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
* Ford gains on joining forces with Volkswagen
* 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 record
intraday highs on Friday, continuing a strong run for the week
on hopes of an interest rate cut this month, while investors
waited for the start of the corporate earnings season next week.
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".
"My belief on why the Fed will likely lower rates in the
July meeting is that it will try to assume its responsibilities
as the central bank for the world, and global economic
indicators 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 driven
the market higher have been priced in and now the focus will
shift to the earnings season.
Corporate profits are expected to take a hit from U.S.-China
trade tensions, with S&P 500 companies expected to report a 0.4%
dip in second-quarter earnings, according to Refinitiv IBES
data.
Results from two major U.S. railroads next week will also be
closely watched for signs of how the trade war is affecting
freight companies and the wider economy.
The S&P 500 .SPX traded above the 3,000 level for a third
straight session, also boosted by a 0.63% gain in the technology
sector .SPLRCT , the S&P 500's best performer so far this year.
The healthcare sector .SPXHC fell 1.70%, the most among
the 11 major S&P sectors, weighed down by a 4% slide in shares
of Johnson & Johnson JNJ.N .
The U.S. Justice Department is pursuing a criminal probe
into whether the healthcare conglomerate lied about potential
cancer risks of its talcum powder, Bloomberg reported, citing
people with knowledge of the matter.
The Dow Jones Industrial Average .DJI was up 157.23
points, or 0.58 percent, at 27,245.31 and the S&P 500 .SPX was
up 6.24 points, or 0.21 percent, at 3,006.15.
The Nasdaq Composite .IXIC was up 32.70 points, or 0.40
percent, at 8,228.74.
Data showed U.S. producer prices rose slightly in June,
leading to the smallest annual increase in producer inflation in
nearly 2-1/2 years and also showed a slowdown in underlying
producer prices last month, suggesting that overall inflation
could remain moderate for a while.
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. Illumina Inc ILMN.O tumbled 15.61%, the most among S&P 500
companies, after the gene sequencing company's preliminary
second-quarter revenue came in below analysts' estimates.
Ford Motor Co F.N gained 2.65% after the automaker and
Volkswagen AG VOWG_p.DE joined forces to develop autonomous
and electric cars.
Advancing issues outnumbered decliners by a 1.66-to-1 ratio
on 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 new
lows, while the Nasdaq recorded 68 new highs and 34 new lows.