Apple, already dominant in technology-stock indexes, is about to become even more so after an overhaul of sector benchmarks compiled by S&P Global and MSCI, which takes effect after the market closes Friday, will remove 11 big US stocks from technology-focused indexes.
Ryan Vlastelica for Bloomberg News:
Payment companies — including Visa Inc., Mastercard Inc., and PayPal Holdings Inc. — will be moved into indexes tracking financial companies, while payroll processors like Paychex Inc. and Automatic Data Processing Inc. will be classified as industrials.
The departures will shrink tech’s weight in the S&P 500, while also making the remaining companies in the industry index more influential. Apple and Microsoft together already account for 46% of the S&P 500 Information Technology Index, and that share will go up when Visa and Mastercard are removed: The credit-card companies are the fourth- and fifth-biggest components, respectively, of the tech benchmark, accounting for 6.8%.
The increased weighting of Apple and Microsoft means investors who are benchmarked against the tech index will have an incentive to own even more of those two stocks to keep up with the index, but that also would heighten the effect if the shares start underperforming the market.
Apple and Microsoft massively outperformed over the past five years, helping to pull up the overall market. Both are seen as safe havens, with strong balance sheets and the kind of durable revenue streams that can withstand slower economic growth or a recession; the pair outperformed amid the recent fallout from the collapse of Silicon Valley Bank.
Apple is up 20% this year, while Microsoft is up 17%, compared with gains of 2.9% for the S&P 500 and 15% for the Nasdaq 100 Index.
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