By Lewis Krauskopf

NEW YORK (Reuters) - The coming week will give investors a fresh view into the health of the US economy with the release of a closely watched employment report that could help determine the trajectory of interest rates in the months ahead.

Stocks are heading into December with the benchmark S&P 500 (^GSPC) hitting record highs following an over 25% year-to-date gain. Part of that performance has been fueled by expectations that the Federal Reserve will continue cutting interest rates into next year, after reducing borrowing costs by 75 basis points in 2024.

But uncertainty over the Fed’s rate trajectory has increased in recent months as a spate of robust economic data - including a blowout jobs report for September - stirs concerns that inflation could rebound if the central bank lowers rates too far, undoing two years of progress in tamping down prices.

While investors have largely welcomed evidence of economic strength, another round of strong jobs data on Dec. 6 could further erode expectations for Fed cuts and fuel wariness over inflation, investors said.

The jobs data "is going to provide a more clear picture of the underlying trend, which is important as there's a lot of debate and uncertainty around the path for interest rates by the Fed,” said Angelo Kourkafas, senior investment strategist at Edward Jones.

Wall Street has already tempered expectations for cuts over the coming year. Fed funds futures show investors betting the rate will fall to 3.8% by the end of next year, from its current 4.5% to 4.75% range. That is more than 100 points higher than what they had priced in September.

Fed Chair Jerome Powell said earlier this month that the central bank does not need to rush to lower rates, citing a solid job market and inflation that remains above its 2% target.

The Fed is "starting to question out loud how much more easing the economy, especially the labor market, really needs," said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.

Futures late on Wednesday were pricing a roughly 70% chance that the central bank will cut rates by 25 basis points at its Dec 17-18 meeting, according to CME Fedwatch.

Economists polled by Reuters expect payrolls to have climbed by 183,000 jobs in November, and a report that far exceeds those forecasts could shake confidence in a December move and bruise stocks, said Anthony Saglimbene, chief market strategist at Ameriprise Financial.

"There might be a little bit of a sell off here if you see the jobs report come in stronger than expected," he said.