US STOCKS-S&P 500 hits record on trade optimism, Fed rate-cut expectations

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* S&P 500 at all-time high; Nasdaq inches closer to record
* Microsoft rises on Pentagon contract win
* Tiffany surges on LVMH's $120 pershare offer
* Dow up 0.52%, S&P 500 up 0.61%, Nasdaq up 1.04%

(Updates to midafternoon, changes byline)
By Chuck Mikolajczak
Oct 28 (Reuters) - The S&P 500 hit a record high on Monday,
while the Nasdaq hovered just below its lifetime high touched in
late July, as a more conciliatory tone between the United States
and China buoyed hopes for a possible trade deal and investors
anticipated a rate cut by the Federal Reserve later this week.
Microsoft Corp MSFT.O shares climbed 2.54%, making the
stock among the biggest boosts to each of three major indexes
after the technology giant won the Pentagon's $10 billion cloud
computing contract, beating out Amazon.com Inc AMZN.O .
The S&P 500 rose as much as 0.7% to 3,044.08, breaching the
record intraday high hit on July 26, while the Nasdaq was less
than 0.2% below its intraday high. The Dow Jones Industrial
Average was less than 1% away from its record intraday level.
President Donald Trump said on Monday he expected to sign a
significant part of the trade deal with China ahead of schedule
but did not elaborate on the timing, building on optimism from
Friday when Washington said it was "close to finalizing" some
parts of a trade deal. Economic data shows that the trade war between the two
largest economies has begun take a toll on both countries,
leading to worries about a global slowdown.
Global central banks have responded by easing monetary
policy. The Federal Reserve is expected to be the latest to
follow that trend at its two-day policy meeting beginning on
Tuesday, with wide expectations that it will cut interest rates
for a third time this year.
"It just seems like the things that would disrupt the rally
– tightening monetary policy - off the table. Some kind of big
battle with the Chinese seems to be off the table, some kind of
political upheaval seems be off the table," said Stephen
Massocca, senior vice president at Wedbush Securities in San
Francisco. "All of that means the line of least resistance is
higher."
The Dow Jones Industrial Average .DJI rose 140.72 points,
or 0.52%, to 27,098.78, the S&P 500 .SPX gained 18.44 points,
or 0.61%, to 3,040.99 and the Nasdaq Composite .IXIC added
86.04 points, or 1.04%, to 8,329.16.
The odds for a quarter percentage point cut in U.S.
borrowing costs have jumped to 94.1% from 49.2% last month,
according to CME Group's FedWatch tool.
The third-quarter earnings season has managed to ease some
concerns related to the impact of the trade tensions on
corporate profits, with over 78% of the 204 S&P 500 companies
that have reported so far surpassing profit expectations,
according to Refinitiv data. Still, third-quarter earnings are
expected to show a decline of 2%.
Investors are waiting for earnings from heavyweights this
week such as Apple Inc AAPL.O , Google-parent Alphabet Inc
GOOGL.O and Merck & Co Inc MRK.N .
Chipmakers, which have acted as a proxy for trade tensions
with China, gained 1.67%. The technology .SPLRCT , healthcare
.SPXHC and communication services .SPLRCL sectors gained
more than 1% each.
Among other stocks, AT&T Inc T.N rose 4.27% after the U.S.
wireless carrier said it would add two new board members and
consider selling off up to $10 billion worth of non-core
businesses next year. Tiffany & Co TIF.N surged 30.88% after Louis Vuitton owner
LVMH LVMH.PA made a $120 per share offer to buy the U.S.
luxury jeweler. Advancing issues outnumbered declining ones on the NYSE by a
1.42-to-1 ratio; on Nasdaq, a 2.14-to-1 ratio favored advancers.
The S&P 500 posted 39 new 52-week highs and no new lows; the
Nasdaq Composite recorded 111 new highs and 37 new lows.