(Updates to late afternoon)

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Nvidia ( NVDA ) second-quarter results due after closing bell

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Dollar recovers even as Fed independence worries linger

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US stocks higher in afternoon trading

By Caroline Valetkevitch

NEW YORK, Aug 27 (Reuters) -

Major stock indexes rose on Wednesday ahead of results from

artificial intelligence leader

Nvidia ( NVDA )

, while the dollar recovered 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 rebounded from its drop in the previous

session and was last up 0.36% at 147.93 Japanese yen,

while the euro was down 0.48% at $1.1586.

The three major U.S. stock indexes were slightly higher, with

Nvidia's ( NVDA ) second-quarter report, due after the closing bell, seen

as a test of the AI optimism that has propelled markets over the

past couple of years. This year, strong gains for a number of

technology-related stocks exposed to AI have helped power major

equity indexes to record highs.

"Trump has been on the Fed's back since Day One, and this

(Cook firing) is just a continuation of that strategy. The

market is completely focused, 100%, on Nvidia ( NVDA )," said Jake

Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma.

Investors are wondering whether Nvidia's ( NVDA ) results will

continue to live up to Wall Street's high expectations, he said.

"My expectation is today it will."

Nvidia's ( NVDA ) shares were last down 0.1%. The company is expected

to report that second-quarter revenue jumped to $46.06 billion,

according to LSEG data, and investors will pay close attention

to its business in China after the company agreed to pay the

U.S. federal government 15% of the sales it made 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 190.54 points,

or 0.42%, to 45,608.19, the S&P 500 climbed 20.02 points,

or 0.31%, to 6,486.06 and the Nasdaq Composite gained

55.61 points, or 0.26%, to 21,599.98.

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 in

French assets on Tuesday.

MSCI's gauge of stocks across the globe rose

1.64 points, or 0.17%, to 954.36.

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 five 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 and gold prices rose. Oil gained on a larger-than-expected

drop in U.S. crude inventories.

U.S. crude rose 90 cents to settle at $64.15 a barrel

and Brent gained 83 cents to settle at $68.05.

Spot gold rose 0.09% to $3,395.33 an ounce.