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PCE inflation rises moderately in June

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Russell 2000 hits one-week high

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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 1.63%, S&P 1.06%, Nasdaq 0.92%

(Updated at 11:46 a.m. ET/1546 GMT)

By Ankika Biswas and Lisa Pauline Mattackal

July 26 (Reuters) -

Wall Street bounced back on Friday with the blue-chip Dow

leading the charge as some megacap tech and chip stocks

recovered from the week's pummeling, while a largely in-line key

inflation reading kept bets of an early rate cut alive.

Industrial conglomerate 3M ( MMM ) jumped 19%, boosting

the Dow to a one-month high after it raised the lower end of its

annual adjusted profit forecast.

The Philadelphia SE Semiconductor index was on

track to snap a three-day losing streak as Nvidia ( NVDA ),

Marvell Technology ( MRVL ), Broadcom ( AVGO ), Texas

Instruments ( TXN ) and Qualcomm ( QCOM ) rose more than 1%

each.

The Magnificent Seven stocks were mixed, with Microsoft ( MSFT )

and Meta Platforms ( META ) gaining more than 1%, while

Tesla and Alphabet shed 0.7% and 2%,

respectively.

The 10-year Treasury yield turned lower

after the inflation data.

Economically sensitive small-cap stocks rose, with the

Russell 2000 jumping 1%, set for its third straight

weekly gain in two months and its best three-week run since

August 2022.

The moderate rise in

U.S. prices

underlined an improving inflation environment, potentially

positioning the Federal Reserve to start easing policy in

September. The central bank's July monetary policy decision is

due next week.

"A cut next Wednesday is unlikely, but the Fed can at

least acknowledge that they're more confident in the

disinflationary trends," said Brian Jacobsen, chief economist at

Annex Wealth Management. "The markets should warmly greet that."

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

meeting held steady at about 88% after the PCE reading,

according to CME's FedWatch. Traders still largely expect two

rate cuts by December, according to LSEG data.

At 11:46 a.m. ET, the Dow Jones Industrial Average

was up 652.82 points, or 1.63%, at 40,587.89, the S&P 500

was up 57.19 points, or 1.06%, at 5,456.41, and the Nasdaq

Composite was up 158.56 points, or 0.92%, at 17,340.28.

However, the S&P 500 and the Nasdaq remained on track

for a second straight week of losses after investors dumped tech

stocks over the past few weeks. Disappointing earnings from

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

artificial-intelligence-linked shares on Wednesday.

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.

Industrials and Materials led gains

across the S&P 500 sector indexes. Energy bucked the

trend and fell tracking lower oil prices.

In earnings, Deckers Outdoor ( DECK ) jumped 8.0% after it

raised its annual profit forecast, while oilfield services firm

Baker Hughes ( BKR ) climbed 3.3% after beating estimates for

second-quarter profit.

Medical device maker Dexcom ( DXCM ) slumped 42.0% 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 3.46-to-1 ratio

on the NYSE, and by a 2.05-to-1 ratio on the Nasdaq.

The S&P index recorded six new 52-week highs, while the

Nasdaq recorded 161 new highs and 39 new lows.