US STOCKS-Wall St rally set to stall as Cisco, Walmart weigh

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Cisco falls on lowering annual forecasts

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Walmart shares drop after Q3 results

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Weekly jobless claims higher than expected

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Futures down: Dow 0.10%, S&P 0.05%, Nasdaq 0.16%

(Updated at 8:38 a.m. ET/1338 GMT)

By Shristi Achar A and Amruta Khandekar

Nov 16 (Reuters) -

U.S. stocks were set for a lower open on Thursday, weighed down by a drop in shares of Cisco and Walmart on underwhelming forecasts, while optimism around peaking interest rates waned.

Shares of

Cisco Systems shed 9.5% 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 dropped 6.3% as the retail giant cautioned about weaker consumer spending ahead of the holiday season, even as it raised annual sales and profit forecast.

Wall Street's main indexes have rallied this week as evidence of cooling inflation in the world's largest economy fueled hopes the U.S. Federal Reserve 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.

"I think the rally from the favorable recent economic data is justified. However, regional (Fed) authorities have very diverse opinions and (it) confuses investors", said Peter Andersen, founder of Andersen Capital Management in Boston.

However, Andersen said he is still optimistic about the possibility of a soft landing for the economy and a year-end rally.

The Labor Department's report showed claims for state unemployment benefits stood at 231,000 for the week ended Nov. 11, higher than estimates of 220,000, according to economists polled by Reuters.

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.

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.

At 8:38 a.m. ET, Dow e-minis were down 35 points, or 0.1%, S&P 500 e-minis were down 2.25 points, or 0.05%, and Nasdaq 100 e-minis were down 25.75 points, or 0.16%.

Among other stocks,

Palo Alto Networks fell 6.9% premarket after the cybersecurity company forecast its second-quarter billings below market expectations due to inflationary pressures.

Macy's shares climbed 9.0% 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 Holdings O>, Baidu and Li Auto fell between 3.5% and 3.6% 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)