FX168 Financial News (North America) — Wall Street has been full of momentum this week. As index-tracking funds are about to readjust $250 billion in stocks, all of this has reached a climax under the influence of the “triple witch” trading incident.

The S&P, Dow Jones, and FTSE Russell stock indices will be restructured on Friday. The quarterly activity is expected to be the busiest in nearly four years, mainly due to technology-driven market fluctuations.

Apple's weight will increase in the main benchmark due to Warren Buffett's recent stock sale. At the same time, new S&P index limit rules will also come into effect, which will affect the allocation of large companies.

According to Piper Sandler & Co.'s estimates, demand from benchmark tracking funds for Apple and newly added S&P 500 components — Palantir Technologies Inc., and Dell Technologies Inc. — has surged, and computer and software stocks will buck the trend and avoid a net outflow trend from other industries.

Overall, tech stocks are expected to see $40 billion in net purchases, with Apple accounting for most of the share.

Michael Kantrowitz, Piper's chief investment strategist, said: “Technology will be the only industry to achieve net purchases.”

This restructuring will put an end to a busy week, which included the Federal Reserve's first rate cut in four years and a quarterly event known as the Triple Witch. On Friday, $5.1 trillion in derivatives related to stocks and indices expires, which could cause market fluctuations when traders close or open new positions.

However, the index-related restructuring did not mean that this was an ominous event. Since money managers usually trade stocks at the end of trading sessions to avoid unnecessary deviations from benchmarks such as the S&P 500 and Russell 3000, this influx of centralized trading may provide a strong liquidity window for the wider market.

After Buffett sells shares, Apple's exponential representation will increase, thereby freeing up the number of shares available for trading. Accordingly, funds that track the index need to buy these stocks to reflect their growing influence.

Additionally, S&P adjusted the rules that determine the influence of the largest companies in their industry-specific indices. From now on, passively managed investment instruments, such as the Technology Select Industry SPDR Fund (XLK), will limit the largest stocks by market capitalization ratio, rather than reducing the weight of the smallest stocks first.

tips

“Triple Witching” (Triple Witching) is a financial term that refers to the third Friday of each quarter, when multiple derivatives contracts expire, including stock options, stock index options, and stock index futures. This day is usually accompanied by higher trading volumes and price fluctuations as investors need to close or adjust their positions. Since multiple contracts expire at the same time, the market can fluctuate drastically, so it is known as the “triple witch.”