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Nov. PCE at 2.4% on yearly basis, below estimated 2.5%

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Lilly up after Novo Nordisk drug shows less weight loss in

trial

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Indexes up: Dow 1.38%, S&P 500 1.31%, Nasdaq 1.30%

(Updates to late morning trading)

By Medha Singh and Purvi Agarwal

Dec 20 (Reuters) - Wall Street's main indexes jumped in

volatile trading on Friday as a cooler-than-expected inflation

report eased some market concerns triggered by the Federal

Reserve forecasting only two rate reductions for 2025.

Treasury yields also retreated from an over 6-1/2 high

hit in the previous session, helping U.S. stocks stage a

turnaround after a weak start to the trading session.

Latest data showed the Personal Consumption Expenditure

(PCE) index rose 2.4% in November on an annual basis, below

estimates of 2.5%, according to economists polled by Reuters.

"The Fed's preferred inflation gauge came in lower than

expected, which may take some of the sting out of the market's

disappointment with the Fed's interest rate announcement on

Wednesday," said Chris Larkin, managing director of Trading and

Investing at E*TRADE from Morgan Stanley.

"Longer term, the Fed is still facing policy uncertainty

from the incoming White House administration, so the odds still

favor a pause on rate cuts in January."

After the data, traders raised their rate cut bets for 2025,

now expecting the first one in March and then again by October.

Before the data, traders saw an about 50% chance of a second

rate cut by December 2025.

The U.S. central bank this week delivered its third

interest-rate cut of the year but projected just two

quarter-point reductions for 2025, down from its forecast in

September of four cuts, in a nod to the economy's continued

resilience and still-high inflation.

The Fed's hawkish shift has put the Nasdaq on track to fall

for the first time in five weeks, with the S&P 500 on

pace for its worst week in nearly six. The Dow was on

track for its third weekly fall.

"We are going to see a choppy, sideways grind higher next

year (with) a 10% to 20% pullback at some point along the way,"

said Will McGough, director of investments at Prime Capital

Financial.

Friday's session also marks the simultaneous expiry of

quarterly derivatives contracts tied to stocks, index options

and futures, also known as "triple witching", which could

exacerbate volatility.

At 11:18 a.m. ET, the Dow Jones Industrial Average

rose 582.51 points, or 1.38%, to 42,924.75, the S&P 500

gained 77.16 points, or 1.31%, to 5,944.24 and the Nasdaq

Composite gained 252.31 points, or 1.30%, to 19,625.08.

Among sectors, healthcare led gains with Eli Lilly ( LLY )

advancing 5% after Danish rival Novo Nordisk's

experimental next-generation obesity drug achieved

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

All 11 major S&P sectors were higher.

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.

Advancing issues outnumbered decliners by a 1.44-to-1 ratio

on the NYSE and by a 1.19-to-1 ratio on the Nasdaq.

The S&P 500 posted no new 52-week highs and 21 new lows,

while the Nasdaq Composite recorded 12 new highs and 150 new

lows.