Dow futures extend losses following Wednesday's sell-off

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U.S. stock futures traded slightly lower early Thursday on the heels of a market slide a day earlier as a recent rally lost steam.

Wall Street points to lower open following Wednesday’s sell-off
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Futures tied to the Dow Jones Industrial Average slipped 62 points, or 0.2%. S&P 500 and Nasdaq 100 futures fell 0.1% and 0.3%, respectively. Futures were off their lows, however, after the University of Oxford and AstraZeneca released preliminary data showing their coronavirus vaccine candidate triggered a similar immune response among all adults.

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Weakness in the futures follows a Wednesday session that finished on a sour note. After bouncing around the flat line for most of the day, the Dow Jones Industrial Average turned south in the final hour of trading to register a loss of 345 points, or 1.2%. The S&P 500 also dropped 1.2%, while the Nasdaq Composite shed 0.8%.

The slide for stocks accompanied mixed news about the coronavirus crisis. On Wednesday morning, Pfizer announced that a final analysis showed that its vaccine candidate was 95% effective against Covid-19. However, New York City announced during the afternoon that it was closing schools due to a rising positivity rate.

“This is the perfect day that describes what we’re calling the ‘Covid air pocket.’ We have a linearity issue, which is that you can’t get there from here without going through a lot of bad news and some slowdown in the real economy,” Alicia Levine, chief strategist at BNY Investment Management, said on Thursday’s “Closing Bell.”

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Despite Wednesday’s struggle, Wall Street has still seen a strong November. The S&P 500 has gained 9.1% month to date, while the small-cap Russell 2000 hit an intraday record high on Wednesday.

The strength for small caps has been part of an outperformance for cyclical stocks in recent weeks after growth-oriented tech stock fueled much of the market’s rally from its March lows.

“You see the market really kind of wanting to move in one direction, and then I think the vaccine news was certainly a catalyst to accelerate that a little bit. So I wouldn’t be surprised to see that trade persist for some time,” Jeff Mills, chief investment officer at Bryn Mawr Trust, said about the rotation into cyclical names.

“That being said, I do think the leadership in the market could be volatile over the next couple of months because you’re going to be battling Covid case increases and incrementally better news relative to the vaccine,” Mills continued.

Thursday morning will bring another look at how the labor market recovery is faring amid rising cases of Covid-19. Economists surveyed by Dow Jones expect the reading for initial jobless claims to come in at 710,000, roughly flat compared with the prior week.

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