(Updates with US market closing levels)

*

Dollar recovers slightly even as Fed independence worries

linger

*

US stocks end higher

*

Nvidia ( NVDA ) shares down about 3% in after-market trading

following

results release

By Caroline Valetkevitch

NEW YORK, Aug 27 (Reuters) - Major stock indexes rose

and the S&P 500 posted a record closing high on Wednesday ahead

of quarterly results from artificial intelligence leader Nvidia ( NVDA )

, while the dollar recovered slightly from the previous

session's drop despite ongoing concerns about the U.S. Federal

Reserve's independence.

A lawyer for Fed Governor Lisa Cook said she would file a

lawsuit against U.S. President Donald Trump after he said he

would fire her. Trump's statement left some investors worried

about the independence of the U.S. central bank.

Interest-rate sensitive two-year U.S. Treasury yields fell

to an almost four-month low and the yield curve steepened as

traders weighed the chance that Trump may be able to make more

dovish appointments to the Fed.

Even so, the dollar traded flat to slightly higher after it

dropped in the previous session. The dollar index was

last up 0.02% at 98.227, while the euro touched its

weakest level since August 6 and was last down 0.09% at $1.1631

The three major U.S. stock indexes ended higher.

After the closing bell, Nvidia's ( NVDA ) shares were down about 3%

even as the company forecast third-quarter revenue above Wall

Street estimates.

This year, strong gains for a number of technology-related

stocks exposed to AI have helped power major equity indexes to

record highs and the results were seen as a test of the AI

optimism that has propelled markets.

"My takeaway is that these (Nvidia ( NVDA )) numbers are not

unexpected, nor is this reaction," said Nick Frasse, product

manager at Vaneck Associates in New York.

"The market has begun to factor in that Nvidia ( NVDA ) can continue

to beat most expectations in spite of headwinds and questions

like what they will have to pay to continue selling to China,"

he added.

The company recently agreed to pay the U.S. federal

government 15% of the sales it made in China in exchange for

undefined export licenses.

Technology shares, including several AI leaders, have

wobbled this month with investors pointing to some signs of

caution emerging in the sector.

The Dow Jones Industrial Average rose 147.16 points,

or 0.32%, to 45,565.23, the S&P 500 added 15.46 points,

or 0.24%, to 6,481.40 and the Nasdaq Composite gained

45.87 points, or 0.21%, to 21,590.14.

European stocks rebounded slightly from the previous day's

decline, with investors monitoring political risks in France.

Concerns over a potential collapse of French Prime Minister

Francois Bayrou's government next month sparked a selloff of

French assets on Tuesday.

MSCI's gauge of stocks across the globe

gained 0.32 points, or 0.03%, to 953.04. The pan-European STOXX

600 index rose 0.1%.

Market watchers interpreted Fed Chair Jerome Powell's

comments at the Fed's annual Jackson Hole symposium last week as

indicating interest rate cuts could be on the way. Fed funds

futures traders are pricing in 84% odds of a cut in September,

according to the CME Group's FedWatch Tool.

But the outlook for U.S. interest rates will still likely

depend on labor market strength and inflation trends.

The two-year note yield was last at 3.625%, down

around 5 basis points on the day. The benchmark 10-year note

yield fell to 4.236%, the lowest since August 14.

The yield curve between two-year and 10-year notes

was last at 61.3 basis points after reaching 63.5

basis points, the steepest since April 22.

Oil gained on a larger-than-expected drop in U.S. crude

inventories. U.S. crude futures rose 90 cents to settle

at $64.15 a barrel and Brent futures gained 83 cents to

settle at $68.05.

Spot gold rose 0.12% to $3,396.34 an ounce.