S&P 500   5,137.08 (+0.80%)
DOW   39,087.38 (+0.23%)
QQQ   445.61 (+1.51%)
AAPL   179.66 (-0.60%)
MSFT   415.50 (+0.45%)
META   502.30 (+2.48%)
GOOGL   137.14 (-0.95%)
AMZN   178.22 (+0.83%)
TSLA   202.64 (+0.38%)
NVDA   822.79 (+4.00%)
NIO   5.77 (+0.35%)
AMD   202.64 (+5.25%)
BABA   74.63 (+0.81%)
T   17.00 (+0.41%)
F   12.45 (+0.08%)
MU   95.15 (+5.01%)
CGC   3.21 (-2.43%)
GE   158.67 (+1.13%)
DIS   111.93 (+0.31%)
AMC   4.36 (+0.93%)
PFE   26.58 (+0.08%)
PYPL   60.54 (+0.33%)
XOM   105.78 (+1.21%)
S&P 500   5,137.08 (+0.80%)
DOW   39,087.38 (+0.23%)
QQQ   445.61 (+1.51%)
AAPL   179.66 (-0.60%)
MSFT   415.50 (+0.45%)
META   502.30 (+2.48%)
GOOGL   137.14 (-0.95%)
AMZN   178.22 (+0.83%)
TSLA   202.64 (+0.38%)
NVDA   822.79 (+4.00%)
NIO   5.77 (+0.35%)
AMD   202.64 (+5.25%)
BABA   74.63 (+0.81%)
T   17.00 (+0.41%)
F   12.45 (+0.08%)
MU   95.15 (+5.01%)
CGC   3.21 (-2.43%)
GE   158.67 (+1.13%)
DIS   111.93 (+0.31%)
AMC   4.36 (+0.93%)
PFE   26.58 (+0.08%)
PYPL   60.54 (+0.33%)
XOM   105.78 (+1.21%)
S&P 500   5,137.08 (+0.80%)
DOW   39,087.38 (+0.23%)
QQQ   445.61 (+1.51%)
AAPL   179.66 (-0.60%)
MSFT   415.50 (+0.45%)
META   502.30 (+2.48%)
GOOGL   137.14 (-0.95%)
AMZN   178.22 (+0.83%)
TSLA   202.64 (+0.38%)
NVDA   822.79 (+4.00%)
NIO   5.77 (+0.35%)
AMD   202.64 (+5.25%)
BABA   74.63 (+0.81%)
T   17.00 (+0.41%)
F   12.45 (+0.08%)
MU   95.15 (+5.01%)
CGC   3.21 (-2.43%)
GE   158.67 (+1.13%)
DIS   111.93 (+0.31%)
AMC   4.36 (+0.93%)
PFE   26.58 (+0.08%)
PYPL   60.54 (+0.33%)
XOM   105.78 (+1.21%)
S&P 500   5,137.08 (+0.80%)
DOW   39,087.38 (+0.23%)
QQQ   445.61 (+1.51%)
AAPL   179.66 (-0.60%)
MSFT   415.50 (+0.45%)
META   502.30 (+2.48%)
GOOGL   137.14 (-0.95%)
AMZN   178.22 (+0.83%)
TSLA   202.64 (+0.38%)
NVDA   822.79 (+4.00%)
NIO   5.77 (+0.35%)
AMD   202.64 (+5.25%)
BABA   74.63 (+0.81%)
T   17.00 (+0.41%)
F   12.45 (+0.08%)
MU   95.15 (+5.01%)
CGC   3.21 (-2.43%)
GE   158.67 (+1.13%)
DIS   111.93 (+0.31%)
AMC   4.36 (+0.93%)
PFE   26.58 (+0.08%)
PYPL   60.54 (+0.33%)
XOM   105.78 (+1.21%)

Nasdaq 100 Index Shake-Up Rattles High-Flying Stocks of 2023

NASDAQ 100 rebalancing

Key Points

  • Nasdaq 100 index is conducting a special rebalancing later this month.
  • The outperformance of the Nasdaq has been driven by seven mega-cap stocks: Apple, Microsoft, Nvidia, Tesla, Amazon, Alphabet, and Meta Platforms.
  • The rebalancing rules require weightings of stocks exceeding 4.5% to be collectively set at 40%.
  • ETFs tracking the Nasdaq 100, like QQQ, will need to sell shares of large stocks and buy other stocks with increased weightings.
  • Starbucks, Mondelez International, Booking Holdings, Gilead Sciences, Intuitive Surgical, Analog Devices, and Automatic Data Processing are expected to increase in weight.
  • 5 stocks we like better than Invesco QQQ

Some of the best performers of 2023 sold off on news that the Nasdaq 100 index was conducting a special rebalancing later this month. 

Nasdaq announced the rebalance on Friday, July 7, after the market’s close. 

As most savvy investors know by now, the outperformance of the Nasdaq and to a lesser degree, the S&P 500 has been driven by seven mega-caps, hailing from the tech, consumer discretionary, and communication services sectors.

Those stocks dubbed the “Magnificent 7” and their year-to-date performances are: 

Apple Inc. NASDAQ: AAPL: 45.52%

Microsoft Corp. NASDAQ: MSFT: 38.93%

Nvidia Corp. NASDAQ: NVDA: 188.68%

Tesla Inc. NASDAQ: TSLA: 118.87%

Amazon.com Inc.  NASDAQ: AMZN: 51.35%

Alphabet Inc. NASDAQ: GOOGL: 31.98%

Meta Platforms Inc. NASDAQ: META: 144.39%

While those stocks accounted for nearly all the market’s gains in the first half of the year, breadth began to improve in June. A Bank of America analyst recently noted that market breadth is normalizing, with 50% of stocks outperforming the S&P 500 in June, up from 23% in May. 


Promise Of AI Stoked Gains

Prior to June, the seven big stocks, most of them rallying on the promise of AI, benefited more than the broader market. The S&P 500 was up 15.91% in the first half, while the Nasdaq 100, as tracked by the Invesco QQQ NASDAQ: QQQ was up nearly 39%. 

The outperformance of the Nasdaq 100, relative to the S&P 500, was due to exactly the issue Nasdaq is addressing: The heavy weightings of the seven stocks above. 

Rather than just shrugging off the prominence of those companies within the index, Nasdaq has said it’s time to adjust the index weightings. 

Rules Of Rebalancing

It’s a little complex, but here’s how the Nasdaq rules work. If all stocks with a weighting of 4.5% or higher, together as a group, constitute more than 48% of the total index, then it’s time to rebalance. According to an already existing set of rules, when that happens, the rebalancing must set the weighting of all those stocks, collectively, at 40%.

As of July 11, Microsoft, Apple, Nvidia, and Amazon each had a weight greater than 4.5%. Six of the stocks sold off on July 10 on news of the rebalance, so the weightings of Tesla and Alphabet were slightly lower than 4.5% on July 11. Meta, whose weighting was already below 4.5%, traded higher on June 10. Its current weighting within the Nasdaq 100 is 4.362%. 

Despite the selling in heavily weighted components, the QQQ ETF eked out a gain of 0.03% on July 10. It was trading higher again on July 11. 

Changes Become Effective July 24

The rebalance will be based on closing prices on July 3, with more details about the mechanics due out on Friday, July 14. The changes will become effective on Monday, July 24, before the opening bell. 

So what does this mean for investors, specifically those who hold shares in QQQ? 

An ETF tracking an index must, according to its investment mandate, track the index as closely as possible. That means, of course, that the QQQ, whose assets under management total $201.16 billion, must sell shares of those large stocks so its holdings match the index weightings. 

Some Stocks Will Get Heavier Weighting

In addition, the QQQ or other ETFs pegged to the Nasdaq 100 must buy enough shares of other stocks that receive heavier weightings as part of the rebalance. 

In a note about the rebalance, Wells Fargo analysts named Starbucks Corp. NASDAQ: SBUX, Mondelez International Inc. NASDAQ: MDLZ, Booking Holdings Inc. NASDAQ: MDLZ, Gilead Sciences Inc. NASDAQ: GILD, Intuitive Surgical Inc. NASDAQ: ISRG, Analog Devices Inc. NASDAQ: ADI and Automatic Data Processing Inc. NASDAQ: ADP as stocks likely to increase in weight. 

The Nasdaq implemented a special rebalance twice before: in December 1998 and May 2011. This time around, no stocks will be removed or added as part of the rebalance. 

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Should you invest $1,000 in Invesco QQQ right now?

Before you consider Invesco QQQ, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Invesco QQQ wasn't on the list.

While Invesco QQQ currently has a "hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Invesco QQQ (QQQ)N/A$445.61+1.5%0.52%N/AN/AN/A
Alphabet (GOOGL)
3.414 of 5 stars
$137.14-1.0%N/A23.64Moderate Buy$153.65
Amazon.com (AMZN)
4.8862 of 5 stars
$178.22+0.8%N/A61.46Buy$197.95
Analog Devices (ADI)
4.9582 of 5 stars
$196.16+2.3%1.75%35.09Moderate Buy$206.26
Apple (AAPL)
4.8845 of 5 stars
$179.66-0.6%0.53%27.98Moderate Buy$205.27
Automatic Data Processing (ADP)
4.3518 of 5 stars
$249.69-0.6%2.24%29.07Hold$253.17
Booking (BKNG)
4.3509 of 5 stars
$3,499.73+0.9%1.00%29.67Moderate Buy$3,697.38
Gilead Sciences (GILD)
4.9737 of 5 stars
$72.31+0.3%4.15%16.07Hold$85.86
Intuit (INTU)
4.9388 of 5 stars
$666.52+0.5%0.54%68.01Moderate Buy$633.29
Intuitive Surgical (ISRG)
4.6187 of 5 stars
$397.90+3.2%N/A79.11Moderate Buy$371.60
Microsoft (MSFT)
4.8954 of 5 stars
$415.50+0.4%0.72%37.57Moderate Buy$411.06
Mondelez International (MDLZ)
4.9342 of 5 stars
$72.37-1.0%2.35%19.94Buy$81.37
Starbucks (SBUX)
4.8708 of 5 stars
$93.16-1.8%2.45%24.91Hold$111.43
Tesla (TSLA)
4.3829 of 5 stars
$202.64+0.4%N/A47.02Hold$219.89
Meta Platforms (META)
4.0016 of 5 stars
$502.30+2.5%0.40%33.71Moderate Buy$494.53
Compare These Stocks  Add These Stocks to My Watchlist 

Kate Stalter

About Kate Stalter

  • stalterkate@gmail.com

Contributing Author

Retirement, Asset Allocation, and Tax Strategies

Experience

Kate Stalter has been a contributing writer for MarketBeat since 2021.

Additional Experience

Series 65-licensed investment advisor, financial advisor, Blue Marlin Advisors; investment columnist for Forbes, U.S. News & World Report

Areas of Expertise

Asset allocation, technical and fundamental analysis, retirement strategies, income generation, risk management, sector and industry analysis

Education

Bachelor of Arts, Saint Mary’s College, Notre Dame, Indiana; Master of Business Adminstration, Kellogg School of Management at Northwestern University

Past Experience

Founder, financial advisor for Better Money Decisions; editor, stock trading instructor for Investor’s Business Daily; columnist, podcast host, video host for MoneyShow.com; contributor for Morningstar magazine


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