US STOCKS-S&P 500, Nasdaq near record highs as rate-cut bets creep up

By Kanchana Chakravarty and Nikhil Sharma

June 26 (Reuters) - The S&P 500 and Nasdaq were headed toward record highs on Thursday, as President Donald Trump's growing frustration with the Federal Reserve's wait-and-watch stance on cutting interest rates fueled bets of more monetary policy easing ahead.

A Wall Street Journal report said Trump has mulled picking Federal Reserve Chair Jerome Powell's replacement early, by September or October, after repeatedly criticizing him for not cutting interest rates sooner.

Traders now price in a nearly 25% chance of the Fed cutting rates in July, compared with 12.5% last week, according to CME Group's FedWatch tool.

Some analysts see Trump's musings about firing Powell or naming a successor early as an effort to influence monetary policy through a "shadow" Fed chair even before Powell leaves office in May 2026.

However, Chicago Fed President Austan Goolsbee said on Wednesday Trump naming Powell's replacement would not influence monetary policy from outside the central bank.

"We know that Trump doesn't want Powell there. He doesn't like what Powell's doing. But whether the new guy comes or not, whoever it is, they still have a dual mandate. It doesn't change the Fed's job," said Adam Sarhan, chief executive of 50 Park Investments.

The benchmark S&P 500 .SPX was trading 0.2% below its record peak, while the tech-heavy Nasdaq .IXIC was about 0.5% below its all-time highs, with risk appetite revived by a truce in the Middle East conflict earlier this week.

The Nasdaq 100 .NDX - a subset of the Nasdaq composite index - touched an intraday record high.

Economic data was mixed. The final reading from the U.S. Commerce Department showed gross domestic product contracted 0.5% in the first quarter. Economists polled by Reuters had forecast a 0.2% contraction.

Separately, a report for weekly jobless claims showed the number of Americans filing new applications for jobless benefits fell last week.

San Francisco Fed President Mary Daly said she's seeing increasing evidence that tariffs may not lead to a large or sustained inflation surge, helping bolster the case for a rate cut in the fall, Bloomberg News reported.

Meanwhile, Richmond Fed President Thomas Barkin remarked tariffs are very likely to push inflation up over the coming months.

The Personal Consumption Expenditures report on Friday - the Fed's preferred gauge of inflation - will be scrutinized to ascertain tariff-induced price changes in the U.S. economy.

At 11:46 a.m. ET, the Dow Jones Industrial Average .DJI rose 285.90 points, or 0.67%, to 43,268.33, the S&P 500 .SPX gained 37.06 points, or 0.61%, to 6,129.22 and the Nasdaq Composite .IXIC gained 127.41 points, or 0.64%, to 20,100.96.

Nine of the 11 major S&P 500 sub-sectors rose. Materials .SPLRCM and energy .SPNY led gains, rising more than 1.2%. On the flip side, real estate .SPLRCR stocks lost 0.9%.

The S&P 500 Banks Index .SPXBK, which tracks large-cap U.S. lenders, advanced 0.7%.

Wall Street brokerages estimated that large lenders can expect as much as $6 trillion in additional balance sheet capacity and billions in freed up capital under a Fed plan to relax leverage rules.

Nvidia NVDA.O edged up 0.6% to trade at a record high.

Shares of sportswear company Nike NKE.N edged up 1.5% ahead of its quarterly results.

Copper miners gained after the red metal's prices jumped to a three-month high. Freeport Freeport-McMoRan FCX.N rose 6.2% and Southern Copper SCCO.N advanced 6.5%.

Equinix's EQIX.O shares dropped 9.2% after its annual growth forecast failed to impress investors, with multiple brokerages cutting their ratings on the data center company's stock.

Advancing issues outnumbered decliners by a 3.71-to-1 ratio on the NYSE and by a 1.77-to-1 ratio on the Nasdaq.

The S&P 500 posted 24 new 52-week highs and 6 new lows while the Nasdaq Composite recorded 56 new highs and 45 new lows.