*

US economic growth regains steam in Q2; inflation slows

*

Ford slumps as higher costs, EV unit dent profit growth

*

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

slips

*

Gains for small-cap indexes Russell 2000 and S&P Small Cap

600

*

Indexes up: Dow 0.9%, S&P 0.59%, Nasdaq 0.57%

(Updated to 2:02 p.m. ET/1802 GMT)

By Lisa Pauline Mattackal and David French

July 25 (Reuters) -

Wall Street's main indexes climbed on Thursday, a day after

a tech-triggered sell-off, with small-cap stocks and

stronger-than-expected GDP data providing support.

The small-cap Russell 2000 jumped 2.3%, on track to

fully recoup Wednesday's broad losses. The Dow led the

three main benchmarks in percentage gains as investors

reassessed their recent flight to underperforming sectors.

Most megacap stocks recovered from a shaky start and were in

positive territory at mid-afternoon. Amazon.com ( AMZN ), Apple ( AAPL )

and Nvidia ( NVDA ) all climbed between 0.8% and 1.2%.

While Alphabet's shares fell 0.8%, Tesla

rose 4.5%. Lackluster earnings from the Google parent and the

electric vehicle maker had pummeled the so-called Magnificent

Seven group of tech stocks on Wednesday, prompting the Nasdaq

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

Gross domestic product data provided support, showing the

U.S. economy expanded 2.8% in the second quarter versus an

estimate of 2%. Inflation subsided, leaving expectations of a

September Federal Reserve interest 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," said Brian Klimke, chief market

strategist at Cetera Investment Management. "The Fed doesn't

necessarily need to kill growth; they're really looking to just

kill inflation."

Bets on a 25-basis-point cut by September stood at 85.8%,

from around 78% prior to Thursday's data, CME's FedWatch Tool

showed.

Market participants are also pricing in at least two rate

cuts by December, according to LSEG data.

Investors now await personal consumption expenditures price

data on Friday to confirm bets of an early start to Fed rate

cuts, after the recent trend of easing inflation and some labor

market weakness.

While heavyweight stocks have powered the market to all-time

highs this year, Wednesday's sell-off reinforced fears that

these stocks might be over-stretched and are in for more

turbulence.

This concern has driven value investors, speeding up their

rotation into smaller-cap stocks and other sectors outside

megacap technology.

The S&P Small Cap 600 rose 2.2% on Thursday.

As of 2:02 p.m. ET, the S&P 500 gained 31.81 points,

or 0.59%, at 5,458.94 points, while the Nasdaq Composite

rose 103.14 points, or 0.57%, to 17,445.55. The Dow Jones

Industrial Average advanced 357.37 points, or 0.90%, to

40,211.24.

Among earnings-driven moves, IBM ( IBM ) shares jumped 5.8%,

also boosting the blue-chip Dow, after the tech company beat

estimates for second-quarter revenue and raised the annual

growth forecast for its software business.

American Airlines ( AAL ) rose 4.1%, reversing premarket

losses after cutting its annual profit forecast. Southwest

Airlines ( LUV ) climbed 6.8% after saying it would implement

changes including ending open seating and offering seats with

extra legroom.

Advances by airlines and logistics firms, of 6% for

Old Dominion

and 6.4% for J B Hunt, helped the Dow

Jones Transportation Average gain 2.5%.

Ford slumped 17.3% after the automaker's

second-quarter adjusted profit missed estimates by a wide

margin. Edwards Lifesciences ( EW ) tumbled 29.6% after it

missed second-quarter revenue estimates.