By Medha Singh and Purvi Agarwal

() -U.S. stock index futures dove on Friday as investors grappled with the possibility of a government shutdown and a higher interest rate path ahead of a key inflation report due on the day.

Dozens of Republicans defied President-elect Donald Trump’s spending bill, leaving Congress with no clear plan before government funding expires at midnight. Failure to extend the deadline could disrupt holiday travel.

Trump’s plans on tariffs, tax cuts and deregulation were among the factors that pushed the Federal Reserve to raise its 2025 forecast for inflation and halve the central bank’s projections of rate cuts that slammed Wall Street on Wednesday.

“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 (NYSE:) Investment Institute, said in a note.

“Even if a shutdown occurs, we believe there is likely to be little economic or financial-market impact.”

Data-wise, investors will look to the Commerce Department’s personal consumption expenditure (PCE) report, due at 8:30 a.m. ET, for clues on how inflation will guide the Fed’s policy. The data is expected to show U.S. consumer spending rose 0.2% last month, the same pace as October.

Traders currently expect fewer than two U.S. rate cuts by the end of next year after the central bank lowered rates by a quarter point as expected this week.

Comments from San Francisco Fed President Mary Daly are also on the radar, ending the media blackout period Fed policymakers had entered ahead of Wednesday’s decision.

At 6:52 a.m. ET, Dow E-minis were down 186 points, or 0.44%, E-minis were down 52 points, or 0.88% and E-minis were down 305.25 points, or 1.43%.

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.

Investors are expecting more gains for the stock market in 2025, fueled by a solid economy supporting corporate profits, moderating interest rates and pro-growth policies from incoming President Donald Trump.

Elsewhere, European stocks dropped as Trump threatened to hit the European Union with tariffs if the bloc does not make large oil and gas trades.

Most megacap and growth stocks were lower in premarket trading, with Tesla (NASDAQ:) down 5.2% and Nvidia (NASDAQ:) and Amazon.com (NASDAQ:) off 3.1% and 2.6% respectively.

Nike (NYSE:) dropped 4.4% after the sportswear seller forecast revenue would fall by low double-digits in the third quarter.

FedEx (NYSE:) jumped 9.5% after announcing the much-anticipated spinoff of its freight trucking division, as it restructures operations to focus on its core delivery business.

Eli Lilly (NYSE:) advanced 9.6% after Danish rival Novo Nordisk (NYSE:)’s experimental next-generation obesity drug achieved lower-than-expected weight loss in a late-stage trial.

Other weight-loss drug developers also gained, with Amgen (NASDAQ:) up 4.3% and Viking Therapeutics (NASDAQ:) soaring 16.9%.