Source: Investing.com -- Shares of Robinhood (NASDAQ:HOOD) and AppLovin (NASDAQ:APP) were down about 5% in premarket trading on Monday.
The decline followed the S&P Dow Jones Indices' decision to leave the composition of the S&P 500 unchanged in its latest quarterly rebalancing, which was conducted on Friday.
Wall Street analysts often forecast which companies will be added to the index before the announcement. Wendy Soong of Bloomberg Intelligence had listed AppLovin, Robinhood, Cheniere, Veeva Systems and Vertiv as potential additions to the S&P 500.
Inclusion in the benchmark index is becoming increasingly important for companies in an environment heavily influenced by passive investment funds. In contrast, removal from the benchmark index can have a negative impact on share prices.
This is because passive investors are forced to sell their shares and adjust their portfolios to bring them in line with the new composition of the S&P 500.