Nasdaq, S&P 500 hit record highs as payrolls data raises rate cut hopes
Fed rate cut debate in view as U.S. job market cools
S&P 500 tech sector hits record high
Banks down ahead of Q2 results next week
Macy's up on report Arkhouse, Brigade Capital raise buyout offer
Indexes up, Dow 0.17, S&P 0.54, Nasdaq 0.9%
Adds analyst quote in paragraph 8-9, adds prices
By Saeed Azhar, Ankika Biswas and Lisa Pauline Mattackal
NEW YORK, July 5 (Reuters) - Wall Street stock indexes closed firmer on Friday, with the tech-heavy Nasdaq and benchmark S&P 500 hitting record highs, as new data showing U.S. labor market weakness boosted expectations for interest rate cuts as early as September.
The rally was fueled by megacap stocks such as MicrosoftMSFT.O which rose nearly 1.5% to end at a record high.
Meta Platforms <META.O> also scored an all-time closing high, gaining around 5.9% to push the information technology .SPLRCT sector to a record high.
S&P 500 communication services .SPLRCL was thetop performing sector, reachingits highest level since 2000.
The Dow Jones Industrial Average .DJI rose 67.87 points, or 0.17%, to close at 39,375.87. The S&P 500 .SPX gained 30.17 points, or 0.54%, at 5,567.19 and the Nasdaq Composite .IXIC advanced164.46 points, or 0.90%, to 18,352.76.
For the week, the S&P 500 gained 1.95%, the Nasdaq rose 3.5% pct, and the Dow climbed 0.66%.
Labor Department data showed U.S. jobs growth slowed marginally in June, and the unemployment rate rose to an over 2-1/2-year high, while wage gains slowed.
Investors expect the data could stir more active debate on rate cuts when the Federal Reserve meets later this month. Odds of the U.S. central bank easingin September jumped to 79% from 66% seen before the data, CME's FedWatch Tool showed.
"This report puts the Fed in a comfortable spot," said Peter Cardillo, chief market economist at Spartan Capital Securities.
"If this continues next month, with no increases in hourly wages, then I think we'll see a rate cut in September and another one in December."
Data released earlier this week also pointed to the U.S. economy losing steam, helping the S&P 500 and Nasdaq notch record closing highs during Wednesday's holiday-shortened session.
"We're in this kind of stagflation adjacent environment - growth is moderating, inflation is staying where it is for the time being," said Alex McGrath, chief investment officer for NorthEnd Private Wealth.
He said the environment is not great for small caps, which are sensitive to interest rates, but megacap companies are pumping out strong earnings which keep the market strong.
The Russell 2000 Small Cap index is down 0.95% for the week.
Major banks fell ahead of second-quarter corporate earnings reports starting next Friday.
Higher interest rates and an uncertain economic environment are casting a cloud over U.S. bank earnings.
Bank of America BAC.N, Wells Fargo WFC.N and JPMorgan & Chase JPM.N dropped between 1.2% to 1.7%, pushing the S&P 500 banks index .SPXBK 1.6% lower.
Macy's M.N on Friday surged 9.5% aftera report said Arkhouse Management and Brigade Capital raised their bid to buy the department store chain for about $6.9 billion.
Advancing issues outnumbered decliners by a 1.04-to-1 ratio on the NYSE. On the Nasdaq, declining issues outnumbered advancers by a 1.05-to-1 ratio.
The S&P 500 posted 19 new 52-week highs and eight new lows while the Nasdaq Composite recorded 46 new highs and 162 new lows.
Volume on U.S. exchanges was 9.73 billion shares, compared with the 11.57 billion average for the full session over the last 20 trading days.
Reporting by Ankika Biswas and Lisa Mattackal in Bengaluru and Saeed Azhar in New York; Additional reporting by Stephen Culp; Editing by Saumyadeb Chakrabarty, Shounak Dasgupta, Shinjini Ganguli and Richard Chang
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