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Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. Dow giant Disney and IPO popular Arm Holdings were big overnight earnings winners.
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The stock market rally continues to show strength, with the S&P 500 hitting a new high and nearly reaching the 5000 level. The Nasdaq marks a new two-year high.
But with many big winners like NVIDIA (NVDA) extended and new buying opportunities relatively limited, it is again becoming a “lockdown” market rally. If you are not lightly invested, it is not easy to add exposure, especially among the true leaders.
Additionally, with Wednesday’s gains, the market is starting to look extended again.
That’s why investors need patience.
walt disney (DES), qualys (QLYS), Arms (ARM), Monolithic power systems (MPWR), McKesson (MCK) and O’Reilly Auto (ORLY) reported Wednesday after closing.
Disney shares rose in extended trading as cost cuts boosted earnings, signaling a move out of a buy zone. ARM soared 20% on strong third-quarter results and raised its full-year guidance, saying AI is driving sales. Monolithic Power rose solidly, ready to clean up a messy consolidation.
Qualys slumped due to mixed results and weak guidance. McKesson fell modestly despite having the best views. O’Reilly Auto plummeted, returning to near a buy point, after the sales came to light.
Dynatrace (DT) reports early Thursday morning.
ARM and Nvidia Stock Are on the Move Classification of IBD. NVDA Stock Is Hot Swing Trader. Monolithic Power and ORLY stocks are on IBD’s Long-Term Leaders Watch List. DT and Nvidia shares are in the IBD 50.
Dow Jones Futures Today
Dow Jones futures rose against fair value, and DIS stock offered a boost. S&P 500 futures lost a fraction. Nasdaq 100 futures rose 0.1%.
The 10-year Treasury yield fell to 4.09%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze leading stocks and the market on IBD Live
Stock market rally
The stock market rally continued to advance on Wednesday.
The Dow Jones Industrial Average rose 0.4% in trading on Wednesday, a record close. The S&P 500 index rose 0.8%, hitting a new all-time high and moving within one point of the 5000 mark. The Nasdaq composite gained 0.95% to reach its best levels since January 2022, not far from its maximum in November 2021.
Nvidia rose 2.75% to 700.00, breaking above the 700 level for the first time.
Market breadth was slightly negative despite strong gains for the S&P 500 and Nasdaq.
The small-cap Russell 2000 fell 0.2%, barely holding the 50-day line.
The Invesco S&P 500 Equal Weight ETF (RSP) rose 0.4%, trailing the S&P 500 but near recent 52-week highs. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) gained 0.75% versus the Nasdaq 100’s 1% gain. But both hit record intraday levels.
US crude oil prices fell 0.75% to $73.86 a barrel.
The 10-year Treasury yield rose 2 basis points to 4.11%, returning to the 200-day line after testing the 50-day.
Nvidia is the king, but this frog can become a prince
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (VAT) rose 1.6% and the VanEck Vectors Semiconductor ETF (SMH) rose 2%, reaching both record levels. Nvidia stock is SMH’s number one holding, and MPWR is also a holding.
Also hitting record highs: the Global X US Infrastructure Development ETF (TO PAVE), the SPDR S&P Homebuilders ETF (XHB), the Health Care Select Sector SPDR Fund (XLV) and the Industrial Select Sector SPDR Fund (XLII). PAVE rose 1.4%, XHB 1.7%, XLV 0.3% and XLI 0.7%.
SPDR S&P Metals & Mining ETF (XME) rose 0.5% and the US Global Jets ETF (JETS) rose 0.15%. The Energy Select SPDR ETF (XLE) advanced 0.2%.
The Financial Select SPDR ETF (XLF) rose 0.75%, near recent 52-week highs. The SPDR S&P Regional Banking ETF (KRE) fell 0.3%, but closed at a two-month low.
Reflecting stocks with more speculative histories, ARK Innovation ETF (ARKK) rose 1% but the ARK Genomics ETF (ARKG) fell 2.3%.
Time the Market with IBD’s ETF Market Strategy
Analysis of the market rebound
It’s hard to criticize a market that shows strength. However, the Nasdaq is 5.7% above its 50-day line, and the Nasdaq 100 is 6% above that key level. The S&P 500 is 5.1% above its 50-day index. All of this is simply spreading, where the risks of a pullback are starting to increase. These indices could certainly be extended much further before that happens, but it’s something to keep in mind.
QQEW and multi-sector ETFs at highs highlight that market leadership remains broad.
But as the market refuses to take a big break, leading stocks look increasingly stretched, leaving investors out.
Nvidia, which leads the S&P 500 for the second year in a row, is already up almost 42% in 2024, but is 31% above its 50-day line.
Some second-tier leaders are giving buy signals. Many have struggled to keep those tickets, at least for a while, although many did well at 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 are in winning stocks and have a large exposure, you can choose to add profits incrementally or take some partial profits, but you can largely ride the positive trend.
If you are relatively unexposed, a market rally after a crash can be frustrating. You see the indices and leading stocks rising without you. But you don’t want to chase the market, especially with the Nasdaq and the big rally leaders stretched thin.
You can try to buy second tier stocks as they give off buy signals. Some of them may perform quite well, but others may fall relatively behind or stumble. So add carefully. If the market rally pulls back relatively soon, these stocks may falter.
Over time, the market rally will have a pause or pullback that lasts more than a few days. The late November/early December pause and early pullback of 2204 briefly “unlocked” the market rally, creating a number of new buying opportunities.
So keep working on your watchlists and stay engaged so you’re ready to take action.
Read the big picture every day to stay in sync with the market direction and leading stocks and sectors.
Follow Ed Carson on Threads at @edcarson1971 and X/Twitter in @IBD_ECarson for stock market updates and more.
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