By Noel Randewich
(Reuters) - Microsoft and healthcare companies lifted Wall Street on Thursday, a day after the Federal Reserve cut interest rates as expected and left the door open for further monetary easing.
Microsoft (O:MSFT) rose 1.9% after unveiling a $40 billion stock buyback plan, and its increase contributed more than any other company to the S&P 500's gain.
The S&P 500 was less than 1% below its record high close from July as markets also became more optimistic about talks between U.S. and Chinese deputy trade negotiators aimed at laying the groundwork for high-level negotiations in early October.
A recent easing in trade tensions has helped the three main indexes recover from losses from August.
"There has been slightly more constructiveness lately, but if there is any sort of agreement, it will be a very light, mini-deal, because the U.S. and China are still very far apart on the main issues," warned Ben Phillips, Chief Investment Officer at EventShares.
The S&P 500 healthcare index (SPXHC) climbed 0.7% after U.S. House Speaker Nancy Pelosi released a proposal on drug pricing policy.
The plan is a "big negative" for drugmakers and the stock reaction has already been priced in to some degree, said Thomas Martin, senior portfolio manager at GLOBALT Investments.
Of 11 sector indexes, healthcare is the worst performer in 2019, with a gain of 6%.
On Wednesday, the Fed announced a quarter percentage point cut in interest rates for the second time this year and said future reductions would be "largely data-dependent."
Traders see a nearly 50% chance for another 25 basis point rate cut in October, according to CME Group's FedWatch tool.
"The market just continues to believe the Fed is going to be accommodative," said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.
The Fed injected another $75 billion into the U.S. banking system on Wednesday, restoring a measure of order after the central bank's benchmark interest rate rose above its targeted range for the first time since the financial crisis.
At 2:56 p.m. ET, the Dow Jones Industrial Average (DJI) was down 0.04% at 27,137.17 points, while the S&P 500 (SPX) gained 0.14% to 3,010.94.
The Nasdaq Composite (IXIC) added 0.19% to 8,193.29.
With the S&P 500 approaching a record high, the benchmark index is trading at about 17 times expected earnings, up from about 15 at the end of last year, according to Refinitiv's Datastream.
"Corporate earnings continue to expand, albeit at a slower pace, and we expect that to continue into 2020," said Bill Northey, senior investment director for U.S. Bank Wealth Management. "We view valuations as high, but not extreme at this point. It's not something that's causing us to wring our hands."
Shares of retailer Target Corp (N:TGT) rose 0.8% after it announced a $5 billion share buyback plan.
Advancing issues outnumbered declining ones on the NYSE by a 1.64-to-1 ratio; on Nasdaq, a 1.09-to-1 ratio favored advancers.
The S&P 500 posted 25 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 63 new highs and 32 new lows.