By Johann M Cherian and Shreyashi Sanyal

(Reuters) - U.S. stock indexes were set to open higher on Tuesday after wage growth data pointed to easing inflation ahead of the Federal Reserve's decision on interest rates.

U.S. labor costs increased less than expected last quarter as wage growth slowed, suggesting that the central bank's aggressive approach to taming inflation was taking hold.

The Fed will make its decision on rates on Wednesday, with traders betting on a 25-basis-point hike (bps) at the end of the its two-day meeting, and a terminal rate of 4.9% in June.

"As the Fed meeting begins today, they'll be looking at every index that could give them a better judgment on inflation and this is one of them," said Peter Cardillo, chief market economist at Spartan Capital Securities LLC.

"Labor costs are still high, but this means costs have come down, and that's a key factor for future wage inflation."

Futures were lower earlier in the day after disappointing earnings and forecasts from bellwethers including , McDonald's and set a cautious tone for the busiest earnings week this season.

Caterpillar Inc (NYSE:) fell 0.7% as the heavy equipment maker reported a drop in quarterly profit on higher manufacturing costs.

McDonald's Corp (NYSE:) beat Wall Street estimates for quarterly comparable sales, but the fast-food chain's shares fell 1.9% as it warned of short-term inflationary pressures.

Pfizer Inc (NYSE:) slid 2.7% after the drugmaker's full-year revenue outlook for its COVID-19 products fell short of expectations.

"With additional earnings coming in this week, participants are a little concerned that the market got a little bit ahead of itself and so are a little cautious heading into the Fed meeting," said Robert Pavlik, senior portfolio manager at Dakota Wealth.

Wall Street started the year on a strong footing and is set to end January higher, with the Nasdaq up nearly 9% as growth stocks attracted investor attention earlier in the month.

Higher rates tend to pressure the valuations of tech and other high growth stocks.

The fell after the labor costs data, and was last at 3.50% compared to 3.55% on Monday.

At 8:52 a.m. ET, were up 97 points, or 0.29%, were up 15 points, or 0.37%, and were up 44 points, or 0.37%.

General Motors Co (NYSE:) jumped 5.1% on strong full-year profit expectations. The world's largest parcel delivery firm Service (NYSE:) also added 1.9% on strong quarterly earnings.

As many as 140 companies reported earnings for the fourth-quarter by Monday. Overall earnings are expected to have fallen 3% this quarter compared with the prior-year, according to Refinitiv data.