NEW YORK - U.S. stocks were higher in Monday afternoon trading, with the S&P 500 and the Nasdaq hitting record highs, as consumer spending rose in March and benign inflation data underscored the Federal Reserve's accommodative stance on interest rates.
Hopes of a trade resolution, upbeat earnings and a dovish Fed have been powering a rally in the benchmark index this year. The index crossed its record high of 2,940.91 hit on Sept. 21 for the first time this year, restoring investors' faith in the decade-long bull run.
"It does create pressure to bring more buyers. Today's headline augments the fear of missing out. It's going to make the bears less bearish or more worried they're going to get run over," said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.
A Commerce Department report showed U.S. consumer spending increased by the most in more than 9-1/2 years in March, but price pressures remained muted, with a key inflation measure posting its smallest annual gain in 14 months.
Tame inflation may lead the central bank to cut interest rates, White House economic adviser Larry Kudlow said in a television interview on Monday.
The Dow Jones Industrial Average rose 44.73 points, or 0.17%, to 26,588.06, the S&P 500 gained 7.69 points, or 0.26%, to 2,947.57 and the Nasdaq Composite added 27.71 points, or 0.34%, to 8,174.11.
Financial shares rose 1.2%, leading gains among the 11 major S&P sectors.
The Fed starts a two-day meeting on Tuesday, at the end of which a decision on interest rates will be announced.
Another busy week of earnings is expected, with results due from Google-parent Alphabet Inc and Apple Inc among other top names.
Analysts now expect profits of S&P 500 companies to have fallen just 0.2% in the first quarter, a sharp improvement from a 2% fall estimated at the beginning of the month, according to IBES data from Refinitiv data.
As trade talks enter their last leg, U.S. negotiators head to China on Tuesday to try to hammer out details to end the protracted tariff spat between the two countries.
"It's really about the administration continuing to hint a trade agreement is near," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
"People don't want to miss out on the expected rally from that news."
The defensive utilities and real estate indexes led the declines among sectors.
Ingersoll-Rand jumped after the Wall Street Journal reported Gardner Denver Holdings Inc is nearing a deal to acquire a unit of the air conditioner maker.
Advancing issues outnumbered declining ones on the NYSE by a 1.83-to-1 ratio; on Nasdaq, a 1.68-to-1 ratio favored advancers.
The S&P 500 posted 38 new 52-week highs and no new lows; the Nasdaq Composite recorded 74 new highs and 21 new lows.