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US economic growth regains steam in Q2; inflation slows

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Ford slumps as higher costs, EV unit dent profit growth

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IBM ( IBM ) gets boost from software, AI demand, as consulting

slips

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American Airlines ( AAL ) recovers ground

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Indexes up: Dow 0.88%, S&P 0.61%, Nasdaq 0.43%

(Updated at 12:03 p.m. ET/1603 GMT)

By Ankika Biswas and Lisa Pauline Mattackal

July 25 (Reuters) -

Wall Street's main indexes rose on Thursday, with the Nasdaq

and the S&P reversing early losses while the Dow and small-cap

stocks outperformed, as stronger-than-expected GDP data provided

some relief after the previous session's tech mauling.

The small-cap Russell 2000 jumped 2% and was on

track to fully recoup the losses from Wednesday's broad Wall

Street sell-off. The Dow also bounced back, as investors

tried to determine if the recent flight to underperforming

sectors was justified.

Most megacap stocks were set to extend losses, with

Microsoft ( MSFT ), Nvidia ( NVDA ) and Meta Platforms ( META )

down between 0.5% and 1.6%.

While Alphabet's shares were down 0.5%, Tesla

was up 3%. Lackluster earnings from the Google parent

and the EV maker had pummeled the so-called "Magnificent Seven"

group of tech stocks on Wednesday, prompting the Nasdaq

and the S&P 500 to log their worst day since 2022.

Data showed the

U.S. economy

expanded 2.8% in the second quarter, versus an estimate of

2%, but inflation subsided, leaving expectations of a September

Fed rate cut intact.

"We've been calling for a Goldilocks recovery, expecting

the economy to hold up, and this report shows that the economy

is actually quite strong. The Fed doesn't necessarily need to

kill growth; they're really looking to just kill inflation,"

said Brian Klimke, Cetera Investment Management's chief market

strategist.

Bets of a 25-basis-point cut by September stood at

85.8%, from around 78% prior to Thursday's data, according to

CME's FedWatch Tool.

Market participants are also pricing in at least two

rate cuts by December this year, according to LSEG data.

Investors are now watching for the personal consumption

expenditures price data on Friday, to confirm bets of an early

start to interest-rate cuts after the recent trend of easing

inflation and some weakness in the labor market.

stocks has powered the markets to all-time highs this

Wednesday's sell-off these stocks might be over-stretched and in

for more turbulence.

"The companies that have done well with high interest rates

and AI enthusiasm are starting to struggle. Other (lagging)

indexes that are more diversified to benefit from interest rates

coming down," Klimke said.

Semiconductor stocks also broadly fell, led by an 11.6%

tumble in Teradyne ( TER ) after the maker of chip-testing

equipment forecast lower-than-expected third-quarter revenue.

At 12:03 p.m. ET, the Dow Jones Industrial Average

was up 350.38 points, or 0.88%, at 40,204.25, the S&P 500

was up 33.15 points, or 0.61%, at 5,460.28, and the

Nasdaq Composite was up 73.99 points, or 0.43%, at

17,416.40.

Among results-driven moves, IBM ( IBM ) jumped 5.7%, also

boosting the blue-chip Dow, after beating estimates for

second-quarter revenue and raising the annual growth forecast

for its software business.

Ford slumped 16.7% after the automaker's

second-quarter adjusted profit missed estimates by a wide

margin, while American Airlines ( AAL ) rose 5.5%, reversing

premarket losses after cutting its annual profit forecast.

Edwards Lifesciences ( EW ) tumbled 28.8% after it missed

second-quarter revenue estimates.

Advancing issues outnumbered decliners by a 2.82-to-1 ratio

on the NYSE, and by a 2.24-to-1 ratio on the Nasdaq.

The S&P index recorded 39 new 52-week highs and eight new

lows, while the Nasdaq recorded 133 new highs and 69 new lows.