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Fed rate cut debate in view as U.S. job market cools

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S&P 500 tech sector hits record high

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All three major indexes set for weekly gains

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Macy's up on report Arkhouse, Brigade Capital raise buyout

offer

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Indexes: Dow flat, S&P up 0.34%, Nasdaq up 0.79%

(Updated at 12:14 p.m. ET)

By Ankika Biswas and Lisa Pauline Mattackal

July 5 (Reuters) - The tech-heavy Nasdaq and the

benchmark S&P 500 jumped to record highs on Friday, as most

megacap stocks hit all-time highs following latest data that

signaled U.S. labor market weakness and pulled Treasury yields

lower.

Microsoft ( MSFT ), Meta Platforms ( META ), Amazon.com ( AMZN )

and Apple ( AAPL ) advanced 1%-4% to hit record highs.

This pushed information technology to an all-time

high, and prompted the S&P 500 communication services

to emerge as the top sector performer, rising 2.1% to its

highest level since 2000.

Labor Department data showed U.S. job growth slowed

marginally in June, and the unemployment rate rose to an over

2-1/2-year high, while wage gains slipped.

The data supported the easing labor market narrative,

following ADP Employment report and jobless claims earlier this

week, giving a fresh boost to bets of a September interest rate

cut.

Investors expect the data could open the path to a more

active debate on interest-rate cuts when the Federal Reserve

next meets later this month.

Odds of the U.S. central bank delivering its first rate cut

in September jumped to 79% from 66% seen before the data,

according to CME's FedWatch Tool.

"The employment data is not indicative of an imminent

recession but supports the soft-landing view. The sharp decline

in temporary may help portend future weakness in the labor

market this summer," said Jack McIntyre, portfolio manager at

Brandywine Global.

"This clearly increases the Fed's confidence level that

policy rates are too restrictive, and they need to cut."

Other data earlier this week also pointed to the U.S.

economy losing steam, prompting market participants to

strengthen their bets for multiple rate cuts this year.

That helped the S&P 500 and the Nasdaq notch record closing

highs during Wednesday's holiday-shortened trading, even as

trading volumes have remained light throughout the week due to

the U.S. Independence Day holiday on Thursday.

At 12:14 p.m. ET, the Dow Jones Industrial Average

was down 5.31 points, or 0.01%, at 39,302.69, the S&P 500

was up 18.75 points, or 0.34%, at 5,555.77, and the Nasdaq

Composite was up 143.53 points, or 0.79%, at 18,331.83.

All the three major Wall Street indexes remain on course for

weekly gains. With second-quarter earnings on the horizon, it

remains to be seen whether Wall Street's rally will broaden

beyond major megacap stocks and whether earnings for those

companies can continue to support steep valuations.

Big banks such as Goldman Sachs ( GS ), Bank of America ( BAC )

, Wells Fargo ( WFC ), JPMorgan & Chase ( JPM ) fell

between 1% and 2%, pushing the S&P 500 banks index down

1.6%.

Macy's on Friday jumped 9.4% after a report said

Arkhouse Management and Brigade Capital raised their bid to buy

the department store chain for about $6.9 billion.

Declining issues outnumbered advancers for a 1.21-to-1 ratio

on the NYSE and for a 1.30-to-1 ratio on the Nasdaq.

The S&P index recorded 16 new 52-week highs and eight new

lows, while the Nasdaq recorded 33 new highs and 129 new lows.

(Reporting by Ankika Biswas and Lisa Mattackal in Bengaluru;

Editing by Saumyadeb Chakrabarty, Shounak Dasgupta and Shinjini

Ganguli)