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PCE inflation rises moderately in June

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Russell 2000 jumps

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Deckers, Baker Hughes ( BKR ) climb after results

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Dexcom ( DXCM ) slips after cutting revenue forecast

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Indexes up: Dow 1.37%, S&P 0.80%, Nasdaq 0.64%

(Updated at 9:51 a.m. ET/1351 GMT)

By Ankika Biswas and Lisa Pauline Mattackal

July 26 (Reuters) -

Wall Street bounced back on Friday as megacap tech and chip

stocks recovered from the week's pummeling, while a largely

in-line key inflation reading kept bets for an early start to

interest-rate cuts alive.

Industrial conglomerate 3M ( MMM ) jumped more than 17%,

boosting the Dow, after the company

raised

the lower end of its annual adjusted profit forecast.

Chip stocks led the recovery in technology stocks, with

the Philadelphia SE Semiconductor index on track to snap

three sessions of losses as Nvidia ( NVDA ), Intel ( INTC ),

Broadcom ( AVGO ) and Qualcomm ( QCOM ) rose between 1.2% and

2.6%.

The so-called Magnificent Seven stocks were mixed in

early trading, with Apple ( AAPL ), Tesla and Alphabet

slipping between 0.5% and 1.4%, while Microsoft ( MSFT )

, Meta Platforms ( META ) and Amazon.com ( AMZN ) rose

0.4% to 2%.

The 10-year Treasury yield turned lower

after the inflation figures were out.

Data showed the Personal Consumption Expenditures Price

Index, the U.S. Federal Reserve's preferred inflation metric,

rose 0.1% on a monthly basis in June and 2.5% annually, both as

expected, while personal income was lower than expected.

The moderate rise in

U.S. prices

underscored an improving inflation environment, potentially

positioning the Fed to start easing policy in September.

"You've got a pretty nice (inflation) report here that

further emboldens the soft landing narrative," said Rick

Meckler, partner at Cherry Lane Investments.

Economically sensitive small-cap stocks rose, with the

Russell 2000 jumping 1.7%, set for its third straight

week of gains, if trends hold.

Bets of a 25-basis-point cut by the Fed's September

meeting held steady at around 88% after the data, according to

CME's FedWatch. Traders still largely expect two rate cuts by

December, according to LSEG data.

At 9:51 a.m. ET, the Dow Jones Industrial Average was

up 547.26 points, or 1.37%, at 40,482.33, the S&P 500 was

up 43.42 points, or 0.80%, at 5,442.64, and the Nasdaq Composite

was up 109.36 points, or 0.64%, at 17,291.08.

However, the S&P 500 and the Nasdaq were still on track

for a second straight week of losses as investors dumped tech

stocks in the past few weeks. Disappointing earnings from

Alphabet and Tesla sparked a steep sell-off in megacap and

artificial-intelligence-linked shares on Wednesday.

"Next week is an even busier week for earnings reports

than this week... after a rough week, on a summer Friday,

markets have a chance to bounce higher," Meckler said.

Worries about Wall Street's growing dependence on a set of

high-momentum stocks, whose valuations now appear inflated, have

made underperforming sectors like mid- and small-cap stocks seem

more attractive now that early rate cuts seem likely.

Rate-sensitive sectors led gains, with the S&P 500

Industrials and Materials indexes up more

than 1% each, while the Dow Jones Transport index gained

1.7%.

On the earnings front, Deckers Outdoor ( DECK ) jumped 10.5%

after raising its annual profit forecast, while oilfield

services firm Baker Hughes ( BKR ) climbed 3.4% after beating

estimates for second-quarter profit.

Medical device maker Dexcom ( DXCM ) slumped 40.2% after

cutting its annual revenue forecast.

Of the 206 companies in the S&P 500 that have reported

second-quarter earnings till date, 78.6% beat analysts'

expectations, according to LSEG data.

Advancing issues outnumbered decliners by a 5.90-to-1 ratio

on the NYSE, and by a 3.72-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and no new

lows, while the Nasdaq recorded 111 new highs and 21 new lows.