The NASDAQ-100 is a stock market index of 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. The companies' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components. It does not contain financial companies, and includes companies incorporated outside the United States. Both of those factors differentiate it from the Dow Jones Industrial Average, and the exclusion of financial companies distinguishes it from the S&P 500.
The NASDAQ-100 began on January 31, 1985 by the NASDAQ, trying to promote itself in the shadow of the New York Stock Exchange. It did so by creating two separate indices. This particular index, which consists of Industrial, Technology, Retail, Telecommunication, Biotechnology, Health Care, Transportation, Media and Service companies; and the NASDAQ Financial-100, which consists of banking companies, insurance firms, brokerage houses and mortgage companies. By creating these two indices, the NASDAQ hoped that mutual funds, options and futures would correlate and trade in conjunction with them.
The base price of the index was initially set at 250, but when it closed near 800 on December 31, 1993, the base was reset at 125 the following trading day, leaving the halved NASDAQ-100 price below that of the more commonly known NASDAQ Composite. The first annual adjustments were made in 1993 in advance of options on the index that would trade at the Chicago Board Options Exchange in 1994. Foreign companies were first admitted to the index in January 1998, but had higher standards to meet before they could be added. Those standards were relaxed in 2002, while standards for domestic firms were raised, ensuring that all companies met the same standards. The all-time highs for the index, set at the height of the Dot-Com Bubble in 2000, stand above the 4,700 level, while its recent bear market lows in 2002 revolving around the Early 2000s Recession, the September 11, 2001 Attacks and the subsequent Afghan War occurred below the 900 point level.
After a gradual 5-year recovery to an intraday high of 2,239.51 on October 31, 2007, the highest reached since February 16, 2001, the index corrected below the 2,000 level in early 2008 amid the Late-2000s Recession, the United States Housing Bubble and the Global Financial Crisis of 2008. Panic focusing on the failure of the investment banking industry culminated in a loss of more than 10% on September 29, 2008, subsequently plunging the index firmly into bear market territory. The NASDAQ-100, with much of the broader market, experienced a Limit Down open on October 24 and reached a 6-year intraday low of 1,018 on November 20, 2008.
By December 2010, the index more than doubled from there to the 2,160 level amid quantitative easing (QE) from the Federal Reserve and optimism that the financial crisis was ending. Following more volatility related to the U.S. federal debt debate in August 2011, the index broke above 2,500 in early February 2012 to reach an intraday peak of 2,800 in late March, surpassed following the announcement of QE3 on September 13, 2012. On September 19, the index reached 2,871.10 and closed at 2,864.03, its highest levels since December 11, 2000, as large-cap tech stocks AAPL and GOOG made all-time closing highs above $700 and $725, respectively. Subsequently, steep losses to the mid-$400s in AAPL hindered the growth of this index, such that, on April 10, 2013, it remained several points below its recent peak, even as the Composite made decade highs and the broader market made all-time nominal highs. Still, on May 15, 2013, as the market continued to rally, the NADSAQ-100 managed to close above 3,000 for the first time since November 15, 2000 and made an intraday high of 3,005.02 points, its highest level since November 16, 2000 and nearly triple its 2008 low.