US STOCKS-S&P 500, Dow hit new highs on rate cut optimism

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* Illumina tumbles on weak preliminary rev estimate
* Altria rises on Goldman Sachs upgrade
* Ford gains on joining forces with Volkswagen
* Indexes up: Dow 0.51%, S&P 0.17%, Nasdaq 0.27%

(Updates to open)
By Shreyashi Sanyal
July 12 (Reuters) - The S&P 500 and the Dow Jones Industrial
Average hit record highs on Friday, as the indexes continued a
strong run for the week on raised expectations of an interest
rate cut this month.
In his two-day testimony before Congress, Federal Reserve
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."
"He (Powell) has said everything he can, short of saying
flat out that we are going to cut interest rates," said Randy
Frederick, vice president of trading and derivatives for Charles
Schwab in Austin, Texas.
"Fed fund futures were telling us for a month that was going
to happen, but Powell has pretty much confirmed that's the
case."
The S&P 500 index .SPX traded above the 3,000 level for
the third straight session, also boosted by a 0.59% gain in the
technology sector .SPLRCT , the S&P 500's best performer so far
this year. Apple Inc AAPL.O led the gainers.
The healthcare sector .SPXHC fell 1%, the most among the
11 major S&P sectors, weighed down by a 15% tumble in Illumina
Inc ILMN.O . The gene sequencing company's preliminary
second-quarter revenue came in below analysts' estimate.

At 10:05 a.m. ET, the Dow Jones Industrial Average .DJI
was up 137.21 points, or 0.51%, at 27,225.29 and the S&P 500
.SPX was up 5.24 points, or 0.17%, at 3,005.15.
The Nasdaq Composite .IXIC was up 21.82 points, or 0.27%,
at 8,217.86.
Keeping investors on edge was Beijing's threat to impose
sanctions on U.S. firms that sell arms to Taiwan after
Washington approved possible sales of $2.2 billion in tanks,
missiles and related equipment. Second-quarter earnings season start next week against the
backdrop of warnings of the U.S.-China trade war hurting
corporate profits. S&P 500 companies are expected to report a
0.4% dip in profits from a year earlier, according to Refinitiv
IBES data.
A Labor Department report showed U.S. producer prices rose
slightly in June, leading to the smallest annual increase in
producer inflation in nearly 2-1/2 years.
Producer price index (PPI) for final demand edged up 0.1%
last month against a forecast of unchanged PPI, according to
economists polled by Reuters.
Altria Group Inc MO.N rose 1.55% on a report that Goldman
Sachs upgraded the Marlboro maker's stock to "buy" from
"neutral."
Ford Motor Co F.N rose 1.82% after the automaker and
Volkswagen AG VOWG_p.DE joined forces to develop autonomous
and electric cars.
Advancing issues outnumbered decliners by a 1.61-to-1 ratio
on the NYSE and by a 1.26-to-1 ratio on the Nasdaq.
The S&P index recorded 31 new 52-week highs and two new
lows, while the Nasdaq recorded 46 new highs and 21 new lows.