By Amruta Khandekar and Shristi Achar A

Dec 6 (Reuters) – Futures tracking U.S. stock indexes inched higher on Wednesday as investors were cautiously optimistic about rate cuts from the Federal Reserve early next year and waited for more labor market data.

The S&P 500 .SPX and the Dow .DJI closed lower in the previous session, but the tech-heavy Nasdaq .IXIC was propped up by a fall in Treasury yields after data showing softening labor demand bolstered bets that the Fed was done raising rates.

Traders have nearly fully priced in the probability that the central bank will hold rates steady next week and expect to see rate cuts being delivered as soon as the first quarter of next year.

Bets of a cut of at least 25 basis points in March currently stand at 59%, according to the CME Group’s FedWatch tool.

“With the Fed wanting to be sure that inflation is truly tied down before it loosens policy, we’re going to see this guessing game, where the market tries to position itself ahead of the Fed’s next move,” Steve Clayton, head of equity funds at Hargreaves Lansdown said in a note.

Most megacap stocks edged higher in premarket trading. NvidiaNVDA.O rose 1.1% after the chip designer said it was working with the U.S. government to ensure new chips for the Chinese market are compliant with export curbs.

Optimism about peaking interest rates has led to a rebound in equities from their October lows, with the benchmark S&P 500 gaining nearly 9% in November, hitting its highest close of the year last week.

Employment data is in focus this week, with November’s non-farm payrolls report, due on Friday, likely to shape expectations for the interest rate path ahead.

Before that, investors will get another glimpse into the state of the labor market with the ADP National Employment report due at 8:15 a.m. ET on Wednesday.

Among other stocks, Plug PowerPLUG.O fell 5.8% before the bell, as Morgan Stanley downgraded the hydrogen fuel cell firm to “underweight” from “equal weight” on liquidity concerns.

Tobacco giants Altria Group MO.N and Philip Morris International PM.N slipped 1.6% and 1.0%, respectively, after UK peer British American Tobacco BATS.L said it will take a $31.5 billion hit from writing down the value of some U.S. cigarette brands.

(Reporting by Amruta Khandekar and Shristi Achar A; Editing by Pooja Desai)

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Original: NVDA Feed: Wall St futures edge up on Fed pivot optimism