US STOCKS-Wall St edges higher as economic data boosts Fed rate-cut bets

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Indexes up: Dow 0.22%, S&P 500 0.27%, Nasdaq 0.33%

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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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Ulta Beauty soars after raising forecasts

(Updates to mid-session trading)

By Johann M Cherian and Pranav Kashyap

Dec 5 (Reuters) -

Wall Street's main indexes edged higher on Friday as investors digested a batch of economic data that appeared to pave the way for a Federal Reserve interest rate cut this month.

The first PCE print since a 43-day government shutdown froze official statistics showed that

consumer spending increased marginally in September. While it broadly suggested a loss of momentum in the economy, the index was still above the Fed's 2% target.

A separate report showed consumer sentiment improved in early December on expectations that price pressures would cool in the next year.

The releases 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.

Policymakers will spar over whether to cut borrowing costs despite stubborn price pressures and signs that the labor market was weakening on the fringes.

Fed Funds futures now imply an 87.2% chance of a 25-basis-point rate cut at this month's meeting, according to CME's FedWatch Tool. Investors also expect the Fed to deliver another quarter-point rate cut by June 2026.

"We don't expect (the Fed) to cut aggressively (after December) because there are these balanced risks between the labor market," said Michael Reynolds, vice president of investment strategy at Glenmede, adding that the danger inflation could pick up again should make policymakers more cautious.

At 11:58 a.m. ET, the Dow Jones Industrial Average rose 104.39 points, or 0.22%, to 47,955.33, the S&P 500 gained 18.62 points, or 0.27%, to 6,875.74 and the Nasdaq Composite gained 78.08 points, or 0.33%, to 23,583.21.

In dealmaking news, shares of Warner Bros. Discovery (WBD) were up 2.9% 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 slipped 3%, while Paramount Skydance, one of the other bidders for Warner Bros, fell 7.5%.

Healthcare stocks dipped 0.3% after a group of vaccine advisers scrapped a long-standing recommendation that all U.S. children receive the hepatitis B shot at birth.

Eight of 11 S&P 500 sectors were higher, led by a 1% rise in communication services.

The benchmark S&P 500 and the tech-heavy Nasdaq touched one-month highs earlier in the day. The blue-chip Dow, along with the other two indexes was on track for their second-straight week of gains.

The benchmark S&P 500 is about 1% shy of a record high, but the standout was the domestically focused small-cap index that gained 1% this week, outpacing the broader market as traders rotated into rate-cut beneficiaries.

On Friday, however, the Russell 2000 index slipped 0.2%.

Ulta Beauty gained 14% after the beauty retailer raised its annual sales and profit forecasts.

Advancing issues outnumbered decliners by a 1.27-to-1 ratio on the NYSE. Declining issues outnumbered advancers by a 1.07-to-1 ratio on the Nasdaq.

The S&P 500 posted 32 new 52-week highs and five new lows while the Nasdaq Composite recorded 100 new highs and 32 new lows.

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