US STOCKS-Wall Street hits record high on rate cut optimism

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* S&P 500, Dow and Nasdaq hit record highs

* J&J falls 4%, weighs on healthcare stocks

* Indexes up: Dow 0.58%, S&P 0.21%, Nasdaq 0.40% (Updates to early afternoon)

By Shreyashi Sanyal and Manas Mishra

July 12 (Reuters) - The three main indexes hit recordintraday highs on Friday, continuing a strong run for the weekon hopes of an interest rate cut this month, while investorswaited for the start of the corporate earnings season next week.

In his two-day testimony before Congress, Federal ReserveChairman Jerome Powell said the U.S. economy was still underthreat from disappointing factory activity, tame inflation and asimmering trade war and that the central bank stood ready to"act as appropriate".

"My belief on why the Fed will likely lower rates in theJuly meeting is that it will try to assume its responsibilitiesas the central bank for the world, and global economicindicators are not as healthy as in the U.S.," said James Abate,chief investment officer at Centre Asset Management in New York.

Abate said most of the positive catalysts that have driventhe market higher have been priced in and now the focus willshift to the earnings season.

Corporate profits are expected to take a hit from U.S.-Chinatrade tensions, with S&P 500 companies expected to report a 0.4%dip in second-quarter earnings, according to Refinitiv IBESdata.

Results from two major U.S. railroads next week will also beclosely watched for signs of how the trade war is affectingfreight companies and the wider economy. urn:newsml:reuters.com:*:nL2N24D0HL

The S&P 500 .SPX traded above the 3,000 level for a thirdstraight session, also boosted by a 0.63% gain in the technologysector .SPLRCT , the S&P 500's best performer so far this year.

The healthcare sector .SPXHC fell 1.70%, the most amongthe 11 major S&P sectors, weighed down by a 4% slide in sharesof Johnson & JohnsonJNJ.N .

The U.S. Justice Department is pursuing a criminal probeinto whether the healthcare conglomerate lied about potentialcancer risks of its talcum powder, Bloomberg reported, citingpeople with knowledge of the matter. urn:newsml:reuters.com:*:nL4N24D3HS

The Dow Jones Industrial Average .DJI was up 157.23points, or 0.58 percent, at 27,245.31 and the S&P 500 .SPX wasup 6.24 points, or 0.21 percent, at 3,006.15.

The Nasdaq Composite .IXIC was up 32.70 points, or 0.40percent, at 8,228.74.

Data showed U.S. producer prices rose slightly in June,leading to the smallest annual increase in producer inflation innearly 2-1/2 years and also showed a slowdown in underlyingproducer prices last month, suggesting that overall inflationcould remain moderate for a while. urn:newsml:reuters.com:*:nL2N24C1HN

Keeping investors on edge was Beijing's threat to imposesanctions on U.S. firms that sell arms to Taiwan afterWashington approved possible sales of $2.2 billion in tanks,missiles and related equipment. urn:newsml:reuters.com:*:nB9N23B01W

Illumina IncILMN.O tumbled 15.61%, the most among S&P 500companies, after the gene sequencing company's preliminarysecond-quarter revenue came in below analysts' estimates. urn:newsml:reuters.com:*:nL4N24D2L0

Ford Motor CoF.N gained 2.65% after the automaker andVolkswagen AG VOWG_p.DE joined forces to develop autonomousand electric cars. urn:newsml:reuters.com:*:nL8N24D385

Advancing issues outnumbered decliners by a 1.66-to-1 ratioon the NYSE and by a 1.59-to-1 ratio on the Nasdaq.

The S&P index recorded 42 new 52-week highs and two newlows, while the Nasdaq recorded 68 new highs and 34 new lows. (Reporting by Shreyashi Sanyal and Manas Mishra in Bengaluru;Editing by Sriraj Kalluvila and Shounak Dasgupta) ((Shreyashi.Sanyal@thomsonreuters.com; +1 646 223 8780 ;Reuters Messaging:Shreyashi.Sanyal.thomsonreuters.com@reuters.net))

This article appears in: Politics , Stocks , World Markets , US Markets

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