Dow Jones futures edged lower early Thursday, along with S&P 500 futures and Nasdaq futures. Dow giant Disney and hot chip IPO Arm Holdings were big earnings winners overnight.
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The stock market rally continues to show strength, with the S&P 500 hitting a fresh record high and nearly hitting the 5000 level. The Nasdaq setting a fresh two-year best.
But with many big winners such as Nvidia (NVDA) extended and new buying opportunities relatively limited, it’s again becoming a “lockout” market rally. If you’re lightly invested, it’s not easy to add exposure, especially in the true leaders.
Also, with Wednesday’s gains, the market is starting to look extended again.
So investors need patience.
Walt Disney (DIS), Qualys (QLYS), Arm Holdings (ARM), Monolithic Power Systems (MPWR), McKesson (MCK) and O’Reilly Auto (ORLY) reported Wednesday after the close.
Disney stock jumped early Thursday on cost cuts buoyed earnings, signaling a move out of a buy zone. ARM skyrocketed more than 20% on strong Q3 results and raised full-year guidance, saying AI is boosting sales. Monolithic Power ran solidly higher, set to clear a messy consolidation.
Qualys tumbled on mixed results and weak guidance. McKesson fell modestly despite topping views. O’Reilly Auto slumped, back to near a buy point, after sales came in light.
Dynatrace (DT) reports early Thursday.
ARM stock and Nvidia are on IBD Leaderboard. NVDA stock is on SwingTrader. Monolithic Power and ORLY stock are on the IBD Long-Term Leaders watchlist. DT stock and Nvidia are on the IBD 50.
Dow Jones Futures Today
Dow Jones futures dipped 0.1% vs. fair value, even with DIS stock offering a lift. S&P 500 futures fell 0.15%. Nasdaq 100 futures edged lower.
The 10-year Treasury yield edged up to 4.12%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally continued to advance Wednesday.
The Dow Jones Industrial Average rose 0.4% in Wednesday’s stock market trading, a record close. The S&P 500 index popped 0.8%, hitting a new all-time high and coming within a point of the 5000 mark. The Nasdaq composite gained 0.95% to reach its best levels since January 2022, not far from its November 2021 peak.
Nvidia rallied 2.75% to 700.00, clearing the 700 level for the first time.
Market breadth was slightly negative despite the solid gains for the S&P 500 and Nasdaq.
The small-cap Russell 2000 fell 0.2%, just holding the 50-day line.
The Invesco S&P 500 Equal Weight ETF (RSP) rose 0.4%, lagging the S&P 500 but near recent 52-week highs. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) gained 0.75% vs. the Nasdaq 100’s 1% advance. But both hit record highs intraday.
U.S. crude oil prices fell 0.75% to $73.86 a barrel.
The 10-year Treasury yield rose 2 basis points to 4.11%, back to the 200-day line after testing the 50-day.
Nvidia Is King, But This Frog May Turn Into A Prince
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose gained 1.6% and the VanEck Vectors Semiconductor ETF (SMH) jumped 2%, both hitting record highs. Nvidia stock is the No. 1 SMH holding, with MPWR also a holding.
Also hitting all-time levels: the Global X U.S. Infrastructure Development ETF (PAVE), the SPDR S&P Homebuilders ETF (XHB), the Health Care Select Sector SPDR Fund (XLV) and the Industrial Select Sector SPDR Fund (XLI). PAVE rose 1.4%, XHB 1.7%, XLV 0.3% and XLI 0.7%.
SPDR S&P Metals & Mining ETF (XME) climbed 0.5% and U.S. Global Jets ETF (JETS) edged up 0.15%. The Energy Select SPDR ETF (XLE) advanced 0.2%.
The Financial Select SPDR ETF (XLF) rose 0.75%, close to recent 52-week highs. The SPDR S&P Regional Banking ETF (KRE) fell 0.3%, but closing off a two-month low.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) climbed 1% but ARK Genomics ETF (ARKG) fell 2.3%.
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Market Rally Analysis
It’s hard to fault a market showing strength. However, the Nasdaq is 5.7% above its 50-day line, with the Nasdaq 100 6% above that key level. The S&P 500 is 5.1% above its 50-day. These all just getting extended, where the risks of a pullback start to climb. To be sure, these indexes could get a lot more extended before that happens, but it’s something to note.
QQEW and multiple sector ETFs at highs highlight that market leadership remains broad.
But with the market refusing to take much of a break, leading stocks are looking increasingly extended, locking investors out.
Nvidia, leading the S&P 500 for a second straight year, is already up nearly 42% in 2024. But it’s 31% above its 50-day line.
Some second-tier leaders are flashing buy signals. Many have struggled to hold those entries, at least for a time, though many were doing well in Wednesday’s rally. Other setups or buying opportunities are for stocks with upcoming earnings, such as Affirm Holdings (AFRM).
What To Do Now
In a lockout market rally, patience is key.
If you’re in winning stocks and have heavy exposure, you can choose to add incrementally or take some partial profits, but you can largely ride the positive trend.
If you’re relatively lightly exposed, a lockout market rally can be frustrating. You see the indexes and leading stocks running up without you. But you don’t want to chase the market, especially with the Nasdaq and big rally leaders extended.
You can look to buy second-tier stocks as they flash buy signals. Some of them may work out quite well, but others may be relative laggards or stumble. So add carefully. If the market rally pulls back relatively soon, these stocks may falter.
Eventually, the market rally will have a pause or pullback that lasts more than a few days. The late November-early December pause and early 2204 retreat briefly “unlocked” the market rally, creating a number of new buying opportunities.
So keep working on your watchlists and staying engaged so you’ll be ready to act.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
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Source: investors.com
