By Shreyashi Sanyal and Aparajita Saxena
(Reuters) - Wall Street's main indexes rallied on Tuesday, with the S&P 500 inching close to record levels, as President Donald Trump's comments on restarting trade talks with China added to optimism of a more accommodative Federal Reserve.
Trump said he would meet with Chinese President Xi Jinping at the G20 summit later this month, and that talks between the two countries would restart after a long lull.
Trade-sensitive industrials jumped 1.72%, while technology stocks gained 1.84%, the biggest boost to the benchmark index.
Chip companies, which have a sizable revenue exposure to China, led the rally among tech stocks, with the Philadelphia Semiconductor index surging 4.23%.
"It's quite clear now that this is a major potential headwind for markets and any positive sounding news like this will likely inspire relief rallies," said Craig Erlam, senior market analyst at OANDA in London.
"That's not to say talks will be successful but investors may be feeling more optimistic this morning than they were a day ago."
The drawn out U.S.-China trade war and its impact on economic growth had investors betting that the Fed would cut rates to preserve the current U.S. economic expansion, which would be the longest on record this summer.
The central bank is expected to leave interest rates unchanged at its two-day policy meeting ending Wednesday, but is widely seen as laying the foundation for a cut later this year.
The Fed is scheduled to release its statement at 2 p.m. EDT (1800 GMT) on Wednesday and Chairman Jerome Powell will hold a press conference shortly after.
The S&P 500 has gained 5% so far this month on rate cut expectations, putting the benchmark index just 1% away from its all-time high hit in early May.
"Fed's main task will be the same as always: Carefully craft its language as to not disappoint markets. 'Yes, we may not cut right away, but don't worry, anything goes wrong we'll be right there to save you'," said Craig Kirsner, president at Stuart Estate Planning Wealth Advisors in Coconut Creek, Florida.
Lifting sentiment was European Central Bank President Mario Draghi's comments indicating a possibility of fresh rate cuts or asset purchases.
At 12:56 p.m. ET, the Dow Jones Industrial Average was up 350.68 points, or 1.34%, at 26,463.21 and the S&P 500 was up 31.46 points, or 1.09%, at 2,921.13.
The Nasdaq Composite was up 122.95 points, or 1.57%, at 7,967.98.
Large-cap favorites such as Apple Inc, Amazon.com Inc, Microsoft Corp rose between 1.5% and 2.5%, lifting the Nasdaq higher.
Boeing Co jumped 4.20%, buoying the Dow, after the planemaker received an order for its grounded 737 MAX jets valued at more than $24 billion at list prices.
Only the defensive utilities, real estate and consumer staples sectors were the decliners.
Advancing issues outnumbered decliners by a 3.33-to-1 ratio on the NYSE and by a 2.78-to-1 ratio on the Nasdaq.
The S&P index recorded 57 new 52-week highs and one new low, while the Nasdaq recorded 77 new highs and 33 new lows.
(Reporting by Shreyashi Sanyal and Aparajita Saxena in Bengaluru; Editing by Sriraj Kalluvila)