S&P 500, Dow hit new highs ahead of index reshuffle

By Stephen Culp

NEW YORK (Reuters) - The S&P 500 and Dow reached record highs on Friday ahead of Monday's major sector reshuffle, capping a week that largely shrugged off trade worries.

Trading volume was expected to spike in anticipation of the S&P 500 sector change, when telecom will be folded into a new sector called communications services, along with heavy-hitting stocks such as Amazon.com, Facebook Inc and Walt Disney Co.

The S&P 500 and the Dow were up, with the tech-heavy Nasdaq losing ground. All three were on track to post their second consecutive weekly gains, with the blue-chip Dow on its way to its best weekly percentage gain in over two months.

"Quadruple witching," when stock options and futures expire, and the S&P 500 and the Russell 2000 rebalance of their indexes, were also seen contributing to heavier trading traffic.

"There's a long going on," said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. "Index funds have gotten an early jump on some of these changes...so they might not get caught up in all the volatility that might normally occur."

"There could be a late spike in volume because of all these index changes occurring," Ghriskey added.

Boeing Co, United States' biggest exporter to China, led trade-sensitive industrials higher. The sector headed up gains by the S&P 500 and the Dow.

Yields on long-dated U.S. Treasuries edged down on Brexit anxieties even as the U.S. Federal Reserve is expected to hike key interest rates next week. Financial stocks headed lower, ending their recent rally.

The Dow Jones Industrial Average rose 78.46 points, or 0.29 percent, to 26,735.44, the S&P 500 gained 3.04 points, or 0.10 percent, to 2,933.79 and the Nasdaq Composite dropped 18.66 points, or 0.23 percent, to 8,009.58.

Telecoms rose 1.4 percent on its last trading day as a discrete major S&P sector, and was the index's biggest percentage gainer.

The advance was led by AT&T Inc, which rose 1.7 percent following a UBS upgrade to "buy."

All of the FAANG group of momentum stocks were trading lower. The group includes Facebook, Apple Inc, Amazon.com, Netflix Inc and Google-parent Alphabet Inc.

Shares of security and alarm company ADT Inc jumped for a second straight session and was last up 6.2 percent as Amazon.com introduced its new Alexa Guard service which could notify ADT of disturbances in the home.

McDonald's Corp was up 2 percent after announcing it would hike its quarterly dividend by 15 percent.

Under Armour Inc rose 3 percent following JPMorgan Chase's upgrade.

A 3.6 percent drop in shares of Micron led chipmakers lower after the company said U.S. tariffs on Chinese goods would weigh on its financial results for as much as a year.

Shares of Pier 1 Imports Inc plummeted 20.4 percent after the home furnishings retailer cut its second-quarter forecasts.

Advancing issues outnumbered declining ones on the NYSE by a 1.29-to-1 ratio; on Nasdaq, a 1.20-to-1 ratio favored decliners.

The S&P 500 posted 53 new 52-week highs and no new lows; the Nasdaq Composite recorded 49 new highs and 31 new lows.

(Reporting by Stephen Culp; Editing by Chizu Nomiyama)