Apple has grown so huge, Nasdaq-100 index to undergo rare rebalancing to reduce AAPL influence

“In a move likely to ripple across the stock market, Nasdaq OMX on Tuesday announced a rare rebalancing of its Nasdaq-100 index, which will reduce the big weighting of Apple Inc.,” Tom Lauricella reports for The Wall Street Journal. “The company currently makes up more than 20% of the index.”

“The rebalancing was driven in part by the seemingly unstoppable rise in Apple shares, which are up more than fourfold in the past two years,” Lauricella reports. “The tech company’s big weighting means that a change in fortune for the maker of iPhones, iPods and iPads has a huge impact on one of the most heavily traded indexes in the market. After the rebalancing, which takes effect May 2, Apple will make up 12% of the Nasdaq-100.”

“The Nasdaq-100 consists of the 100 largest nonfinancial stocks that trade on the Nasdaq and is the index tracked by the heavily traded QQQ exchange-traded fund and many other securities,” Lauricella reports. “The move matters to investors because more than $330 billion worth of assets track the index via exchange-traded funds, mutual funds, options and futures.”

Lauricella reports, “The move could mean significant selling pressure on Apple shares by money managers tracking the index. Because of the way the index has been calculated, Apple was given more than twice the weight in the index than it should have had based on its number of shares. Under the new plan, it will be reduced to the weight it should have given its size.”

“Apple’s market capitalization is roughly $300 billion, twice that of Google. But its weighting in the index was five times that of Google. After the rebalancing, Google’s share of the index will be 5.8% compared to Apple’s 12.3%. Apple will remain the largest component of the index,” Lauricella reports. “In addition to Apple, 81 other stocks will see their share of the index reduced. The remaining 18 stocks will get a boost in the index. Among the biggest beneficiaries will be Microsoft Corp., whose weighting in the index was reduced in the only other special rebalancing of the index 13 years ago. Microsoft will see its weighting boosted to 8.3% from 3.4%.”

Read more in the full article here.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

17 Comments

  1. Well, since Apple HAS grown so huge and its impact on the tech sector IS significant, why change the weighting? Smells like someone is futzing with the numbers to make someone look good.

  2. Good to see these necessary steps being taken to reflect not only the current realities of the index, but how it’s likely to trend going forward.

    As Apple plateaus, it would be irresponsible to saddle the 100 with that burdensome weight. Conversely, placing increased faith in MS as they continue to orchestrate one of the more memorable turnarounds in recent history does nothing but solidy the 100 as in marches forward into the 21st century.

    1. Zune Tang,,,, Is that you??? I say totally right. 🙂 Microsoft will come smashing down… or is that back…… down… and what an impact it will make.

      When the inevitable happens and MS crashes to a shell of its former self, will the market be rocked. And of course,,,, pundits will blame Apple…. Shame on them..

      Such is life.
      en

  3. You have to love this. It is like being back in school. Lets put a bell curve on the grades so the smart talented kid in the room doesn’t make the rest look so bad. So, lets curve the score of Microsoft and Google to make it look like they count.

  4. Apple Inc. (AAPL) Pre-Market Trading
    Pre-Market Charts | After Hours Charts
    Apr. 4, 2011 Market Close: $ 341.19
    Pre-Market Last: Net / % Change
    $ 336.99 -4.20 (-1.23%)
    Pre-Market High: $ 338.15
    Pre-Market Volume: 740,416
    Pre-Market Low: $ 329.50

    AAPL is already making a comeback.

  5. Excellent! Now when aapl goes up it won’t have to drag the NASDAQ dead weight up with it. Basically aapl can outperform the NASDAQ to an even greater extent than before. Super.
    (Sod the pension funds, they’re only in it for the kick backs anyway.)

  6. The big traders, Hedgefunds, and Mutual funds have been selling for weeks. That;s why Apple has been going down steadily. This is only a surprise to us small Investors. However, this is a buying opportunity. Apple should head up from here. The SEC might have a look at what;s basically Insider Trading, but I wouldn’t hold my breath.

  7. ERROR ERROR
    THIS DOES NOT COMPUTE:

    “Microsoft will see its weighting boosted to 8.3% from 3.4%.”

    That’s a decline in weighting. Sadly, Mr. Murdoch won’t let me see the entire source article for verification unless I line his pockets with green. No thank you Mr. Murdoch.

      1. I hate the way the percentages are listed in these reports. To my mind it should always be listed in the order of “from” then “to”, rather than the reverse.

    1. To end run the WSJ pay wall, copy the title of the article, pull up a search engine (like it or not, “G” works best), paste the title in and search. You will get multiple hits for the article, some from the WSJ and others from other sites that will also have the full text.

      Good luck!

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