LDN - Business

Futures slip as peak rate optimism wanes; Cisco drops

[November 16, 2023] By Shristi Achar A and Amruta Khandekar

(Reuters) -U.S. stock index futures slipped on Thursday as optimism around an end to the Federal Reserve's interest rate hikes waned and a drop in shares of Cisco following a dour forecast further weighed on sentiment.

Wall Street's main indexes have rallied this week as evidence of cooling inflation in the world's largest economy fueled hopes the Fed was most likely done hiking interest rates.

In an action-packed week, which saw the tech-heavy Nasdaq hit an over three-month high, markets also took comfort from the U.S. Senate's passage of a stopgap spending bill to avert a government shutdown.

However, uncertainty around when the central bank might start cutting interest rates has kept investors on edge.

"Investors threw the Fed’s 'higher for longer' mantra out of the window this week," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

"But this is certainly as good as it gets in terms of Fed optimism. If the markets go faster than the music, the Fed must calm down the game by a tough talk, and if needed, by more action."

Pressuring futures further, Cisco Systems shed 11% before the bell, as the communications and networking firm cut its full-year revenue and profit forecasts on slowing demand for its networking equipment.

Walmart raised its annual sales and profit forecast on Thursday for the second straight quarter, signaling a strong start to the holiday season. Still, shares of the retail giant slipped 2.9%.

While money markets have fully priced in a probability that the Fed will hold rates steady in the December meeting, they see about 62% odds of an at least 25 basis point rate cut in May, according to CME Group's FedWatch tool.

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Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., October 26, 2023. REUTERS/Brendan McDermid

Market participants will take monetary policy cues from a slew of Fed officials, including voting members New York Fed President John Williams and Fed Vice Chair for Supervision Michael Barr, who are slated to speak during the day.

Investors will also await a raft of economic data due later in the day, including the weekly jobless claims numbers for the week ended Nov. 11, the Philly Fed Business index and industrial production data. At 7:04 a.m. ET, Dow e-minis were down 33 points, or 0.09%, S&P 500 e-minis were down 3.75 points, or 0.08%, and Nasdaq 100 e-minis were down 37.25 points, or 0.23%.

Palo Alto Networks fell 5.4% premarket after the cybersecurity company forecast its second-quarter billings below market expectations due to inflationary pressures.

Macy's shares climbed 5.5% as the department store operator's quarterly sales beat analysts' estimates, helped by healthy inventory.

U.S.-listed shares of Chinese firms such as PDD HoldingsO>, Baidu and Li Auto fell between 3% and 3.8% following "disappointing" talks between U.S. President Joe Biden and Chinese leader Xi Jinping and continued weakness in China's property sector.

(Reporting by Shristi Achar A and Amruta Khandekar in Bengaluru; Editing by Maju Samuel)

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