“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.]