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Indexes up: Dow 0.35%, S&P 500 0.39%, Nasdaq 0.42%

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Nike ( NKE ) rises ahead of quarterly results

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US economy contracts 0.5% in Q1

(Updates after markets open)

By Kanchana Chakravarty and Nikhil Sharma

June 26 (Reuters) - The S&P 500 and Nasdaq headed toward

record highs on Thursday, as President Donald Trump's growing

frustration with the Federal Reserve's wait-and-watch stance on

cutting interest rates fueled bets of more monetary policy

easing ahead.

A Wall Street Journal

report said Trump has mulled picking Federal Reserve Chair

Jerome Powell's replacement early, by September or October,

after repeatedly criticizing him for not cutting interest rates

sooner.

Traders now price in a nearly 25% chance of the Fed

cutting rates in July, compared with 12.5% last week, according

to CME Group's FedWatch tool.

The benchmark S&P 500 was trading 0.5% below its

record peak, while the tech-heavy Nasdaq was about 0.7%

below its all-time highs, with risk appetite revived by a truce

in the Middle East conflict earlier this week.

The Nasdaq 100 - a subset of the Nasdaq composite

index - touched an intraday record high.

Economic data was mixed. The final reading from the U.S.

Commerce Department showed gross domestic product contracted

0.5% in the first quarter. Economists polled by Reuters had

forecast a 0.2% contraction.

"A 0.5% contraction is worse than expected, but that really

reflects how much imports overwhelmed exports in the first

quarter, as businesses and consumers tried to get ahead of the

tariff program," said Sam Stovall, chief investment strategist

at CFRA Research.

Separately, a report for weekly jobless claims showed the

number of Americans filing new applications for jobless benefits

fell last week.

Fed San Francisco President Mary Daly said she's seeing

increasing evidence that tariffs may not lead to a large or

sustained inflation surge, helping bolster the case for a rate

cut in the fall, Bloomberg News reported.

The Personal Consumption Expenditures report on Friday - the

Fed's preferred gauge of inflation - will be scrutinized to

ascertain tariff-induced price changes in the U.S. economy.

At 10:11 a.m. ET, the Dow Jones Industrial Average

rose 149.52 points, or 0.35%, to 43,133.31, the S&P 500

gained 23.61 points, or 0.39%, to 6,115.77 and the Nasdaq

Composite gained 83.54 points, or 0.42%, to 20,056.37.

Ten of the 11 major S&P 500 sub-sectors rose. Materials

led gains with a 0.8% rise. On the flip side, real

estate stocks lost 0.8%.

Nvidia ( NVDA ) rose 1% after scaling a fresh all-time high

on Wednesday.

Shares of sportswear company Nike ( NKE ) edged up 0.8%

ahead of its quarterly results.

Copper miners gained after the red metal's prices jumped to

a three-month high. Freeport Mcmoran ( FCX ) rose 6% and

Southern Copper ( SCCO ) advanced 6.3%.

Advancing issues outnumbered decliners by a 3.01-to-1

ratio on the NYSE and by a 1.56-to-1 ratio on the Nasdaq.

The S&P 500 posted 23 new 52-week highs and 2 new lows while

the Nasdaq Composite recorded 44 new highs and 29 new lows.

(Reporting by Kanchana Chakravarty and Nikhil Sharma in

Bengaluru; Editing by Devika Syamnath)