US STOCKS-Wall Street advances as Federal Reserve rate cut bets gather momentum

(Updates to mid-afternoon trading)

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Indexes up: Dow 1.23%, S&P 500 0.72%, Nasdaq 0.40%

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Alphabet up after report on talks with Meta to supply AI chips

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Retail sales, producer prices, consumer confidence reports released

By Stephen Culp

NEW YORK, Nov 25 (Reuters) - Wall Street advanced on Tuesday as a spate of economic data appeared to support the case for the U.S. Federal Reserve to implement its third and final rate cut of the year in December, while softness in the tech sector limited the Nasdaq's gains.

All three major U.S. stock indexes strengthened as the session wore on, with the blue-chip Dow out front. But sagging shares of artificial intelligence frontrunner Nvidia (NVDA) limited the Nasdaq's advance.

Nvidia (NVDA) dipped 3.9%, while the Philadelphia SE Semiconductor index was last off 0.8%.

An influx of economic data was released, much of it stale due to the recent protracted government shutdown, supporting views that the Federal Open Market Committee will reduce its key Fed funds target rate by 25 basis points at its upcoming monetary policy meeting.

The Commerce and Labor departments issued September reports on retail sales and producer prices, respectively, which showed spending softened and that inflation continued to cool.

"Of course (the data) reflects September and we're in November, but nevertheless the trend seems to be that inflation is not worsening, and that opens the door to a December rate cut," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

More recent data from the Conference Board showed a worse-than-expected deterioration of consumer confidence, with near-term expectations tumbling nearly 12%.

"Going into the holiday season, I don't think this bodes well," Cardillo added. "(It's) another point that supports the need to lower rates in December."

Financial markets agree, and are currently pricing in an 84.7% likelihood of that happening, compared with 50.1% a week ago. That probability has gained strength in recent days following dovish remarks by New York Fed President John Williams and Fed Governor Christopher Waller, among others.

The Dow Jones Industrial Average rose 569.39 points, or 1.23%, to 47,017.66, the S&P 500 gained 48.51 points, or 0.72%, to 6,753.63 and the Nasdaq Composite gained 93.49 points, or 0.40%, to 22,964.28.

Among the 11 major sectors in the S&P 500, healthcare led the gainers, while utilities suffered the steepest percentage decline.

While softer-than-expected retail sales data and the dour consumer confidence reading raised concerns over the health of the consumer, who is responsible for about 70% of the U.S. economy, a smattering of generally positive retail earnings helped send the S&P 500 retail index up 2.2%. Department store chain Kohl's jumped 34.6% and clothing retailer Abercrombie & Fitch (ANF) surged 35.0%, after the companies hiked their annual earnings forecasts.

But Burlington Stores (BURL) tumbled 11.5% after third-quarter revenue missed estimates. Alphabet's shares rose 1.3% after the Information reported Meta Platforms was in discussions to use Google's AI chips in its data centers from 2027 and rent chips from Google Cloud by next year. U.S.-listed shares of Alibaba slipped 2.1% even after the Chinese e-commerce firm beat quarterly revenue expectations.

Cryptocurrency exchange shares Coinbase and Strategy Inc (MSTR) slid 3.4% and 5.2%, respectively, in the face of ongoing bitcoin weakness.

Advancing issues outnumbered decliners by a 3.73-to-1 ratio on the NYSE. There were 144 new highs and 38 new lows on the NYSE.

On the Nasdaq, 3,121 stocks rose and 1,462 fell as advancing issues outnumbered decliners by a 2.13-to-1 ratio.

The S&P 500 posted 36 new 52-week highs and 2 new lows while the Nasdaq Composite recorded 118 new highs and 69 new lows.

(Reporting by Stephen Culp in New York; Additional reporting by Johann M Cherian, Sruthi Shankar and Purvi Agarwal in Bengaluru; Editing by Matthew Lewis)