The Nasdaq-100 (^NDX[2]) is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange. It is a modified capitalization-weighted index. The stocks' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components. It is limited to companies from a single exchange, and it does not have any financial companies. The financial companies are in a separate index, the Nasdaq Financial-100.
The base price of the index was initially set at 250, but when it closed near 800 on December 31, 1993, the base was reset at 125 the following trading day, leaving the halved Nasdaq-100 price below that of the more commonly known Nasdaq Composite. The first annual adjustments were made in 1993 in advance of options on the index that would trade at the Chicago Board Options Exchange in 1994. Foreign companies were first admitted to the Nasdaq-100 in January 1998, but had higher standards to meet before they could be added. Those standards were relaxed in 2002, while standards for domestic firms were raised, ensuring that all companies met the same standards.
Investing in the Nasdaq-100
The Invesco QQQ, an exchange-traded fund sponsored and overseen since March 21, 2007, by Invesco, trades under the ticker Nasdaq:QQQ. It was formerly called Nasdaq-100 Trust Series 1. On December 1, 2004, it was moved from the American Stock Exchange, where it had the symbol QQQ, to the Nasdaq, and given the new ticker symbol QQQQ, sometimes called the "quad Qs" by traders. On March 23, 2011, Nasdaq changed its symbol back to QQQ.[4] Retail buy and hold investors might prefer to purchase Invesco's similar Nasdaq: QQQM, or "QQQ Mini" which has a lower fee structure, but lacks the liquidity that high-frequency traders need in the traditional QQQ product.[5]
The Nasdaq-100 is often abbreviated as NDX, NDQ, NAS100 or US100 in the derivatives markets. Its corresponding futures contracts are traded on the Chicago Mercantile Exchange. The regular futures are denoted by the Reuters Instrument Code ND, and the smaller E-mini version uses the code NQ. Both are among the most heavily traded futures at the exchange.[7]
After a gradual 5-year recovery to an intraday high of 2,239.51 on October 31, 2007, the highest reached since February 16, 2002, the index corrected below the 2,000 level in early 2008 amid the late-2000s recession, the United States housing bubble and the financial crisis of 2007–2008. Panic focusing on the failure of the investment banking industry culminated in a loss of more than 10% on September 29, 2008, subsequently plunging the index firmly into a bear market. The Nasdaq-100, with much of the broader market, experienced a limit down open on October 24 and reached a 6-year intraday low of 1,018 on November 20, 2008.[citation needed]
Amid quantitative easing (QE) from the Federal Reserve and optimism that the financial crisis was ending, the index embarked on a volatile four-year climb higher, closing above 3,000 on May 15, 2013, for the first time since November 15, 2000. By October 18, 2013, with GOOG passing $1,000 per share for the first time, the index had made a closing high of 3,353.88 and intraday high of 3,355.63, its highest levels since the 2000 United States elections and more than triple the 2008 low.
Additionally, since 2014, companies with multiple classes of stock are allowed to have multiple classes included in the index, provided they meet Nasdaq's criteria. Prior to 2014, companies were limited to one class of stock in the index (usually the one with the larger market capitalization).[citation needed]
Yearly rebalancing and re-ranking
While the composition of the Nasdaq-100 changes in the case of delisting (such as transferring to another exchange, mergers and acquisitions, or declaring bankruptcy, and in a few cases, being delisted by Nasdaq for failing to meet listing requirements), the index is rebalanced once a year, in December, when Nasdaq reviews its components, compares them with those not in the index, re-ranks all eligible companies and makes the appropriate adjustments.[citation needed]
There are two tools the Nasdaq uses to determine the market values of companies for the annual review:
Share Prices as of the last trading day in October.
Publicly announced share totals as of the last trading day of November.
Those components that are in the top 100 of all eligible companies at the annual review are retained in the index. Those ranked 101 to 125 are retained only if they were in the top 100 of the previous year's annual review. If they fail to move into the top 100 in the following year's review, they are dropped. Those not ranked in the top 125 are dropped regardless of the previous year's rank.[citation needed]
The index also drops a company if, at the end of two consecutive months, it fails to have an index weighting of at least one-tenth of a percent. This can occur at any time.[citation needed] Companies that are dropped are replaced by those with the largest market value that are not already in the index. Anticipation of these changes can lead to changes in the stock prices of affected companies.[citation needed]
The index publicly announces all changes, regardless of when they occur, via press releases at least five business days before the change takes place. The 2018 results of the re-ranking and rebalancing were announced on December 14, with the changes effective the morning of December 24, coinciding with the expiration of options on December 21.[citation needed]
Differences from Nasdaq Composite index
The Nasdaq-100 is frequently confused with the Nasdaq Composite Index. The latter index (often referred to simply as "The Nasdaq") includes the stock of every company that is listed on Nasdaq (more than 3,000 altogether).[citation needed]
The Nasdaq-100 is a modified capitalization-weighted index. This particular methodology was created in 1998 in advance of the creation of the Nasdaq-100 Index Trust, which holds portions of all Nasdaq-100 firms. The new methodology allowed Nasdaq to reduce the influence of the largest companies and to allow for more diversification. However, the weights of the stocks were not changed after that, which led to more problems. In May 2011, Nasdaq did a major rebalance of the index to bring it closer to market-cap weighting.[citation needed]
The index is rebalanced quarterly only if:
One company is worth 24% of the index
Companies with a weighting of at least 4.5% make up 48% or more of the index
The index is rebalanced annually, after the quarterly rebalancing, only if:
One company is worth 15% of the index
The five largest companies by market capitalizations have weights of 40% or more of the index[12]
Differences from other indices
In addition to its almost complete lack of financial companies, the Nasdaq-100 includes seven companies incorporated outside the United States. Although the S&P 500 Index includes non-U.S. companies, the Dow Jones Industrial Average has never included foreign companies.[citation needed]
As of June 2024, the index's seven companies incorporated in foreign countries are as follows:
Cayman Islands (headquartered in Ireland, previously China) - PDD Holdings
Additionally, the Nasdaq-100 is also the only index of the three that has a regularly scheduled re-ranking of its index each year (in December), ensuring that the largest non-financial companies on Nasdaq are accurately included.[citation needed]
Related indices
In 2006, Nasdaq created a "farm team" index, the Nasdaq Q-50, representing the next fifty stocks in line to enter the Nasdaq-100. With some exceptions, most stocks that are added to the index come up through the Q-50. In 2011, Nasdaq created the NASDAQ-500 to track the 500 largest stocks on Nasdaq, and the Nasdaq-400, tracking those stocks not included in the Nasdaq-100.[citation needed]
Nasdaq has also divided the 100 into two distinct sub-indices; the Nasdaq-100 Tech follows those components who service the tech sector, and the Nasdaq-100 Ex-Tech, which follows those components that are not considered tech companies. The latter index includes noted e-commerce companies Amazon.com and eBay, which are classified as retailers.[citation needed]
This table is current as of the open of trading on November 18, 2024. An up-to-date list is available in the External links section.
Historical components
As of July 2024, 514 companies have been components of the index. Of these, only four, Apple, Costco (through its merger in 1993 with Price Club, with Costco, as a separate entity, not becoming a component until at least 1989), Intel and PACCAR, have been components, continuously, since the first dissemination of the index in 1985. Two other current components, KLA Corporation and Micron Technology, were also components when the index started, but have been removed from the index over time for various reasons.[13]
On April 3, 2014, the Class C common stock of Google was added to the index as a result of Google's stock split. This meant the index had 101 components. Later in 2014, additional classes of stock from other index companies were added to the index, bringing the number of constituent securities in the index to 107.[citation needed] On December 12, 2014, Nasdaq announced that American Airlines Group, Electronic Arts and Lam Research would be added to the index, effective December 22, replacing Expedia Group, F5 Networks and Maxim Integrated Products.[33]
Changes in 2015
On March 23, Walgreens Boots Alliance replaced Equinix in the index. Although it was still listed on NASDAQ, Equinix converted into a real estate investment trust, making it ineligible for inclusion in the Nasdaq-100, but it did gain eligibility for the Nasdaq Financial-100.[34] On July 1, Liberty Interactive created two new tracking stocks, tracking the company's interests in Latin America. Both tracking stocks were added to the index the same day.[citation needed] On July 2, Kraft Foods merged with Heinz, becoming Kraft Heinz. Catamaran Corporation was removed from the index after the close of trading on July 23, after going private. JD.com replaced it on July 29. DirecTV was removed from the index on July 24 due to its acquisition by AT&T and replaced by BioMarin Pharmaceutical on July 27. Sigma-Aldrich was removed on July 31, after being acquired by Merck KGaA. Skyworks Solutions replaced Sigma-Aldrich on August 3.[35]
Altera was removed on October 7 as a result of its merger with Intel. Incyte replaced Altera's on that date.[36]PayPal was added to the index on November 11, as Broadcom was in the process of merging with Avago.[37]
On February 1, Avago Technologies changed its name to Broadcom.[39] On February 22, CSX Corporation replaced KLA-Tencor as a member of the index.[40] On March 16, NetEase replaced SanDisk as a member of the index.[41] On April 18, Liberty Media established two tracking stocks (BATRA), (BATRK) to follow the performance of its investment in the Atlanta Braves.[42] On June 20, Dentsply Sirona returned to the index, replacing four Liberty Media tracking stocks (LMCA), (LMCK), (BATRA), (BATRK).[43]
On October 23, Align Technology replaced Mattel in the index.[52] On December 8, Nasdaq announced that five companies would enter the index on December 18. They were ASML Holding, Cadence Design Systems, Synopsys, Take-Two Interactive and Workday These companies replaced Akamai Technologies, Discovery Communications – both classes listed in the index (DISCA) (DISCK), Norwegian Cruise Lines, Tractor Supply and Viacom.[53]
On December 10, 2021, Nasdaq announced that six new companies would join the index prior to the market open on December 20, 2021. They are Airbnb (ABNB), Datadog (DDOG), Fortinet (FTNT), Lucid Group (LCID), Palo Alto Networks (PANW), and Zscaler (ZS). They replaced CDW (CDW), Cerner (CERN), Check Point (CHKP), Fox Corporation (FOXA/FOX), Incyte (INCY), and Trip.com (TCOM).[69]
On February 2, Constellation Energy was announced as being added to the index as of the end of the previous day. Exelon, from which Constellation was spun off, remained in the index; this increased the number of companies in the index to 101 and the number of stocks to 102 (because 2 classes of Alphabet Inc. stock are in the index).[71]
On December 19, the annual re-ranking of the index took place prior to market open. The six stocks joining the index were CoStar Group, Rivian Automotive, Warner Bros. Discovery, GlobalFoundries, Baker Hughes and Diamondback Energy. They replaced Baidu, DocuSign, Match Group, NetEase, Skyworks Solutions, Splunk, and Verisign. Dropping seven components allowed the Nasdaq-100 index to once again have 100 companies.[74]
On November 18, AppLovin replaced Dollar Tree as Dollar Tree no longer met minimum weighting standards.[84]
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