Stock Indexes Without Apple

The rapid rise in the value of Apple’s (NASDAQ: AAPL) shares has been credited with much of the improvement in the Nasdaq and S&P 500 over the past year. Apple’s market cap makes it a tremendous part, 12%, of the value of the Nasdaq. As Apple has fallen for five days in a row, the Nasdaq’s value has been hammered. Apple’s decline and its effect on the broader market make an argument that the indexes, particularly the Nasdaq, post two sets of values. One would include Apple and the other would not.

Apple’s drop has disguised the improvement in share value of several other large tech firms. Microsoft’s (NASDAQ: MSFT) shares have risen strongly in the past several days. The same is true of Intel (NASDAQ: INTC), Starbucks (NASDAQ: SBUX) and several dozen other corporations that would have significant weight as Nasdaq components but do not because of Apple.

There has never been an action to remove a single company from any major U.S. index. It would distort the value of that index, it would have been argued. That has been true of the large indexes for years and perhaps decades. But now Apple is an exception. Nasdaq needs to treat it as such and show its movement with and without Apple. Investors do not need a distorted view of the market.

Douglas A. McIntyre