Will the weighting change in the Nasdaq-100 index initiate declines of FAANG stocks❓
The new trading week on Wall Street promises to be really interesting. As early as tomorrow, investors will learn the CPI inflation reading from the US, which could be the final, important element creating the next FOMC decision on interest rates. What's more, the end of the week brings the start of the Q2 corporate earnings season, which, given the persistent recession narrative, could create even more volatility.
The uncertainty surrounding these events is already being felt as Wall Street indices have been unable to take a common direction since the start of the week. The oil to the fire in this context was added today by announcements of possible structural changes, which put the largest US companies in a problematic position.
Start investing today or test a free demo
Open account Try demo Download mobile app Download mobile appFAANG companies (technology companies with the largest market capitalisation) are under downward pressure today following an announcement by Nasdaq Inc, which plans to rebalance the Nasdaq-100 index to reduce the benchmark's overconcentration relative to the largest companies. Details of the modification rule will not be released until this Friday, but investors are nonetheless estimating with uncertainty how the changes may affect future listings of the largest US listed companies.
According to preliminary Nasdaq documents, the treatment could reduce the share of Microsoft (MSFT.US), Alphabet (GOOGL.US), Apple (AAPL.US), Nvidia (NVDA.US), Amazon (AMZN.US) and Tesla (TSLA.US) to 40 per cent relative to the overall index (currently 50.9 per cent). If indeed the Nasdaq were to decide to modify the weights in the benchmark in this way, this could initiate capital repositioning pressures among index ETFs based on an index of technology companies, which could theoretically weaken the ongoing upward momentum in the share prices of the largest FAANG companies and strengthen the position of smaller-cap stocks. Source: Bloomberg
The US100 stock price started the session with declines. However, looking at the H4 interval, the price bounced off the EMA100 average (which was also support earlier), making a return to the uptrend possible. Currently, the line drawn from the last peaks should be considered as the nearest resistance. If this line is broken, the next target for market bulls will be the resistance zone at 15400 points. Source: xStation 5
This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.
