US STOCKS-Wall Street hits new highs on rate-cut optimism

* Major indexes touch record highs
* Ford gains on joining forces with Volkswagen
* J&J weighs on healthcare stocks
* Indexes up: Dow 0.71%, S&P 500 0.33%, Nasdaq 0.49%

(Updates to midafternoon in U.S. markets, changes byline, adds
NEW YORK to dateline)
By April Joyner
NEW YORK, July 12 (Reuters) - U.S. stocks hit record highs
on Friday as high expectations for an interest-rate cut from the
Federal Reserve continued to propel shares while investors
awaited next week's kickoff of the corporate earnings season.
In his two-day testimony before Congress, Federal Reserve
Chairman Jerome Powell said the U.S. economy was still under
threat from disappointing factory activity, tame inflation and a
simmering trade war and that the central bank stood ready to
"act as appropriate."
The S&P 500 .SPX traded above the 3,000 level for a third
straight session, with industrial .SPLRCI and consumer
discretionary .SPLRCD posting gains of 1% or more.
With firm expectations for interest-rate cuts in place, the
focus among several investors has turned to the corporate
earnings season as large U.S. banks, including Citigroup Inc
C.N and JPMorgan Chase & Co JPM.N , are set to report next
week. "All this week has been the Federal Reserve's influence,"
said Mark Kepner, equity trader at Themis Trading in Chatham,
New Jersey. "At the position we're at here, we could see
ourselves declining a bit if earnings are not that good."
Analysts currently estimate that S&P 500 companies will
report a 0.4% dip in second-quarter earnings, according to
Refinitiv IBES data.
The Dow Jones Industrial Average .DJI rose 191.72 points,
or 0.71%, to 27,279.8, the S&P 500 .SPX gained 9.99 points, or
0.33%, to 3,009.9 and the Nasdaq Composite .IXIC added 40.05
points, or 0.49%, to 8,236.09.
Data for U.S. producer prices in June showed the smallest
annual increase in producer inflation in nearly 2-1/2 years and
a slowdown in underlying producer prices, which suggested that
overall inflation could remain moderate for a while.
Ford Motor Co F.N shares gained 2.65% after the automaker
and Volkswagen AG VOWG_p.DE said they would join forces to
develop autonomous and electric cars.
Johnson & Johnson JNJ.N shares slid 4.3% after Bloomberg
reported that the U.S. Justice Department is pursuing a criminal
probe into whether the healthcare conglomerate lied about
potential cancer risks of its talcum powder. Johnson & Johnson's slide dragged down healthcare shares,
whose 1.3% decline was the biggest among S&P 500 sectors.
Illumina Inc ILMN.O shares tumbled 15.7%, the most among
S&P 500 companies, after the gene sequencing company's
preliminary second-quarter revenue came in below analyst
estimates. Advancing issues outnumbered declining ones on the NYSE by a
1.92-to-1 ratio; on Nasdaq, a 1.74-to-1 ratio favored advancers.
The S&P 500 posted 46 new 52-week highs and two new lows;
the Nasdaq Composite recorded 76 new highs and 40 new lows.