US STOCKS-Wall St gains as PCE data boosts Fed rate-cut bets

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Indexes up: Dow 0.49%, S&P 500 0.46%, Nasdaq 0.56%

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Warner Bros gains after Netflix (NFLX) agrees to buy the company

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Investors assess inflation and consumer sentiment data

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HPE falls on weak AI server revenue

(Updates with morning prices after PCE data, analyst comments)

By Johann M Cherian and Pranav Kashyap

Dec 5 (Reuters) -

Wall Street's main indexes edged higher on Friday as investors digested a long-delayed inflation report and recalibrated expectations for the Federal Reserve's policy path.

U.S. consumer spending

rose in line with forecasts in September, while core prices increased 2.8% year-on-year, a touch below expectations for a 2.9% gain, the latest Personal Consumption Expenditures report showed.

The release, the first PCE print since a 43-day government shutdown froze official statistics, gave markets and policymakers a fresh pulse-check on the economy ahead of what is shaping up to be one of the

Fed's most contentious meetings

in years.

Separately, the University of Michigan's survey pointed to consumer sentiment improving in December, with individuals anticipating inflation to ease over the next one-year period to 4.1%, compared with 4.5% in late November.

Fed Funds imply now an 87% chance of a 25-basis-point rate cut at this month's meeting, according to CME's FedWatch Tool.

"In purely numerical terms, the camp in favor of unchanged interest rates is currently slightly ahead. However, the governors seem to be leaning more toward an interest rate cut," said Commerzbank's chief economist, J?rg Kr?mer.

"The decisive factor is likely to be which way Fed Chair Powell leans and how successful he is in persuading other members to follow him."

Next week, Fed officials are set to spar over whether to cut borrowing costs despite stubborn price pressures and a still-resilient labor market.

Secondary labor indicators show little sign of an imminent hiring slowdown, giving inflation hawks fresh ammunition as the Fed looks for clearer progress toward its 2% target.

Investors also expect the Fed to deliver another quarter-point rate cut by June 2026.

At 10:07 a.m. ET, the Dow Jones Industrial Average rose 236.46 points, or 0.49%, to 48,087.63, the S&P 500 gained 31.44 points, or 0.46%, to 6,888.56 and the Nasdaq Composite gained 131.27 points, or 0.56%, to 23,636.41.

In dealmaking news, shares of Warner Bros. Discovery (WBD) were up 3.2% after Netflix (NFLX) agreed to buy one of Hollywood's most prized, decades-old assets for $72 billion, ending a weeks-long bidding war.

Shares of the streaming giant were flat after paring losses from pre-market trading.

Dovish remarks from several influential policymakers in recent weeks have helped underpin risk appetite. Wall Street's main indexes are on track for modest weekly gains, with the benchmark S&P 500 about 1% shy of its record high.

The standout was the domestically focused small-cap index , which jumped 1.2%, outpacing the broader market as traders rotated into rate-cut beneficiaries.

Hewlett Packard Enterprise fell 1% after forecasting first-quarter revenue below estimates, as it sees a fall in AI server income due to customers shifting their orders to the second half of the year.

Oklo fell 6.3% after the nuclear technology firm unveiled a planned $1.5 billion share sale.

Cooper Companies (COO) jumped 8.3% after the medical device maker said it is initiating a formal strategic review aimed at identifying opportunities to enhance long-term shareholder value.

Advancing issues outnumbered decliners by a 1.87-to-1 ratio on the NYSE and by a 1.37-to-1 ratio on the Nasdaq.

The S&P 500 posted 29 new 52-week highs and 4 new lows, while the Nasdaq Composite recorded 78 new highs and 22 new lows.

(Reporting by Johann M Cherian, Pranav Kashyap, Twesha Dixit and Purvi Agarwal in Bengaluru; Editing by Tasim Zahid)