US STOCKS-Wall Street edges higher as Fed rate cut decision nears

By Johann M Cherian and Pranav Kashyap

Dec 9 (Reuters) - Wall Street's main stock indexes rose marginally on Tuesday, with an imminent interest rate cut by the Federal Reserve priced in, while investors assessed the future of U.S. AI chip exports to China.

The Federal Reserve's two-day policy meeting begins on Tuesday, with policymakers set to decide whether to lower borrowing costs despite inflation still running above the central bank's 2% target.

Policymakers have sent mixed signals about the outlook. Some have warned that price pressures could easily reaccelerate, while others are more concerned about the labor market's health.

Markets still expect an 89.6% chance of a 25-basis-point rate on Wednesday, according to CME's FedWatch Tool and are penciling in another 50 basis points of easing next year.

Tuesday's Labor Department report did little to clear the air as job openings increased marginally in October, but hiring remained subdued.

"The Fed is as much in the dark as the rest of us," said Peter Cardillo, chief market economist at Spartan Capital Securities.

"They will cut by 25 basis points, but there may be a surprise in their language, which I suspect could be more hawkish and indicate they're going to take a pause in the first quarter of 2026."

At 11:50 a.m. ET, the Dow Jones Industrial Average .DJI rose 151.74 points, or 0.32%, to 47,891.06, the S&P 500 .SPX gained 15.91 points, or 0.23%, to 6,862.42 and the Nasdaq Composite .IXIC gained 37.60 points, or 0.16%, to 23,583.50.

Eight of the 11 S&P 500 sectors edged higher, led by a 1.6% rise in energy .SPNY, while financials .SPSY also gained 0.9%.

Expectations for Fed rate cuts have underpinned risk-taking in recent weeks, bringing the S&P 500 within 1% of a record high, while small caps .RUT have outperformed the benchmark index this quarter. Adding to recent gains, the Russell 2000 index gained 0.7% on Tuesday.

Meanwhile, U.S. President Donald Trump said he would allow Nvidia to ship H200 processors, its second-most powerful AI chips, to China for a 25% fee on those exports.

However, a Financial Times report that said Beijing was set to limit access to those chips, while China hardliners in Washington slammed the Trump administration for its decision. Nvidia's shares were last down 0.4% after rising nearly 2% in premarket trading.

Advanced Micro Devices AMD.O and Intel INTC.O were also subdued despite Trump saying that a similar approach would apply to other semiconductor companies.

Investor appetite for corporate spending on artificial intelligence infrastructure is likely to face greater scrutiny with results due from Oracle ORCL.N and Broadcom AVGO.O later this week.

Traders also kept an eye on a bidding war between Paramount Skydance PSKY.O and Netflix NFLX.O over Warner Bros WBD.O that has lifted shares of the iconic Hollywood studio by 11% in the past two sessions. Warner Bros shares added 1.4% on Tuesday.

Among others, Campbell's CPB.O slid 4% after the packaged-food maker said it selectively raised prices to counter higher costs, while AutoZone AZO.N fell 6.5% after quarterly results missed estimates.

Advancing issues outnumbered decliners by a 2.19-to-1 ratio on the NYSE and bya 1.76-to-1 ratio on the Nasdaq.

The S&P 500 posted 15 new 52-week highs and four new lows, while the Nasdaq Composite recorded 79 new highs and 58 new lows.