What Is the NASDAQ 100 Index?
The NASDAQ 100 is one of the two stock indexes used to track the values of stocks trading on the NASDAQ stock exchange. The NASDAQ Composite index includes most of the stocks on the exchange, and the NASDAQ 100 focuses on 100 of the most important companies listing shares on the NASDAQ.
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Identification
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The NASDAQ 100 stock index is composed of the stock values of the 100 largest non-financial stocks that trade on the NASDAQ market. The index is market cap weighted. This means that the larger companies by market value in the list of 100 have a greater weight in the index than the smaller companies. The symbol for looking up the value of the NASDAQ 100 is NDX. In early November 2010, the NDX had a value of about 2,170.
Significance
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The NASDAQ stock exchange is the home exchange for many of the better known technology stocks and the NASDAQ 100 is watched as an indicator for the technology sector of the market. The NASDAQ website states the index includes companies in computer hardware and software, biotechnology, telecommunications, retail and wholesale trade. Financial companies are excluded from the NASDAQ 100, giving greater focus on the technology company stocks.
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Components
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The top 10 stocks in the NASDAQ 100 compose almost 50 percent -- 47 percent in November 2010 -- of the value of the index. The 10 stocks include nine technology companies and one pharmaceutical firm, Teva Pharmaceuticals. The top five stocks in the NASDAQ by market value are Apple, Inc., Qualcomm, Inc., Google, Inc., Microsoft Corporation and Intel Corporation.
History
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During the technology stock market bubble of the 1990's the NASDAQ 100 reached a peak value of 4,700 in March 2000. By October 2002, the index was down to just a few points above 800. The long market recovery brought the NASDAQ 100 up to over 2,200 in October 2007. The bear market of 2008 to 2009 pushed the index down to lows near 1,030. From the bear market bottom in March 2009, the NDX almost doubled in value in the next 13 months.
Potential
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Investors who want an investment that tracks the NASDAQ 100 stock index can buy shares in the Powershares QQQ ETF. The fund trades under the stock symbol QQQQ. The history of the NASDAQ 100 index shows the potential for gains and losses with QQQQ. This exchange traded fund provides investors with an investment primarily in the largest technology companies in the United States.
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