Markets in Limbo: Inflation Data, Fed Comments, and Political Shifts Fuel Uncertainty

US Stock Futures Hover as Inflation Data and Fed Comments Steal the Spotlight

US stock futures opened mixed on Thursday morning, with investors awaiting crucial inflation data and commentary from Federal Reserve Chairman Jerome Powell. As the market digests the latest consumer price data and anticipates Powell’s remarks, there’s a sense of cautious optimism that is keeping traders on edge.

By 05:06 AM EDT, the Dow futures were up slightly by 51 points (0.12%), the S&P 500 futures inched up by 3.25 points (0.05%), and the Nasdaq 100 futures dipped by 2.25 points (0.01%). On Wednesday, the S&P 500 and Dow saw modest gains, while the tech-heavy Nasdaq Composite struggled. The latest Labor Department report revealed that October's consumer prices rose in line with forecasts, strengthening the belief that the Federal Reserve may act to cut interest rates in its December meeting.

The data sent the 2-year Treasury yield lower, signaling market expectations of a Fed rate cut, while longer-term yields—such as those on the 10-year and 30-year Treasuries—crept up. Analysts at Vital Knowledge cautioned, however, that concerns about inflationary pressures from the incoming Trump administration’s policies could remain a key theme in the coming months.

Republicans Gain Control of the House: What This Means for the Economy and Markets

In a significant political development, Republicans secured a majority in the US House of Representatives following the 2024 midterm elections. This victory gives President-elect Donald Trump’s party control of both chambers of Congress, setting the stage for the potential passage of his policy agenda, which includes tax cuts, deregulation, and tariffs on imports.

While the GOP's win in the House is notable, the victory margin is razor-thin, leaving room for some maneuvering from the Democrats, who will be the minority party in both the House and Senate. Notably, in the Senate, a supermajority of 60 votes will be needed to break a filibuster, which could create some hurdles for major legislation.

Republican Senator John Thune, elected as the new Senate Majority Leader, has indicated that the filibuster will remain intact during his leadership, which could limit the scope of what Congress can pass without significant bipartisan support. Still, with a Republican-controlled Congress, many of Trump’s proposed policies, including tax reforms and changes to trade policies, could advance quickly, influencing everything from corporate tax rates to foreign relations.

Cisco Systems Stumbles Despite Earnings Beat, Shares Dip

Shares of networking giant Cisco Systems (CSCO) dipped slightly in after-hours trading on Thursday, despite the company reporting better-than-expected quarterly earnings. Cisco’s second-quarter revenue dropped 6% to $13.84 billion, but this still topped Wall Street’s forecasts. The company’s earnings per share also surpassed expectations, signaling that the tech giant is navigating the challenging business environment with resilience.

However, Cisco’s guidance for the full fiscal year was underwhelming. It revised its forecast for annual revenue to a range of $55.3 billion to $56.3 billion, which was slightly up from the previous forecast but still lower than analysts had hoped for. Investors had hoped for a more robust recovery in corporate spending, particularly in the wake of delays caused by companies offloading excess inventories. The company's forecast for fiscal Q2 sales also fell in line with Wall Street’s expectations, but the lack of a stronger upward revision sent a signal that growth could remain sluggish through the year.

The stock had climbed over 17% so far in 2024, but the muted outlook caused some to temper their expectations about Cisco’s growth trajectory. Investors are likely to keep a close eye on how the company navigates the slow recovery in IT spending and its ongoing efforts to win new business.

Fed Chair Jerome Powell’s Speech in Focus: What’s Next for Interest Rates?

Federal Reserve Chair Jerome Powell’s upcoming speech in Texas is drawing significant attention from investors. Powell’s comments will likely offer insight into the central bank’s view on inflation and interest rates as we head into the year-end.

Earlier this month, the Fed cut borrowing costs by 25 basis points, signaling that the risks of inflation were largely balanced against the need for continued economic growth. Powell is expected to touch on the progress the Fed has made in stabilizing the economy, particularly in terms of job growth and inflation, but his outlook will be critical as the market tries to gauge whether further rate cuts are on the horizon.

Economists are closely watching Powell’s take on the incoming administration’s economic policies, particularly as Trump’s proposed tax cuts and trade tariffs could put renewed pressure on inflation. Powell has previously dismissed rumors of being dismissed from his post by the Trump administration, reaffirming his commitment to remaining in his role. With inflation still a key focus for the Fed, Powell’s speech will likely provide important clues as to whether the Fed will continue its path of moderation or take a more aggressive stance on interest rates.

Oil Prices Under Pressure as Demand Concerns Grow

In the commodity markets, oil prices faced downward pressure on Thursday, weighed down by concerns over slowing global demand and rising production levels. As of 05:06 AM EDT, Brent crude traded flat at $72.25 per barrel, while US crude (WTI) inched up by just 0.01% to $68.44 per barrel.

The Organization of the Petroleum Exporting Countries (OPEC) recently revised down its forecast for global oil demand growth in both 2024 and 2025, citing weaker-than-expected consumption from China, the world’s largest oil importer. The International Energy Agency (IEA) is expected to follow suit with a similarly cautious outlook when it releases its monthly report later in the session.

On the supply side, the US Energy Information Administration (EIA) raised its forecast for US oil output this year and next, adding to concerns that higher production could exacerbate the current supply glut. Traders will also be keeping an eye on the EIA’s weekly oil inventory report, which is scheduled to be released later on Thursday after a delay due to the Veterans’ Day holiday earlier in the week.