdaq will
trim the weight of a handful of companies that make up close to
half of the Nasdaq 100.
Nasdaq describes the Nasdaq 100 as a "modified market
capitalization-weighted index," with company weights depending
on their stock market value, while also applying rules to limit
the influence of the largest stocks in the index.
The Nasdaq 100 includes 100 of the largest companies that trade
on the Nasdaq exchange, and changes to the index will force
investment funds that track it to adjust their portfolios and
sell shares of companies that have their weight in the index
reduced.
"We estimate that declining weights will drive passive net
selling worth more than a day's average trading volume in GOOGL
and more than one-third of a day's volume in MSFT, AMZN, and
NVDA," Goldman Sachs wrote in a client note on Monday.
Broadcom, which will likely see its weight increase in the
Nasdaq 100 following the rebalance, rose 1.6%. The chipmaker
currently makes up 2.4% of the index, according to Refinitiv
data.
Microsoft, Apple, Nvidia, Amazon and Tesla have been among the
biggest winners in the U.S. stock market's recovery this year,
increasing their combined influence in the Nasdaq 100. That has
helped the Nasdaq 100 surge 42% in 2023, compared to a 25%
increase in the Nasdaq 100 Equal Weighted Index.
The Nasdaq 100 was near flat on Friday.
Nasdaq announced its plan to rebalance the index on July 7.
A special rebalance may be triggered if the aggregate weight of
companies individually accounting for more than 4.5% of the
index tops 48%, according to Nasdaq.
(Reporting by Noel Randewich; Editing by Chris Reese)
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