By Lisa Pauline Mattackal and Ankika Biswas
(Reuters) - The Nasdaq and the S&P 500 hit record highs on Monday, while the Dow scaled a more than one-month high as investors awaited a key inflation report, Congressional testimony from Federal Reserve Chair Jerome Powell and the start of earnings season this week.
Expectations for interest-rate cuts as early as September received a boost after Friday's nonfarm payrolls report showed U.S. job growth slowed in June, the latest data to point to weakness in labor market conditions.
Investors, however, will seek a clearer picture of the Fed's likely monetary policy trajectory for the rest of the year.
Traders now see a 74% chance of a 25-basis-point cut in September, up from last week's 60%, while expecting an overall reduction of about 50 bps for the year, according to CME's FedWatch and LSEG data.
On the economic front, this week's consumer and producer price index data will be closely watched to gauge whether price pressures are easing.
"The fact of the matter is the Fed has a dual mandate and their mandate is employment and inflation. Inflation is going down and unemployment is going up," said Thomas Hayes, chairman at Great Hill Capital LLC.
"They now have cover to make a cut when they want to and signs point toward September."
The S&P 500 and the Nasdaq closed at all-time highs as megacap tech stocks such as Meta Platforms and Microsoft touched record peaks.
However, megacaps including Alphabet, Amazon.com and Meta Platforms shed between 0.4% and 1.3%. Tesla fell 2.4% after jumping to its highest level this year on Friday.
Chip stocks Nvidia, Intel, Marvell Technology, Advanced Micro Devices and Qualcomm jumped between 1% and 5%, helping the Philadelphia SE Semiconductor Index gain 2%.
Major banks including Citigroup, JPMorgan Chase and Wells Fargo are slated to kick off the second-quarter earnings season on Friday. Their shares rose nearly 1% each on the day.
While the S&P 500 Financial Index was the top sectoral gainer, Communication Services was the biggest laggard.
The small-cap Russell 2000 gained nearly 1%.
Investors are focusing on earnings to see if a stratospheric jump in a handful of megacap stocks such as Nvidia can justify their pricey valuations.
Markets will also watch Powell's semi-annual testimony before U.S. Senate and House committees on July 9 and 10 closely, as well as commentary from several other Fed officials through the week.
At 9:48 a.m. ET, the Dow Jones Industrial Average was up 276.53 points, or 0.70%, at 39,652.40, the S&P 500 was up 13.11 points, or 0.24%, at 5,580.30, and the Nasdaq Composite was up 21.41 points, or 0.12%, at 18,374.17.
Paramount Global reversed its premarket course and fell 2.3% after Sunday's announcement of a merger with Skydance Media.
Planemaker Boeing gained 2.3% after agreeing to plead guilty to a criminal fraud conspiracy charge and pay a fine of $243.6 million to resolve a U.S. Justice Department investigation into two fatal 737 MAX crashes.
Advancing issues outnumbered decliners by a 2.10-to-1 ratio on the NYSE, and by a 2.10-to-1 ratio on the Nasdaq.
The S&P index recorded 17 new 52-week highs and one new low, while the Nasdaq recorded 48 new highs and 36 new lows.
(Reporting by Lisa Mattackal and Ankika Biswas in Bengaluru; Editing by Anil D'Silva and Pooja Desai)
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