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.
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Create account Try a 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
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