NASDAQ Index Blog - Archive Posts for July, 2014

Strong Economic Report Strengthens the Tone of Earnings Season Updated: 7/30/2014

This morning, the Bureau of Economic Analysis announced that US GDP increased at an annual rate of 4% in the second quarter. This comes as the NASDAQ-100 companies continue to report earnings, including 24 this week. Comcast and Apple have both reported, and are outperforming the NASDAQ-100 this week. The Index is up 3% since the beginning of the quarter and 10.50% year-to-date.

“The NASDAQ-100 will see nearly 1/4 of member companies announcing earnings this week… the 24 reporting companies represent 12.59% of the Index by weight,” said David Krein, Head of Research, NASDAQ OMX Global Indexes.

INDEX MOVES THIS WEEK

  • NASDAQ BIOTECHNOLOGY INDEX (NBI) is up 0.95% since Friday’s close. Year-to-date performance for the index is up 14% after being up above 20% at the end of February. Amgen and Gilead are up 5.58% and 4.33%, respectively, this week.
  • NASDAQ CLEAN EDGE GREEN ENERGY (CELS) was up 1.13% as of noon on Wednesday. Some of the index’s largest holdings include Tesla Motors, Linear Technology and First Solar.
  • PHLX Gold/Silver Sector (XAU) was down 1.53% as of noon on Wednesday. The price of gold is currently $1,293 per ounce, down $10 this week.

INDEX TO WATCH

  • The NASDAQ Technology Dividend Index (NQ96DIVUS) consists of 89 technology and telecommunications securities that pay a regular dividend. Over the last year, the index has produced an annual yield of 3.1%, exceeding the NASDAQ US Technology Index’s 1.6% figure.

Biggest Earnings Week of the Quarter for NASDAQ-100 Companies Updated: 7/23/2014

The Wall Street Journal reported yesterday that inflation was in line with expectations, which quelled apprehension the Fed would soon be forced to raise interest rates. Additionally, Janet Yellen, Fed Chair, recently remarked that interest rates would remain low because we have to “deal with a very real problem, namely the economy is operating significantly short of its potential.” According to economic data though, stocks have broadly surged this year. Today, market reports show that technology and biotech securities gained on upbeat quarterly earnings, exemplified by the 1.5% rise in Apple Inc.’s shares, which beat its forecast.

“This is the biggest week of the quarter for NASDAQ-100 companies announcing earnings, with more than half the Index by weight reporting. Some notable earnings announcements today and tomorrow include Facebook, Amazon, Starbucks, and Baidu,” said David Krein, Head of Research, NASDAQ OMX Global Indexes.

INDEX MOVES THIS WEEK

  • NASDAQ BIOTECHNOLOGY INDEX (NBI) is up 3.14% since Friday’s close. Year-to-date performance for the index is up 14% after being up above 20% at the end of February. Biogen is up over 11% this week after beating earnings today.
  • NASDAQ-100 (NDX) was up 0.60% as of noon on Wednesday. Qualcomm, Facebook and Intel all had returns north of 2%, specifically, returns were 3.14%, 3.10% and 2.14%, respectively.
  • PHLX OIL SERVICE SECTOR (OSX) was up 1.33% as of noon on Wednesday. The price of crude oil is $103.13 per barrel, down $3 in the past month.

INDEX TO WATCH

  • The NASDAQ International Multi-Asset Diversified Income Index (NQMAXUS) consists of 126 securities within five asset classes, including: equities, REITs, preferreds, infrastructure and fixed income. Year-to-date, the index has outperformed the NASDAQ Global Ex-US Index while producing an annual yield of close to 5%.

NASDAQ GLOBAL RISK MANAGED INCOME INDEX IS BASIS FOR NEW FIRST TRUST ETF By: Rob Hughes
on 7/23/2014

The NASDAQ Global Risk Managed Income Index is a rules-based, quantitatively enabled index designed to provide risk managed, globally diversified exposure to income-generating asset classes to produce a high yield for the risk taken. The Index consists of liquid, income-bearing exchange-traded funds (ETFs) and other exchange traded products across various asset classes to gain the diversified, risk managed exposure.

The First Trust ETF seeks to replicate, to the extent possible, the performance of the Index net of expenses. The investment strategy of the First Trust ETF is to invest in and hold constituent securities of the Index in the same proportion as they are reflected in the Index or securities intended to replicate the performance of the Index.

“NASDAQ’s suite of Dividend and Income indexes have long been standard benchmarks, and we are proud First Trust has launched a product on one of the most innovative income indexes in the market,” said Dave Gedeon, Managing Director, NASDAQ OMX Global Indexes. “NASDAQ’s partnership with Newfound Research has resulted in an expansion of income investing from the traditional to the technical.”

“We are pleased to partner with NASDAQ OMX Global Indexes and Newfound on a strategy that we believe provides a compelling income solution for Canadian investors,” said Fraser Howell, chief executive officer of FT Portfolios Canada Co. “In the current low yield environment where many investors and advisors actively hunt for the dual goals of income generation and risk mitigation, we feel our new First Trust ETF (TSX:ETP) may provide the flexibility to potentially achieve both objectives.”

For more information, contact:

Rob Hughes
Vice President, Sales and Business Development
NASDAQ OMX Global Indexes
Direct: +1 212 401 8987
Robert.Hughes@nasdaqomx.com

NASDAQ Global Indexes and Dorsey Wright Partner for International Focus 5 Index By: Rob Hughes
on 7/23/2014

NASDAQ OMX Global Indexes is once again excited to partner with Dorsey Wright & Associates (DWA) to launch the Dorsey Wright International Focus 5 Index. The index comprises five select exchange-traded funds from the First Trust Portfolios product line with powerful relative strength characteristics.

The First Trust Dorsey Wright International Focus 5 ETF (Symbol: IFV), based on the index of the same name, will be listed on The NASDAQ Stock Market® (NASDAQ®) and begin trading on NASDAQ today.

IFV is designed to provide targeted exposure to the five First Trust international ETFs, identified by the (DWA) index methodology, to offer the greatest potential to outperform the other ETFs in the selection universe. First Trust international ETFs provide the universe for the index selection. Using DWA's relative strength ranking system, the ETFs are compared to each other to determine inclusion. The top five ranking ETFs are included in the index and the relative strength analysis is conducted on a weekly basis with ETFs replaced when they fall sufficiently out of favor. The index is rebalanced periodically so each position is equally weighted. The design of the index allows for identification of major themes in the market, exposure to those countries or regions whose price action is superior to others, and elimination of exposure to those countries or regions whose price action is sub-par relative to others.

For more information, contact:


Rob Hughes
Vice President, Sales and Business Development
NASDAQ OMX Global Indexes
Direct: +1 212 401 8987
Robert.Hughes@nasdaqomx.com

PowerShares launches new Canadian ETF with NASDAQ OMX Global Indexes By: Rob Hughes
on 7/21/2014

The appetite for fixed-income investments remains strong among Canadian investors despite a prolonged period of record-low yields. When interest rates eventually rise, many Canadian fixed-income investors may be surprised by the negative effect on their portfolios.

Historically, a laddered bond strategy has helped reduce the risks associated with rising interest rates, but managing a fixed-income portfolio requires expertise.

PowerShares Canada today announced the listing of two new smart beta exchange-traded funds (ETFs) on the Toronto Stock Exchange (TSX) that aim to help investors interested in fixed income strategies.

One of them, the PowerShares LadderRite U.S. 0-5 Year Corporate Bond Index ETF, is based on the new NASDAQ LadderRite 0-5 Year USD Corporate Bond Index . The index is designed to give investors exposure to a laddered basket of U.S.-dollar-denominated, investment-grade corporate bonds. USB has a low management fee of 0.25%. The ticker symbol "USB" represents Canadian-dollar-denominated units, while "USB.U" represents U.S.-dollar-denominated units.

For more information, please contact:

Rob Hughes
Vice President, Sales and Business Development
NASDAQ OMX Global Indexes
Direct: +1 212 401 8987
Robert.Hughes@nasdaqomx.com

J.P. Morgan re-launches ADR.com, offering NASDAQ Global Index data Updated: 7/17/2014

J.P. Morgan, one of the world’s leading depositary receipts (DR) banks, has re-launched ADR.com, an enhanced portal for investors and issuers. ADR.com will better serve Depository Receipt (DR) market participants by providing issuer clients, investors, brokers, and investment advisers the tools to monitor DR trading activity and discover international investment opportunities. It is the first public website to visually illustrate dynamic views of the NASDAQ Global Index Family, alongside other exchange and market data.

Yellen Remarks on Interest Rates to Senate Banking Committee Updated: 7/16/2014

Yesterday Yellen spoke with the Senate Banking Committee and reported slight optimism. At this point, the Fed still has a monthly bond-buying program at $35B. In discussing when and the possibility of raising interest rates, Yellen noted, “There's no formula and there's no mechanical answer that I can give you about when the first rate increase will occur… It will depend on the progress of our economy and how we assess it based on a variety of indicators.”


“Next week will be the heart of earnings announcement season for the NASDAQ-100, with 36 companies representing 52% of the index reporting,” said David Krein, Head of Research, NASDAQ OMX Global Indexes.


INDEX MOVES THIS WEEK

  • NASDAQ BIOTECHNOLOGY INDEX (NBI) is down 3.25% since Friday’s close. Year-to-date performance for the index is up 10% after being up above 20% at the end of February.
  • NASDAQ-100 (NDX) was up 0.69% as of noon on Wednesday. Intel beat earnings and is up 8% this week. As well, eight of the other top 10 largest companies have had positive returns with Amazon and Microsoft having positive returns north of 2.5%.
  • PHLX OIL SERVICE SECTOR (OSX) was up 1.23% as of noon on Wednesday. The price of crude oil is $100.91 per barrel, down $6 in the past month.

INDEX TO WATCH

  • The NASDAQ US Multi-Asset Diversified Income Index (NQMAUS) includes five asset classes with the basket including 126 securities. The five asset classes are equities, REITs, preferreds, MLPs and fixed income. Year-to-date, the index has outperformed major US equity benchmarks including the NASDAQ Composite, S&P 500 and Dow Jones Industrial Average.

Video: John Jacobs on the Advantages of Being Part of a Global Exchange Company By: John Jacobs
on 7/15/2014

John Jacobs, Executive Vice President, NASDAQ OMX Global Information Services, explains the advantages of being a part of a global exchange.


Transcript: The fact that NASDAQ Global Indexes is part of the NASDAQ OMX Exchange company gives us some great advantages. For example, since we power 75 markets around the planet, we have natural inroads and connections to those markets that allow us to reach those market participants and they, in turn, are the gateway to the investors. That’s why you’ve seen NASDAQ OMX Indexes, like the NASDAQ-100, for example, start being launched in ETFs and other kinds of products around the planet. We’ve got access to the local marketplace through those connections. In addition, those markets are operating on our trading technology, which is the basis for our index technology. So, again, we have a natural conduit to be able to partner in local markets. The other advantage of being a part of this exchange company is that NASDAQ OMX owns a variety of derivative exchanges, those in Europe and in the US, where we are the number one options market, for example. And when we go to ETF sponsors and other product sponsors, and we can say, “look, if you pick our index, versus another indexers benchmark, we can guarantee you that, if it’s options eligible, we will get an index option launched on your product.” And we’ve all seen that the most successful products out there are the ones that have a variety of different products on them. So you take an index, you launch an ETF and an option, and a future, and structured products, and it appeals to a wide variety of investors and traders. That ensures the most success for all the products. They don’t really compete, they are complementary. So, again, being part of this larger family, gives us great opportunities to leverage the assets of this overall company.


June Monthly Performance Report Updated: 7/10/2014

The PHLX Gold/Silver Sector Index is June's top performer at 18.5% and the OMX Stockholm 30 Index is the worst performer of June at -1.8%. Get a quick overview of NASDAQ OMX Index performance data for our top 50 most watched indexes here.

NASDAQ OMX Global Indexes Now Available Through Informa Investment Solutions Updated: 7/10/2014

NASDAQ OMX announced the following 21 NASDAQ Indexes are now available to clients of Informa Investment Solutions' Zephyr StyleADVISOR. They will also be launched within Informa Investment Solution's PSN Enterprise in the coming months. Eighteen of the indexes are within the NASDAQ Global Index Family, and are comprised of nearly 9,000 global securities with a combined $41.8 Trillion float-adjusted market cap.

The remaining three indexes are from the NASDAQ Dividend Achiever family - a robust series of income-oriented indexes tied to exchange traded products (ETPs) that track nearly $20 billion in assets under management (AUM).

NASDAQ OMX Global Indexes Now Offered Through the StatPro Revolution Platform Updated: 7/9/2014

NASDAQ OMX Global Indexes is partnering with StatPro Group to offer all StatPro Revolution clients access to NASDAQ’s complete suite of more than 40,000 indexes in the NASDAQ Global Index Family.


In an unprecedented move in the index data space, StatPro Revolution’s App Store, which will feature the NASDAQ indexes on a constituent and total level, will allow clients the opportunity to buy benchmark data on a per portfolio basis. This means that smaller asset managers and individual investors now have access to deeper insights at a significantly lower cost.


NASDAQ’s Index Level Performance available in StatPro Revolution can be redistributed by downstream clients in their own reports without the need for a direct license or associated fees. This enables investor communications without incurring additional fees for reporting rights, typically charged by other benchmark providers.


With this partnership, StatPro is one of NASDAQ OMX’s Elite Data Vendors.

Q2 Earnings Announcements Underway Updated: 7/9/2014

Yesterday’s earnings announcement from Alcoa is the first US-listed company to report second quarter earnings and the majority of US-listed companies will do the same over the next month and a half. Major US and global equity indexes were down this week. FOMC minutes are expected to be released today at 2pm EST.

“Over the next four weeks, many of the biggest names in technology from the NASDAQ-100 are expected to announce earnings, kicking-off with Google, Yahoo, eBay and Intel next week,” said David Krein, Head of Research, NASDAQ OMX Global Indexes.

INDEX MOVES THIS WEEK

  • NASDAQ BIOTECHNOLOGY INDEX (NBI) is down 4.29% since Friday’s close. Year-to-date performance for the index is up 12% after being up above 20% at the end of February.
  • NASDAQ OMX GLOBAL GOLD & PRECIOUS METALS (QGLD) was up 1.53% as of noon on Wednesday. The price of gold is currently $1,323 per ounce, up $3 this week.
  • NASDAQ INTERNET (QNET) was down 3.85% as of noon on Wednesday. Some of the largest holdings of the index include Amazon, Google, Facebook and Priceline.

INDEX TO WATCH

  • Over the next four weeks, 84 securities in the NASDAQ-100 are expected to announce the most recently quarterly earnings. Eight of the 84 will announce during the week of July 14. The index is down 1.03% this week and up 8.2% year-to-date.

Open Letter to the industry: The Hidden Tax of Index Data Updated: 7/9/2014

By Justin Wheatley, Chief Executive, StatPro Group

This op-ed was originally published in Inside Market Data on July 7, 2014.

As index use has grown, so have the ways in which entrenched index providers are extracting revenues from licensing their indexes and underlying data. But with cost still a key concern, with the popularity of exchange-traded funds growing, and with incumbents facing fresh competition, the industry may be ripe for change, says StatPro group chief executive Justin Wheatley


It is a remarkable phenomenon how much money is spent these days on index data. Indexes started off as a humble measure of roughly how well a stock market was performing. Today, there are millions of indexes available. Fund management companies must buy the licences to use these indexes to measure their performance, and they pay handsomely for this privilege.

Over the years, index providers have generally become more and more aggressive about how their indexes are licenced, seeking out additional licencing fees for every possible usage. Over the 20 years I have worked in the industry, I have rarely heard anyone that was happy about the cost of their index supply. There is a perception that companies are trapped and forced into paying excessive fees for little perceived value-add, despite the best attempts of index providers to demonstrate how unique and useful their particular indexes are.

To a certain extent, it is puzzling how index providers can charge so much. If a supplier of a product keeps raising its price and enjoys significant net margins (over 80 percent, in some cases), you would expect competition to join the fray and drive down prices to a normal and reasonable level—especially if the product is easy to imitate. Well, indexes are indeed very easy to imitate, and competitors have popped up everywhere, sometimes even offering indexes for free. Yet the leading providers of index services have seen no drop in business—in fact, they have grown even faster. So the success of the incumbents has nothing to do with the uniqueness of their products (some rival indexes have a 99.99 percent correlation with the leading index), but rather something else.

The new market for exchange-traded funds (ETFs) has also been a boon for index providers, as would-be sellers of ETFs have launched numerous funds pegged to indexes. Fund management companies pay significant sums for the right to offer such products as the S&P 500 ETF, the FTSE 100 ETF or the MSCI World ETF, as it helps sell their ETFs better, even though they could easily produce an ETF based on a low-cost index.

Brand Management

So it is evident that the index business is not only about the computation of a benchmark, but is also an exercise in brand management. Fund managers make a lot of money managing other people’s investments. Their top priorities are reputation and trust. By using a recognizable brand name as a benchmark index, they can gain and maintain trust with their clients. This brand effect is the real reason why the leading index providers do so well. It is also noteworthy that some providers are strong in equities and others in bonds. Some are well known for a particular market or region, like emerging markets, but none are used for every type of investment, even though many cover everything. Once an index provider is established as the leader in a given niche, it is hard to unseat them, as they have the trust of the market.

Brand name and trustworthiness are important to retail and institutional investors alike. The institutional investors are the guardians of pension funds and insurers deposits, who parcel out their capital to be managed by different fund managers. They are in turn advised by professional consultants whose job it is to keep the fund managers honest. These consultants want to benchmark the fund managers against indexes to ensure that their performance is up to scratch, and this process has contributed to the growth of indexes.

Say a consultant recommends an index to measure the fund manager. The fund manager has no choice but to use this index and then manage their money relative to this benchmark. Once embedded, this index is nearly impossible to replace, and this in turn allows index providers to raise fees without fear of cancellation. As certain index providers become the “leaders,” it takes a brave consultant to recommend a new, cheaper index provider.

The index world is an entrenched business. The fees of index services are initially paid by the fund managers, but they simply pass the fees on to their clients. So in the end, it is pensioners and investors who pay. Indexes have become a hidden tax.

So, despite this unhappy outlook, it is pleasing then when companies try to break the near-index monopoly that exists. Nasdaq OMX has recently launched a big campaign to provide a new class of global equity indexes that are nearly identical to other famous indexes, but at a fraction of the price. Using its technology, Nasdaq has built an index calculator that can easily create thousands of indexes at a much lower cost than their competitors. Nasdaq also has a world-famous brand, and should leverage this to gain market share.

Another is the Freedom Index, an independent, not-for-profit index provider, set up with the express intent of providing free indexes (it does accept donations, however, and StatPro makes a financial contribution to funding the Freedom Index, and also supplies it with data to compute its indexes), and providing a high-minded attempt to make the incumbents more reasonable. While the Freedom Index is tiny and has no brand to speak of yet, its worthy desire to do the right thing should enable it to gain support easily, and brands are best built through reputation, rather than simply marketing.

Both low-cost alternatives like Nasdaq OMX, and free providers like Freedom Index are expanding their coverage, and plan to one day be major providers of index data. Consultants would be advised to take a look and save their clients and pensioners a packet of money while being every bit as good as any other index provider.

Video: John Jacobs on How Index Providers Compete on Price & Value By: John Jacobs
on 7/8/2014

John Jacobs, Executive Vice President, NASDAQ OMX Global Information Services, addresses the Importance of Value and Price in the Index Data Business in the third installment of his video series.


Transcript: I absolutely think indexers will compete more on price in the future. I think the bigger question is less about price and more on value. So as we’ve mentioned before, indexers, modern indexers are moving toward; full-service ones have to be multi-asset class and it has to be a scalable model, not just a technology scalable model, but a scalable model across every facet of what they do. You have to be nimble and lean when it comes to index administration, and operations and when it comes to rolling out your data in a variety of different formats. NASDAQ OMX, as part of the NASDAQ OMX Group, NASDAQ Indexes has always been a very efficiently built organization. Our goal is that the next 10,000 indexes, shouldn’t cost the same as the first 10,000 indexes. So we are continuing to roll out a superior set of indexes with an additional value proposition at the lowest possible cost. And cost matters to all the downstream users of indexes, so we are absolutely committed to being the low cost provider of indexes, data, components and performance to all the users of indexes downstream. So, I think, you’re going to see more and more, as you see in the environment with some of the ETF providers today, looking and switching benchmarks out to find ones that can give them, probably, better cost structures and certainty of the pricing of their products. We are absolutely going to continue to drive to be the low-cost index provider.


NASDAQ® and NASDAQ® are registered trademarks of The NASDAQ Group, Inc. The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Neither The NASDAQ Group, Inc. nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding NASDAQ-listed companies or NASDAQ proprietary indexes are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.

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