US STOCKS-S&P 500, Dow track second straight weekly gain on stimulus optimism

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* Investors starting to price in Biden victory – strategists

* Pelosi says stimulus talks would resume with Mnuchin

* Xilinx surges on report of buyout offer by AMD

* Materials, information technology stocks lead early gains

* Indexes up: Dow 0.61%, S&P 0.89%, Nasdaq 1.32% (Updates to early afternoon)

Oct 9 (Reuters) – Wall Street’s main indexes rose on Friday, setting up the S&P 500 and the Dow for their second straight weekly gain on hopes of more federal fiscal aid and growing expectations of a Democratic victory in next month’s presidential election.

U.S. House Speaker Nancy Pelosi said she would resume talks on a possible COVID-19 stimulus package with Treasury Secretary Steven Mnuchin later on Friday, with a report saying Mnuchin will present $1.8 trillion in counter offer.

Eight of the 11 major S&P indexes were up, led by materials and information technology. Energy stocks dipped, but were still set for their biggest weekly percentage increase since June.

“It’s hope on the part of the market that stimulus is still on the table and it believes that Trump is pushing for stimulus,” said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York.

Recent trading on Wall Street has been dictated by headlines on fiscal aid, with the three main indexes tumbling on Tuesday after Trump called off negotiations.

They have since recovered as both sides indicated they were willing to resume discussions.

Investors have also begun to digest the possibility of Democratic candidate Joe Biden winning the Nov. 3 election after a fractious debate last month led to a jump in his lead over Trump in several national polls.

“When you have a president and the leader of the House, both as Democrats, there’s a greater potential for stimulus to come somewhere later on down the road,” Pavlik said.

The S&P utilities and industrials jumped to their highest level in seven months and materials edged closer to its record high set in September.

The S&P small- and mid-cap indexes are on course to end the week with gains of about 5.5% and nearly 5%, respectively, outpacing a rise of about 3.5% in the benchmark S&P 500.

The two indexes are also on track to outperform the tech-heavy Nasdaq, which has surged since a coronavirus-driven crash in March, thanks to a narrow rally in stocks of mega-cap technology companies such as Apple Inc and Inc.

At 1:04 p.m. ET, the Dow Jones Industrial Average was up 171.99 points, or 0.61%, at 28,597.50, the S&P 500 was up 30.76 points, or 0.89%, at 3,477.59, and the Nasdaq Composite was up 150.87 points, or 1.32%, at 11,571.85.

In company news, Xilinx Inc surged 13.2% after a report said Advanced Micro Devices Inc was in talks to buy the chipmaker in a deal valued at more than $30 billion. Shares of AMD fell 4.1%.

General Electric Co jumped 3.3% as a report said Goldman Sachs reinstated coverage on the U.S. industrial conglomerate with a “buy” rating, saying the company will emerge stronger from the COVID-19 pandemic.

Advancing issues outnumbered decliners by a 1.45-to-1 ratio on the NYSE. Advancing issues outnumbered decliners by a 1.60-to-1 ratio on the Nasdaq.

The S&P index recorded 75 new 52-week highs and one new low, while the Nasdaq recorded 127 new highs and 13 new lows. (Reporting by Devik Jain and Sagarika Jaisinghani in Bengaluru; Editing by Maju Samuel)