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Strategies & Market Trends : The Thread -- Ignore unavailable to you. Want to Upgrade?

To: Joe Hoek who wrote (7812)	7/25/2000 5:52:05 PM
From: Joe Hoek	Respond to of 49816

Hadn't thought about this, but according to this article funds will have to do some selling to reallocate the index fund(s). Not a very good article on the whole... biz.yahoo.com After the close of trading tomorrow, JDS Uniphase (Nasdaq:JDSU - news) will replace beleaguered drug chain Rite Aid (NYSE:RAD - news) in the S&P 500. As with all changes to the S&P 500, index fund managers must sell a portion of the other 499 stocks they own in order to raise enough capital to pay for the index's new member. After tomorrow's close, JDS stock will be about the 60th-largest company in the index. And since the S&P 500 is a cap-weighted index -- the larger the market capitalization of a firm, the larger its weighting in the index -- funds will be forced to buy a lot of JDS stock tomorrow. The likely result is a bit of selling pressure among large stocks Wednesday. And if there are any foul winds from firms reporting earnings, this pressure could translate into a full-scale market sell-off.