Wall St. notches all-time highs on lingering rate-cut optimism

NEW YORK (Reuters) – All three major indexes posted record closing highs on Friday as firm expectations for an interest-rate cut from the Federal Reserve continued to propel shares while investors awaited next week’s kickoff of the corporate earnings season.

The S&P 500 closed above the 3,000 level for the first time, with the industrial .SPLRCI, consumer discretionary .SPLRCD and materials .SPLRCM sectors each posting gains of at least 1%.

In his two-day testimony before Congress, Fed Chairman Jerome Powell said the U.S. economy was still under threat from disappointing factory activity, tame inflation and a simmering trade war and that the central bank stood ready to “act as appropriate.”

“Clearly his messaging was far more directive in terms of what the Fed is going to do at the next meeting than just a vague promise to keep the economic expansion intact,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey. “That has brought the market to new highs.”

With expectations for rate cuts in place, the focus is turning to the corporate earnings season as large U.S. banks, including Citigroup Inc (C.N) and JPMorgan Chase & Co (JPM.N), are set to report next week.

Analysts estimate that S&P 500 companies will report a 0.4% dip in second-quarter earnings, according to Refinitiv IBES data.

The Dow Jones Industrial Average .DJI rose 243.95 points, or 0.9%, to 27,332.03, the S&P 500 .SPX gained 13.86 points, or 0.46%, to 3,013.77 and the Nasdaq Composite .IXIC added 48.10 points, or 0.59%, to 8,244.14.

For the week, the S&P 500 rose 0.8%, the Dow added 1.5% and the Nasdaq gained 1%.

Data for U.S. producer prices in June showed the smallest annual increase in producer inflation in nearly 2-1/2 years and a slowdown in underlying producer prices, which suggested that overall inflation could remain moderate for a while.

Ford Motor Co (F.N) shares gained 2.65% after the automaker and Volkswagen AG (VOWG_p.DE) said they would join forces to develop autonomous and electric cars.

Johnson & Johnson (JNJ.N) shares slid 4.1% after Bloomberg reported that the U.S. Justice Department is pursuing a criminal probe into whether the healthcare conglomerate lied about potential cancer risks of its talcum powder.

Johnson & Johnson’s slide dragged down the S&P 500 healthcare index .SPXHC, whose 1.2% decline was the biggest among S&P 500 sectors.

Illumina Inc (ILMN.O) shares tumbled 16.1%, the most among S&P 500 companies, after the gene sequencing company’s preliminary second-quarter revenue came in below analyst estimates.

Advancing issues outnumbered declining ones on the NYSE by a 2.02-to-1 ratio; on Nasdaq, a 1.43-to-1 ratio favored advancers.

The S&P 500 posted 50 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 83 new highs and 55 new lows.

Volume on U.S. exchanges was 5.68 billion shares, compared to the 6.71 billion average for the full session over the last 20 trading days.