By Stephen Culp
NEW YORK, Aug 27 (Reuters) - The S&P 500 and the Dow advanced on Thursday as investors digested the U.S. Federal Reserve's new strategy to adopt an average inflation target and restore the United States to full employment, as well as a promising development in the fight against COVID-19.
The Fed's new strategy sent Treasury yields higher, which gave a lift to interest rate-sensitive financials .SPSY.
The sector provided the biggest boost to the S&P 500 and the Dow, helping to put the former on track for a new record closing high and edging the latter closer to reclaiming positive territory for the year so far.
The Dow remains more than 3% below its record high reached in February.
Declines in market-leading momentum stocks capped the S&P's gains and held the Nasdaq in the red.
Shares of Abbott Laboratories ABT.N jumped 7.9% after the company won U.S. approval to market a cheap, portable, rapid COVID-19 antigen test, which could be a step toward containing the pandemic that sent the U.S. economy spiraling into recession.
Economic recovery was forefront in Fed Chairman Jerome Powell's remarks made as part of the Kansas City Fed's virtual Jackson Hole symposium. In the speech Powell outlined the central bank's aggressive new strategy to support the economy by lifting inflation and returning the economy to full employment.
"We're going to have low interest rates as far as we can see and COVID is on the way out because of the inexpensive test that Abbot is introducing soon," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "It gives investors two reasons to be positive about equities."
But with last week's initial jobless claims stubbornly hovering above the 1 million mark, according to the Labor Department, a return to full employment currently appears to be a long haul.
The Dow Jones Industrial Average .DJI rose 211.78 points, or 0.75%, to 28,543.7, the S&P 500 .SPX gained 10.01 points, or 0.29%, to 3,488.74 and the Nasdaq Composite .IXIC dropped 21.48 points, or 0.18%, to 11,643.58.
Of the 11 major sectors in the S&P 500, financials enjoyed the biggest percentage gain while communications services .SPLRCL, weighed down by Netflix Inc NFLX.O and Facebook Inc FB.O, lagged.
Shares of Walmart Inc WMT.N and Microsoft Corp MSFT.O rose 5.3% and 2.7%, respectively after announcing a joint bid for TikTok's U.S. assets.
Luxury retailer Tiffany & Co TIF.N advanced 1.9% after reporting stronger-than-expected profit just days after delaying its $16.2 billion sale to France's LVMH LVMH.PA.
On the other end of the retail scale, discount stores Dollar General Corp DG.N and Dollar Tree Inc DLTR.O also beat quarterly profit expectations.
Boeing Co BA.N rose 1.4% after the European Union Aviation Safety Agency announced plans to begin flight tests of its grounded 737 MAX plane.
Cosmetics maker Coty Inc COTY.N plunged 8.7% after retail closures and weak demand led to a bigger-than-expected quarterly loss.
Advancing issues outnumbered declining ones on the NYSE by a 1.05-to-1 ratio; on Nasdaq, a 1.30-to-1 ratio favored decliners.
The S&P 500 posted 37 new 52-week highs and no new lows; the Nasdaq Composite recorded 58 new highs and 20 new lows.
(Reporting by Stephen Culp; Editing by Cynthia Osterman)
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