US STOCKS-U.S. stocks set for slightly higher open as investors await Fed rate cut decision

By Johann M Cherian and Pranav Kashyap

Dec 8 (Reuters) - Wall Street's main indexes were set to open slightly higher on Monday, as investors priced in that the Federal Reserve will deliver a long-awaited rate cut later this week in a meeting that is shaping up to be one of the most divisive in years.

Delayed data last week showed that consumer spending increased moderately towards the end of the third quarter, giving investors greater confidence that the Fed will focus on lowering borrowing costs on Wednesday to help shore up the labor market.

Inflation has so far proved sticky, making most policymakers cautious about lowering borrowing costs, although a few influential Fed policymakers have adopted a more dovish stance in recent weeks.

"The vote is likely to be a three-way split, with Governor (Stephen) Miran preferring a larger 50-basis-point move, and at least three policymakers preferring to stand pat," said Michael Brown, a senior research strategist at Pepperstone.

"Should four or more officials break ranks, it would mark the largest split since 1992," said a group of analysts at Deutsche Bank.

Traders are now pricing in an 89.6% chance of a 25-basis-point rate cut on Wednesday, up from as low as 30% in November, according to the CME's FedWatch Tool.

They will also closely scrutinize Chair Jerome Powell's comments that day to gauge the central bank's future policy path.

Worries that inflation could pick up again have investors betting on interest rate increases by central banks in Japan, Canada and Australia by the end of 2026.

By contrast, markets expect the U.S. Federal Reserve to cut rates by at least 75 basis points over the same period, including a 25-basis-point reduction in December.

At 8:34 a.m. ET, Dow E-minis YMcv1 were up 6 points, or 0.01%, S&P 500 E-minis EScv1 were up 8.25 points, or 0.12% and Nasdaq 100 E-minis NQcv1 were up 58.25 points, or 0.23%.

Rate-cut expectations helped Wall Street's main indexes notch a second straight week of gains on Friday, while the small-cap Russell 2000 index .RUT, which is particularly sensitive to interest rates, also posted modest advances.

Futures tracking the Russell 2000 index RTYcv1 edged up 0.6% on Monday.

Meanwhile, White House Economic Adviser and top contender for the Fed Chair role next year Kevin Hassett said in an interview that the Fed should continue to lower interest rates.

Valuations of technology companies will be in the spotlight this week, with chip company Broadcom AVGO.O and Oracle ORCL.O expected to report quarterly results.

Shares of Broadcom AVGO.O rose 2.9% in premarket trading after a report said Microsoft is in talks with the company about custom chips.

Concerns that companies are relying on debt to fund costly artificial intelligence ambitions, while also pursuing complex deals across the sector, have triggered tech-led sell offs several times this year. Oracle added 1.6%.

Marvell Technology MRVL.O dropped 6.3% after S&P Dow Jones Indices did not add the chipmaker to the S&P 500 .SPX.

Confluent gained 29% after IBM said it will acquire the data-infrastructure company for about $11 billion. Shares of Big Blue slipped 1%.

Tesla TSLA.O stock fell 1.5% after brokerage Morgan Stanley downgraded the electric-vehicle maker to equal-weight from overweight.

Carvana jumped 8% after S&P Dow Jones Indices announced that the online used-car dealer secured a spot in the benchmark S&P 500 index.