Analysts believe that due to Buffett's massive sale of Apple shares before, Apple's weight in major benchmark indices will increase. Analysts expect tech stocks to see a net purchase of $40 billion, with Apple expected to account for the majority.
Wall Street ushered in turbulent Friday. At the same time as “triple witching day” (triple witching), major US stock indexes will restructure stocks worth 250 billion dollars.
Stock indices owned by S&P Dow Jones Indices (S&P Dow Jones Indices) and FTSE Russell (FTSE Russell) will undergo quarterly adjustments on Friday. Analysts believe that due to market fluctuations driven by technical factors, this quarterly adjustment is expected to be the busiest in nearly four years.
Among them, the weight of Apple Inc. (Apple Inc.) in the major benchmark indices will increase, after stock god Warren Buffett (Warren Buffett) sold the company's shares. At the same time, the new S&P index weight limit regulations will soon come into effect. The purpose of these adjustments is to maintain the diversity and stability of the index, prevent the performance of very few large companies from excessively affecting the performance of the entire index, and also enable funds and investors tracking these indices to better spread risk.
As investors tracking the benchmark index increase demand for new Apple and S&P 500 constituents (such as Palantir Technologies Inc. and Dell), analysts believe computer and software stocks are expected to buck the trend, while other industries may experience net outflows. According to Piper Sandler & Co. estimates, tech companies are expected to see a net purchase of 40 billion dollars, with Apple accounting for the majority.
Piper's chief investment strategist said:
“Technology will be the only net buyer.”
Analysts believe that the restructuring with the benchmark index was not an ominous event. Since fund managers usually trade towards the end of the trading session to avoid excessive deviations from benchmarks such as the S&P 500 and Russell 3000, a surge in concentrated trading volume can provide a strong liquidity window for the wider market.
And after Buffett's sale, Apple's index representation will increase, completely freeing up the number of stocks available for trading. As a result, index-tracking funds will need to buy these stocks to simulate their increased weight. Apple shares rose 0.58% intraday on Friday to $230.20. Apple's stock price has risen by more than 24% so far this year.
Additionally, S&P's index adjusted the rules that determine the influence of large market capitalization companies in its selected industry indices. After the adjustment, passive management tools such as the Technology Select Sector SPDR Fund (XLK) will begin to limit the weight of stocks with the largest market capitalization, rather than first reducing the weight of the stocks with the smallest market capitalization in the index as before.
There are many major events in US stocks this week. Apart from the Federal Reserve's first rate cut in four years and the current index restructuring, there is also the arrival of the quarterly “Three Witch Days.” “Three magic days” for US stocks means that stock options, stock index futures, and stock index option contracts expire at the same time on the same trading day. This happens four times a year, on the third Friday of March, June, September, and December. The expiration of a large number of options on “Three Witches Day” means that traders need to adjust their positions, so market trading volume usually increases dramatically on this day, leading to sharp price fluctuations. As derivatives, stocks, and indices worth $5.1 trillion expire, this could cause market turmoil, and traders either continue to hold and renew their existing positions or open new ones.
