Dow Jones Futures: Disney Stock Surges, AI Play Skyrockets; Key Trends in ‘Lockout’ Rally

Dow Jones futures were slightly changed overnight, together with S&P 500 futures and Nasdaq futures. The big earnings winners overnight were Disney, a Dow giant, and Arm Holdings, a hot chip IPO.




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The market rally is displaying continued strength, with the S&P 500 reaching a new record high and nearly hitting the 5000 level. The Nasdaq is setting a fresh two-year best.

However, with many significant winners such as Nvidia (NVDA) extended and relatively limited new buying opportunities, it’s becoming once again a “lockout” market rally. It’s not easy to add exposure if you’re lightly invested, particularly in the true leaders.

Moreover, the market is starting to look extended again after Wednesday’s gains.

Hence, investors require 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.

In extended trade, Disney stock jumped on cost cuts buoyed earnings, indicating a move away from a buy zone. ARM skyrocketed 20% on strong Q3 results and raised full-year guidance, stating that AI is boosting sales. Monolithic Power ran solidly higher, intending to clear a messy consolidation.

Qualys tumbled on mixed results and weak guidance. Despite topping views, McKesson fell modestly. O’Reilly Auto slumped, returning to near a buy point, after sales came in light.

Dynatrace (DT) reports early Thursday.

ARM stocks and Nvidia are on IBD Leaderboard. NVDA stocks are on SwingTrader. Monolithic Power and ORLY stocks are on the IBD Long-Term Leaders watchlist. DT stocks and Nvidia are on the IBD 50.

Dow Jones Futures Today

Dow Jones futures edged higher vs. fair value, with DIS stock offering a lift. S&P 500 futures lost a fraction. Nasdaq 100 futures rose 0.1%.

The 10-year Treasury yield edged down to 4.09%.

Keep in mind that overnight activity in Dow futures and elsewhere does not 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.

In Wednesday’s stock market trading, the Dow Jones Industrial Average rose 0.4%, marking 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 peak in November 2021.

Nvidia rallied 2.75% to 700.00, clearing the 700 level for the first time.

Despite the solid gains for the S&P 500 and Nasdaq, market breadth was slightly negative.

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

In 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

The market is showing strength, a positive sign. 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. These are all reaching extended levels, where the risks of a pullback start to increase. These indexes could become even more extended before that happens, but it’s something to take note of.

Highlights like QQEW and multiple sector ETFs at highs indicate that market leadership remains broad.

Despite the market not taking much of a break, leading stocks are looking increasingly extended, which locks out investors.

Nvidia, leading the S&P 500 for a second straight year, is already up nearly 42% in 2024. However, it’s currently 31% above its 50-day line.

Some second-tier leaders are showing buy signals. However, many have struggled to hold those entries, at least for a time, even though many were performing 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

Patience is key in a lockout market rally.

If you’re heavily invested in winning stocks, you can choose to add incrementally or take some partial profits, but you can largely ride the positive trend.

A lockout market rally can be frustrating if you have relatively low exposure. 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 show buy signals. Some of them may work out quite well, but others may be relative laggards or stumble. So add with caution. If the market rally pulls back relatively soon, these stocks may falter.

Eventually, there will be a pause or pullback in the market rally lasting more than just 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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