By Shubham Batra and Amruta Khandekar

(Reuters) -Wall Street’s main indexes kicked off the last week of the year on a positive note on Tuesday as growing bets of early rate cuts by the Federal Reserve lifted investor sentiment after Christmas holidays.

Signs of cooling inflation have bolstered expectations of a dovish policy pivot by the Fed next year, pushing the benchmark close to its record closing high touched in January 2022.

A close above that level will confirm the benchmark index has been on a bull run since bottoming out in October 2022.

U.S. stocks ended higher on Friday after the Commerce Department’s Personal Consumption Expenditures (PCE) report showed inflation continues to meander down toward the Fed’s average annual 2% target.

The three main indexes also logged their eighth consecutive weekly gains on Friday following the report, the longest winning streak for the S&P 500 since late 2017.

“Everyone is still enjoying the fruits of last week’s rally and (expectations of) significantly lower move in interest rates,” said Michael James, managing director of equity trading at Wedbush Securities.

Traders’ bets that the central bank will deliver a rate cut of at least 25 basis points in March 2024 stood at about 83%, compared with about 21% in November, according to the CME Group’s (NASDAQ:) FedWatch tool.

All the major S&P 500 sector indexes were in the green except healthcare.

Adding to the gains, Intel (NASDAQ:) rose 4.0% after Israel’s government agreed to give it a $3.2 billion grant for a new $25 billion chip plant that it plans to build in the country.

The Philadelphia semiconductor index hit a record high and was last up 1.3%, while the small-cap index touched its highest level in 20 months.

“I do think that further repositioning towards more smaller and mid-cap names is going to continue to be the main theme (heading into 2024),” said James.

Trading volumes are likely to remain low during this week with most market participants away on year-end holidays. The only key economic data expected this week is the jobless claims report and no Fed officials are scheduled to speak.

At 11:27 a.m. ET, the was up 87.98 points, or 0.24%, at 37,473.95, the S&P 500 was up 11.69 points, or 0.25%, at 4,766.32, and the was up 46.87 points, or 0.31%, at 15,039.84.Shares of Manchester United (NYSE:) rose 2.2% after billionaire Jim Ratcliffe struck a long-awaited deal to buy a 25% stake in the football club at $33 per share.

Among other movers, Gracell Biotechnologies shot up 59.8% after AstraZeneca (NASDAQ:) said on Tuesday it will buy the China-based firm for up to $1.2 billion.

Advancing issues outnumbered decliners by a 2.72-to-1 ratio on the NYSE and by a 1.82-to-1 ratio on the Nasdaq.

The S&P index recorded 26 new 52-week highs and no new lows, while the Nasdaq recorded 129 new highs and 29 new lows.

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