They'd be priced low. There is no "should" when it comes to markets - the market price is whatever people will transact at.
The problem is that stock price movements depend upon future events - making money in the markets is effectively a future-prediction problem. So if your strategy is to discard the bottom 10%, great, you got rid of Foot Locker and Sears. You also would've gotten rid of Apple in 1998, which was responsible for a good portion of the index's gains over the last 20 years. And you would've kept losers like PG&E, which went bankrupt over a black-swan event (they were doing fine until they burned down a town).
The problem is that stock price movements depend upon future events - making money in the markets is effectively a future-prediction problem. So if your strategy is to discard the bottom 10%, great, you got rid of Foot Locker and Sears. You also would've gotten rid of Apple in 1998, which was responsible for a good portion of the index's gains over the last 20 years. And you would've kept losers like PG&E, which went bankrupt over a black-swan event (they were doing fine until they burned down a town).