(For a Reuters live blog on U.S., UK and European stock

markets, click or type LIVE/ in a news window.)

*

Lilly up after Novo Nordisk drug shows less weight loss in

trial

*

FedEx ( FDX ) up after announcing freight truck division spinoff

*

Futures down: Dow 0.35%, S&P 500 0.54%, Nasdaq 0.82%

(Updates before markets open)

By Medha Singh and Purvi Agarwal

Dec 20 (Reuters) -

Wall Street's main indexes were set to fall at the open on

Friday on fears over high interest rates next year although a

cooler-than-expected inflation report kept losses in check.

U.S. stock index futures pared losses after a Commerce

Department report showed the Personal Consumption Expenditure

(PCE) index, the Fed's preferred inflation measure, rose 2.4% in

November on an annual basis, below estimates of 2.5%, as per

economists polled by Reuters.

After the data, traders raised their

rate cut bets

for 2025, now expecting a rate cut first in March and then

again by October. Before the data, there was about 50% chance of

a second rate cut by December 2025.

Wall Street was jolted this week after the Fed forecast

only two rate reductions in 2025 and raised its inflation

estimate, in a nod to the economy's continued resilience and

still-high inflation.

"Before that Fed meeting, inflation wasn't as much of a

concern and then the Fed told us that we don't think we've won

that battle yet," said Mike Dickson, head of research and

quantitative strategies at Horizon Investments.

"On the margin that means that we have a lot more of

balance between a healthy labor market and their concern for

inflation."

San Francisco Federal Reserve Bank President Mary Daly

said

this week's decision to lower interest rates was a "close

call," and echoed Chair Jerome Powell's view that caution is now

warranted toward future moves.

At 8:54 a.m., Dow E-minis were down 148 points,

or 0.35% and the S&P 500 E-minis were down 0.54% to 5,902

points. Nasdaq 100 E-minis were down 174.5 points, or

0.82%.

Meanwhile, The U.S. Congress was

scrambling

to avert a partial government shutdown before a midnight

deadline, after more than three dozen Republicans rejected a

demand by President-elect Donald Trump to use the measure to

lift the nation's debt ceiling.

"We doubt there will be a new agreement in time to avert a

partial shutdown after December 20, but we expect a new spending

bill around the end of the year," Paul Christopher, head of

global investment strategy at Wells Fargo Investment Institute,

said in a note.

The Nasdaq was set to fall for the first time in five weeks

and the S&P 500 was on pace for its worst week since

September. The Dow was on track for its sharpest weekly

fall since March 2023.

Wall Street firms are mostly projecting gains for the stock

market next year, with year-end targets for the S&P 500 ranging

from 6,000 to 7,000. The index was last hovering around 5,900.

Most megacap and growth stocks were lower in premarket

trading, with Tesla, Nvidia ( NVDA ) and Amazon.com ( AMZN )

off about 1% each.

Nike ( NKE ) dropped 5% after the sportswear seller forecast

revenue would fall by low double-digits in the third quarter.

FedEx ( FDX ) jumped 8.2% after announcing the

much-anticipated spinoff of its freight trucking division, as it

restructures operations to focus on its core delivery business.

Eli Lilly ( LLY ) advanced 6.4% after Danish rival Novo

Nordisk's experimental next-generation obesity drug

achieved lower-than-expected weight loss in a late-stage trial.