Nasdaq, S&P gain on megacap boost in lead up to inflation report

The S&P 500 and the Nasdaq rose on Tuesday as most megacap stocks gained, with focus now moving to key inflation data later this week that could provide more clarity on the extent of the Federal Reserve's expected interest rate cut on Sept. 18.

Apple fell 1.6%, with China's Huawei launching a tri-fold smartphone hours after the debut of a new iPhone.

The iPhone maker also lost its fight against an order by EU competition regulators to pay 13 billion euros ($14.34 billion) in back taxes to Ireland.

EV maker Tesla rose 2.2%, leading gains among megacaps and growth stocks.

Nine of the 11 major S&P 500 sectors were trading higher, with consumer discretionary and communication services leading gains.

Wall Street's main indexes had recorded gains of more than 1% on Monday as investors looked for bargains following a week of steep losses.

The focus this week continues to be on the August inflation reading on Wednesday that is likely to show a slight moderation in the headline number to 2.6% on a year-on-year basis, while it is expected to remain unchanged at 0.2% on month.

"If we get an inflation report that is too hot that may cause concern, or if it is too soft you may see markets respond negatively because that's going to increase the recession risk," said Erik Knutzen, multi-asset chief investment officer at Neuberger Berman.

On Thursday, the producer prices report will follow the CPI data.

Money markets are all but convinced that the U.S. central bank will begin its policy easing cycle later this month, with a 73% chance of a 25-basis point cut and a total easing of 100 bps by the end of 2024, according to CME's FedWatch Tool.

Later on Tuesday, Philadelphia will be center stage when Kamala Harris and Donald Trump meet in a highly anticipated televised debate that could weigh heavily on the November election. The two, who have never met in person, will square off at 9 p.m. ET (0100 GMT) for a 90-minute debate hosted by ABC News.

At 09:39 a.m. ET, the Dow Jones Industrial Average rose 5.86 points, or 0.01%, to 40,835.45, the S&P 500 gained 14.37 points, or 0.26%, to 5,485.42, and the Nasdaq Composite gained 40.82 points, or 0.24%, to 16,925.42.

Oracle jumped 11.2% after beating estimates for quarterly results and forecast second-quarter revenue growth above expectations.

Wells Fargo gained 1.6% after Chief Financial Officer Mike Santomassimo at an industry conference said overall deposits are performing well.

Hewlett Packard Enterprise dropped 7.8% after the AI server maker announced a $1.35 billion mandatory convertible preferred stock offering to fund its acquisition of Juniper Networks.

Advancing issues outnumbered decliners for a 1.07-to-1 ratio on the NYSE, while declining issues outnumbered advancers for a 1.14-to-1 ratio on the Nasdaq.

The S&P 500 posted 22 new 52-week highs and seven new lows, while the Nasdaq Composite recorded 16 new highs and 58 new lows.