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U.S. PCE stands at 2.2% in Aug

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Russell 2000 index up 1.5%

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Bristol-Myers gains after schizophrenia drug approval

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Costco slips after Q4 revenue misses estimates

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Indexes: Dow up 0.97%, S&P 500 up 0.05%, Nasdaq off 0.34%

(Updated at 11:50 a.m. ET/1550 GMT)

By Johann M Cherian and Purvi Agarwal

Sept 27 (Reuters) -

The blue-chip Dow rose on Friday to hit an intraday record

and small-cap stocks outperformed after a benign inflation

report cleared the way for the Federal Reserve to focus on

shoring up the labor market while continuing its interest rate

easing.

A Commerce Department's report showed that consumer spending

increased moderately in August, suggesting the economy retained

some of its solid momentum in the third quarter, while inflation

pressures continued to abate.

At 11:50 a.m. ET, the Dow Jones Industrial Average

rose 410.80 points, or 0.97%, to 42,585.91, the S&P 500

gained 2.69 points, or 0.05%, to 5,748.00 and the Nasdaq

Composite lost 61.33 points, or 0.34%, to 18,128.96.

The Russell 2000 index, which tracks small caps

that fare better in a low rate environment, gained 1.5% to a

one-week high.

Ten out of the 11 S&P 500 sectors were higher, led by a

2% rise in energy stocks, while technology stocks

declined 1%.

Nasdaq components such as Nvidia ( NVDA ) and Microsoft ( MSFT )

lost 2.7% and 0.5%, respectively, as investors turned

their focus to other sectors.

Financial stocks including Goldman Sachs ( GS ) and

healthcare stocks like UnitedHealth ( UNH ) were the biggest

boosts to the Dow.

Investors now slightly favor a bigger 50 basis point cut

at the Fed's next meeting with a 52.1% chance, up from a coin

toss before the data, as per the CME Group's FedWatch Tool.

Cooling price pressures gave the Fed enough room to commence

its policy easing cycle with a 50 bps cut last week. Focus will

now shift to a slew of labor market reports due next week.

"Markets are just hopeful that we get more cuts. The Fed may

accelerate this cutting cycle, but we may not get another 50 bps

cut unless we get some bad data - a negative jobs report or a

spike in unemployment," said John Luke Tyner, portfolio manager

at Aptus Capital Advisors.

Meanwhile, the University of Michigan's final September

estimate on consumer sentiment stood at 70.1, compared with

estimates of 69.3, as per economists polled by Reuters.

Markets will parse through remarks from Fed Governor

Michelle Bowman later in the day.

Late on Thursday, Fed Governor Lisa Cook said the central

bank's rare move earlier this month could address increased

"downside risks" to employment.

Wall Street's main indexes ended higher in the previous

session, with the S&P 500 closing at a record high level.

All three indexes are on track for their third straight week of

gains.

Among other stocks, Bristol-Myers Squibb ( BMY ) surged 3.2%

after the U.S. FDA approved its schizophrenia drug.

Costco Wholesale ( COST ) dropped 1.7% after posting

downbeat fourth-quarter revenue.

U.S.-listed shares of Chinese firms such as Alibaba

rose 2.8%, PDD Holdings ( PDD ) climbed 4.4% and NetEase

gained 3% after China's central bank lowered interest

rates and injected liquidity into the banking system.

The optimism spilled over to miners such as Arcadium

, which added 3.5%, and U.S.-listed shares of BHP

rose 1.8%.

Advancing issues outnumbered decliners by a 3.39-to-1 ratio

on the NYSE and by a 2.37-to-1 ratio on the Nasdaq.

The S&P 500 posted 39 new 52-week highs and no new lows,

while the Nasdaq Composite recorded 61 new highs and 48 new

lows.