Dow advances to record high after inflation report; small caps outperform
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U.S. PCE stands at 2.2% in Aug
Russell 2000 index up 1.5%
Bristol-Myers gains after schizophrenia drug approval
Costco slips after Q4 revenue misses estimates
Indexes: Dow up 0.97%, S&P 500 up 0.05%, Nasdaq off 0.34%
Updated at 11:50 a.m. ET/1550 GMT
By Johann M Cherian and Purvi Agarwal
Sept 27 (Reuters) - The blue-chip Dow rose onFriday to hit an intraday recordand small-cap stocks outperformed after a benign inflation report cleared the way for the Federal Reserve to focus on shoring up the labor market while continuing its interest rate easing.
A Commerce Department's report showed that consumer spending increased moderately in August, suggesting the economy retained some of its solid momentum in the third quarter, while inflation pressures continued to abate.
At 11:50 a.m. ET, theDow Jones Industrial Average .DJI rose 410.80 points, or 0.97%, to 42,585.91, the S&P 500 .SPX gained 2.69 points, or 0.05%, to 5,748.00 and the Nasdaq Composite .IXIC lost 61.33 points, or 0.34%, to 18,128.96.
The Russell 2000 index .RUT, which tracks small caps that fare better in a low rate environment, gained 1.5% to a one-week high.
Ten out of the 11 S&P 500 sectors were higher, led by a 2% rise in energy stocks .SPNY, while technology stocks .SPLRCT declined 1%.
Nasdaq components such as Nvidia NVDA.O and Microsoft MSFT.O lost 2.7% and 0.5%, respectively, as investors turned their focus to other sectors.
Financial stocks including Goldman Sachs GS.N and healthcare stocks like UnitedHealth UNH.N were the biggest boosts to the Dow.
Investors now slightly favor a bigger 50 basis point cut at the Fed's next meeting with a 52.1% chance, up from a coin toss before the data, as per the CME Group's FedWatch Tool.
Cooling price pressuresgave the Fed enough room to commence its policy easing cycle with a 50 bps cutlast week. Focus will now shift to a slew of labor market reports due next week.
"Markets are just hopeful that we get more cuts. The Fed may accelerate this cutting cycle, but we may not get another 50 bps cut unless we get some bad data - a negative jobs report or a spike in unemployment," said John Luke Tyner, portfolio manager at Aptus Capital Advisors.
Meanwhile, the University of Michigan's final September estimate on consumer sentiment stood at 70.1, compared with estimates of 69.3, as per economists polled by Reuters.
Markets will parse through remarks from Fed Governor Michelle Bowman later in the day.
Late on Thursday, Fed Governor Lisa Cook said the central bank's rare move earlier this month could address increased "downside risks" to employment.
Wall Street's main indexes ended higher in the previous session, with the S&P 500 .SPX closing at a record high level. All three indexes are on track for theirthird straight week of gains.
Among other stocks, Bristol-MyersSquibb BMY.N surged 3.2% after the U.S. FDA approved its schizophrenia drug.
Costco Wholesale COST.O dropped 1.7% after postingdownbeat fourth-quarter revenue.
U.S.-listed shares of Chinese firms such as Alibaba BABA.N rose 2.8%, PDD Holdings PDD.O climbed 4.4% and NetEase NTES.O gained 3%after China's central bank lowered interest rates and injected liquidity into the banking system.
The optimism spilled over to minerssuch as Arcadium<ALTM.N>, which added 3.5%, and U.S.-listed shares of BHP BHP.N rose 1.8%.
Advancing issues outnumbered decliners by a 3.39-to-1 ratio on the NYSE and by a 2.37-to-1 ratio on the Nasdaq.
The S&P 500 posted 39 new 52-week highs and no new lows, while the Nasdaq Composite recorded 61 new highs and 48 new lows.
PCE, the shorter term view https://reut.rs/3WXgbkd
Reporting by Johann M Cherian and Purvi Agarwal in Bengaluru; Editing by Anil D'Silva and Maju Samuel
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