US STOCKS-Wall St advances as data keeps Fed cut expectations on track

By Chuck Mikolajczak

NEW YORK, Dec 5 (Reuters) - U.S. stocks gained modestly on Friday as the latest flurry of economic data kept elevated expectations for a Federal Reserve interest rate cut next week intact.

In the wake of the 43-day government shutdown, market participants have been digesting delayed economic data as the backlog slowly dwindles, while also looking to secondary indicators to gauge the health of the economy.

Delayed data from the Commerce Department showed consumer spending, which accounts for more than two-thirds of economic activity, rose 0.3% in September to match the estimate of economists polled by Reuters, after a downwardly revised 0.5% gain in August.

In addition, the Personal Consumption Expenditures Price Index increased 0.3% after gaining 0.3% in August, the Bureau of Economic Analysis said. In the 12 months through September, the PCE Price Index advanced 2.8% after rising 2.7% in August. Both were in line with forecasts.

A separate report from the University of Michigan's Surveys of Consumers showed consumer sentiment improved in early December to 53.3, topping the 52 forecast.

Markets were pricing in an 87.2% chance of a 25-basis-point rate cut at this month's Fed meeting, according to CME's FedWatch Tool, although the meeting is expected to have a large number of dissenting voters over concerns about persistent inflation. Expectations for a cut were below 30% two weeks ago until several Fed officials voiced support for a rate reduction.

"The Fed's going to cut next week, there are going to be a couple of dissents, going to be interesting to see how all that's received by the market," said Jed Ellerbroek, portfolio manager at Argent Capital Management in St. Louis.

"The equity markets love the rate cuts. It's going to help residential and nonresidential construction, it's going to boost every business out there that's got debt and wants to refinance, and a lot of the big tech companies are issuing new debt, helpful for them too now."

The Dow Jones Industrial Average .DJI rose 166.57 points, or 0.35%, to 48,017.51, the S&P 500 .SPX gained 16.60 points, or 0.24%, to 6,873.72 and the Nasdaq Composite .IXIC gained 58.92 points, or 0.25%, to 23,564.05.

All three indexes were poised for a second straight weekly advance.

Shares of Warner Bros Discovery WBD.O climbed 5.6% after Netflix NFLX.O agreed to buy its TV, film studios, and streaming division for $72 billion, ending a weeks-long bidding war.

Netflix shares were off 2.8%, while Paramount Skydance , one of the other bidders for Warner Bros, tumbled 8.4%.

The S&P 500 healthcare index .SPXHC dipped 0.3% after a group of vaccine advisers scrapped a longstanding recommendation that all U.S. children receive the hepatitis B shot at birth.

Communication services .SPLRCL, up 0.8%, was the best-performing of the 11 S&P 500 sectors.

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

Ulta Beauty surged 13.1% after the beauty retailer raised its annual sales and profit forecasts.

Advancing issues outnumbered decliners by a 1.21-to-1 ratio on the NYSE. Declining issues outnumbered advancers by a 1.1-to-1 ratio on the Nasdaq.

The S&P 500 posted 33 new 52-week highs and six new lows while the Nasdaq Composite recorded 110 new highs and 44 new lows.