(Reuters) – The shares of the most valuable Wall Street companies were mixed on Friday as the Nasdaq 100 index prepared to rebalance to address its “overconcentration.” Nvidia and Tesla dipped 1.4% and 0.4%, respectively, while Alphabet added close to 1% and Apple and Amazon remained unchanged.
Before trading starts on Monday, Nasdaq will reduce the weight of a few companies that account for nearly half of the Nasdaq 100.
Nasdaq defines the Nasdaq 100 as a “modified market capitalization-weighted index,” where the weights of companies depend on their market value while also limiting the influence of the largest stocks. The index includes the 100 largest companies on the Nasdaq exchange, and changes to it will require investment funds to adjust their portfolios and sell shares of companies with reduced weight in the index.
“We estimate that declining weights will lead to passive net selling worth more than the average trading volume in GOOGL and more than one-third of a day’s volume in MSFT, AMZN, and NVDA,” Goldman Sachs stated in a client note on Monday.
Broadcom, which is expected to see its weight increase in the Nasdaq 100 following the rebalance, rose 1.6%. Data from Refinitiv shows that the chipmaker currently accounts for 2.4% of the index.
The recovery in the U.S. stock market this year has been favorable to Microsoft, Apple, Nvidia, Amazon, and Tesla, increasing their combined influence in the Nasdaq 100. This has resulted in a 42% surge in the Nasdaq 100 in 2023, compared to a 25% increase in the Nasdaq 100 Equal Weighted Index.
The Nasdaq 100 remained nearly flat on Friday.
The plan to rebalance the index was announced by Nasdaq on July 7.
Nasdaq has mentioned that a special rebalance might be triggered if the total weight of companies individually accounting for more than 4.5% of the index surpasses 48%.
(Reporting by Noel Randewich; Editing by Chris Reese)
Credit: The Star : Tech Feed
