US100 - Indices

The US100 is an index derivative instrument, whose quotations are based on the futures contracts on Nasdaq 100 index, which is composed of the 100 largest non-financial companies listed on the Nasdaq Stock Market. US100 tracks and mirrors sentiments across the largest, US technology companies. Established on January 31, 1985, Nasdaq 100 is renowned for its heavy concentration in technology and innovation-driven companies, making it a key barometer for the tech sector and growth stocks. 

The Nasdaq 100 includes tech industry titans such as Apple, Microsoft, Amazon, Alphabet (Google), Facebook (Meta), and Tesla, among others. These companies are leaders in their respective fields, ranging from AI, software, semiconductors and hardware to e-commerce, biotechnology, or even consumer services. In general, performance of technology stocks has the biggest impact on Nasdaq 100, making its quotations fragile to tech stocks valuations and sentiments.

The Nasdaq 100 is also known for its volatility compared to other major indices like the S&P 500 or the Dow Jones Industrial Average. This volatility can be attributed to the high-growth nature of its constituent companies, which are more sensitive to changes in market sentiment, economic conditions, and technological disruptions. However, this volatility also presents opportunities for traders and investors who are adept at navigating market fluctuations. However, traders should well understand the financial leverage risk before consider trading on US100.

Nasdaq 100 is a modified market capitalization-weighted index, meaning that the weight of each component company is based on its market capitalization, but with certain adjustments to ensure diversification and compliance with regulatory requirements. 

This methodology helps to prevent any single company from having an outsized influence on the index's performance. Companies inside the index are changing during years, and their ‘weigh’ impact on benchmark depends on market capitalization. For example, Cisco was the biggest one in 2000, but in 2024 the biggest stock in Nasdaq 100 is Nvidia.

One of the defining characteristics of the Nasdaq 100 is its focus on innovation and growth. The index is often seen as a reflection of the broader trends in technology and consumer behaviour, making it a popular choice for investors looking to gain exposure to high-growth sectors such as: AI, semiconductors, software, cloud computing or data centres. The companies in the Nasdaq 100 are typically at the forefront of technological advancements, driving significant changes in how we live, work, and interact.

The Nasdaq 100 performance is closely watched by market participants, analysts, and policymakers as an indicator of the health and direction of the technology sector and the broader economy. The index's influence extends beyond the United States, affecting global markets and investment decisions. Its composition of leading non-financial companies, focus on high-growth sectors, and global influence make it an essential tool for investors and traders seeking to capitalize on the dynamic and ever-evolving landscape of the technology-driven economy (software and hardware, data centres, semiconductor etc.)

Trading US100

The best time to trade the Nasdaq 100 (US100) largely depends on trading strategy, market conditions, and personal schedule. However, there are specific periods during the trading day when the market tends to be more active and liquid, providing better opportunities for traders. If you are trading from outside the United States, it's essential to consider the time zone differences. 

For example, European traders may find the overlap between the U.S. and European market hours (8:00 AM to 11:30 AM EST) particularly convenient. Also, significant developments in Asian markets can influence U.S. market sentiment during pre-market hours.

Trading on US100 also takes place during the first hour after US market open (9:30 AM to 10:30 AM EST) or during important data releases (8:30 AM to 10:00 AM EST). These releases can cause significant market movements, making it a prime time for trading the Nasdaq 100.  

The midday period often experiences lower trading volumes and reduced volatility as traders take a break for lunch. The afternoon session (1:00 PM to 4:00 PM EST) can see increased activity as traders return from lunch and prepare for the market close. 

The last hour of trading (3:00 PM to 4:00 PM EST) is particularly active as traders adjust their positions before the market closes, leading to heightened volatility and trading opportunities. During after-market and pre-market trading, investors may also react to late-breaking news or earnings reports, which are mostly released before or after the market close. However, liquidity is generally lower, and spreads can be wider, so caution is advised.

The US100 is widely traded using contracts for difference (CFDs), which are derivative instruments that allow traders to speculate on the price movements. CFD trading allows traders to take both long and short positions on the US100, meaning they can profit from both rising and falling prices. However, it's important to be aware of the associated risks, including high leverage, which can magnify both gains and losses. It's recommended that traders have a solid understanding of CFD trading and risk management strategies before investing in the volatile US100.

US100 trading via contracts for difference (CFDs) is one of the investment options offered by XTB.

5 Important Market Reports Influencing the Nasdaq 100 Index

1. U.S. Non-Farm Payrolls (NFP) Report: This monthly report provides data on employment changes in the U.S., excluding the agricultural sector. Strong job growth can indicate economic strength and consumer spending power, positively impacting the Nasdaq 100.
2. Federal Reserve Interest Rate Decisions: Announcements from the Federal Reserve regarding interest rates and monetary policy can significantly influence the Nasdaq 100. Lower interest rates generally support higher stock prices, while rate hikes can have the opposite effect.
3. Corporate Earnings Reports: Quarterly and annual earnings reports from major technology and growth companies listed on the Nasdaq 100 provide insights into their financial health and performance. Positive earnings can drive the index higher, while negative earnings can lead to declines.
4. U.S. GDP Report: This report measures the overall economic activity and growth of the U.S. economy. Strong GDP growth can boost investor confidence and positively impact the Nasdaq 100, while weak growth can lead to declines.
5. Consumer Price Index (CPI): The CPI measures inflation by tracking changes in the price level of a basket of consumer goods and services. High inflation can lead to fears of rising interest rates, which can negatively impact the Nasdaq 100.

Factors Influencing the Nasdaq 100 Index

• Technology Sector Performance: The Nasdaq 100 is heavily weighted towards technology companies. The performance of tech giants like Nvidia, Apple, Microsoft, Amazon, and Alphabet can significantly influence the index's movement.
• Interest Rates: Changes in interest rates can impact the cost of borrowing and investment. Lower interest rates tend to support higher stock prices (pressuring the so-called risk-free rate) while higher rates can lead to declines, especially in growth stocks sensitive to financing costs.
• Global Economic Conditions: As many companies in the Nasdaq 100 have significant international operations, global economic trends and trade relations can affect the index. Economic slowdowns or growth in major economies can influence the performance of these companies.
• Market Sentiment: Investor sentiment, driven by factors like geopolitical events, policy changes, and market speculation, can lead to significant volatility in the Nasdaq 100. Positive sentiment generally drives the index higher, while negative sentiment can cause declines.
• Innovation and Technological Advancements: The Nasdaq 100 includes companies at the forefront of innovation. Breakthroughs in technology, new product launches, and advancements in fields like artificial intelligence, cloud computing, and biotechnology can drive the index's performance.