Need to Know: Here’s what hit the Magnificent 7 stocks, and why the selling may continue.

It could be nothing. But our call of the day from The Macro Tourist’s Kevin Muir has an explanation as he warns selling of those heavyweights may just be getting started.

As Muir explains, the Nasdaq over the weekend announced final changes for its Nasdaq 100 rebalance or “Reconstitution” that will kick in with Friday’s option expiration. The committee had recently flagged the Magnificent 7 group’s heavy concentration and its methods of dealing with that, says Muir.

Rebalancing by index committees is done quarterly to limit the influence of the biggest companies, but the Nasdaq did a “special rebalancing” this summer. Those company weights are capped at 20% of the index if they exceed 24%, with the combined weight of those exceeding 4.5% capped at 40% if it exceeds 48%. Here’s the Nasdaq’s committee’s recent chart:

Muir flagged Barclays, which noted a “considerable surprise” from the rebalance, saying those big stocks saw “aggregate downweights translating to roughly -$13bn in supply, in contrast with the anticipation according to index methodology that those names would see meaningful ($17 billion previously projected to buy) upweights.”

Muir says Barclays laid out “monster” stock selling needed for rebalancing: Apple, $4.7 billion; Microsoft, $4.1 billion; Amazon, $2.26 billion; Alphabet A shares
GOOGL,
-1.26%
$1.22 billion; Alphabet C shares
GOOG,
-1.42%
$1.29 billion; Nvidia $1.76 billion and Meta $135 million. Tesla needs buying of $2.9 billion, but the bank notes $5.67 billion in buying was expected.

JPMorgan quants also noted the rebalancing, with figures that more or less matched the above. Money raised by selling those stocks must now go into buying the remaining 93 Nasdaq 100 names, Muir says.

So investment funds tracking those index changes would be forced to adjust their portfolios — hence Monday’s action.

“The selling of MAG7 to buy the rest of the Nasdaq-100 created one of the worst days of relative performance over the past couple of years,” said Muir.

Muir commended the Nasdaq committee for trimming the big names, and suggests selling could keep happening as other committees may follow suit in the new year.

“My guess is that this won’t be the end of the MAG7 selling and that we will look back at this point as the start of their return to being much more normal performing stocks,” said Muir.

The markets

Stock futures
ES00,
+0.02%

YM00,
+0.11%

NQ00,
+0.13%
are inching up, with Treasury yields
BX:TMUBMUSD10Y

BX:TMUBMUSD02Y
pulling back and the dollar
DXY
slipping, as the yen
USDJPY,
-0.65%
recoups some of Monday’s losses. Gold
GC00,
+0.45%
is positive, but hovering right at $2000/oz.

The buzz

CPI is due at 8:30 a.m., with economists forecasting no change in the headline rate, but a creep up on core prices — minus food and energy. Annually, CPI is seen at 4%, and to 3.1% from 3.2% for core. (Follow MarketWatch’s live blog)

The federal budget is also ahead.

AstraZeneca
AZN,
+0.40%
will buy clinical-stage biopharmaceutical Icosavax
ICVX,
-0.19%
for up to $1.1 billion. Icosavax shares are up 45% in premarket on the deal premium.

Hasbro
HAS,
+0.39%
shares are down after saying 900 jobs will go due to weak toy sales. Mattel
MAT,
+0.05%
is also off.

Oracle
ORCL,
+1.34%
is down 9% after the software giant’s revenue disappointed, with data-center expansion plans looking risky.

Following AT&T’s
T,
-1.77%
$14 billion contract snub, Nokia
NOK,
-1.89%

NOKIA,
+1.22%
cut its 2026 margin outlook.

Shares of school bus provider Blue Bird
BLBD,
+1.07%
are jumping after a profit surprise.

Ford
F,
+0.54%
will reportedly halve production of its electric F-50 Lightning pickup trucks next year.

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