By Amruta Khandekar and Shristi Achar A

Dec 4 (Reuters) – U.S. stock index futures slipped on Monday, as investors turned wary ahead of a slew of economic data this week that is likely to test the narrative about a cut in interest rates by the Federal Reserve early next year.

Wall Street kicked off December on an upbeat note, extending gains from the previous month that were driven by robust earnings and expectations that the Fed was done with its rate hiking campaign.

The benchmark S&P 500 .SPXregistered its highest close of the year on Friday as remarks from Fed Chair Jerome Powell bolstered the peak rates view.

Traders have priced in the likelihood that the central bank will keep rates unchanged next week, with about 59% betting on rate cuts starting as soon as March 2024, according to the CME Group’s FedWatch tool.

However, some analysts have cautioned that markets have been too quick to price in lower interest rates.

“We are not in the camp of early or aggressive cuts. Inflation has been coming down but the path towards 2% is still long,” Mohit Kumar, chief European economist at Jefferies, said in a note.

A number of economic reports through the week will provide a gauge on the interest rate path as well as on the potential for a “soft landing” – where the Fed manages to bring inflation under control while averting a recession.

Investors are awaiting readings on U.S. services sector activity and a survey on job openings, while November’s non-farm payrolls report is set to grab the spotlight on Friday.

Pressuring equities, Treasury yields edged higher on Monday after a sharp fall in the previous week.

Megacap growth stocks including Nvidia NVDA.O, Meta Platforms META.O and Apple AAPL.O edged lower between 0.6% and 0.8% before the bell.

Also hurting sentiment on Monday were renewed fears about a widening of the war between Israel and Hamas after an attack on three commercial vessels in the southern Red Sea.

Fed officials have now entered a media blackout period before the interest rate decision on December 13.

Shares of Alaska Air GroupALK.N dropped 10.7% after the carrier said on Sunday it would acquire peer Hawaiian Holdings HA.O for $1.9 billion, including debt. Hawaiian’s shares nearly tripled in value.

Shares of cryptocurrency firms such as Coinbase Global COIN.O, Riot Platforms RIOT.O and Marathon Digital MARA.O rose between 7.4% and 12.2% premarket as bitcoin crossed $40,000 for the first time this year.

UberUBER.Nadded 4.4% as the ride-hailing firm was set to join the S&P 500 index, effective December 18.

(Reporting by Amruta Khandekar and Shristi Achar A; Editing by Anil D’Silva and Pooja Desai)

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Original: NVDA Feed: US STOCKS-Futures dip as focus shifts to economic data for policy cues