US STOCKS-S&P 500 drifts near peak as tech losses weaken Fed-powered surge

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* Walmart teams up with Microsoft for TikTok bid

* Dow briefly turns positive on the year

* Boeing rises as European regulator to begin 737 Max tests

* Indexes mixed: Dow up 0.56%, S&P flat, Nasdaq down 0.64% (Updates to early afternoon)

Aug 27 (Reuters) - The S&P 500 hovered near record level on Thursday as a rally in technology stocks lost steam, weakening the momentum gained from the Federal Reserve’s plan to allow inflation in a bid to lift the U.S. economy out of a deep pandemic-driven recession.

Rolling out the central bank’s aggressive new strategy at a virtual Jackson Hole symposium, Fed chief Jerome Powell said it would offset below-2% periods with higher inflation “for some time,” and ensure employment doesn’t fall short of its maximum level.

“The strategy should be positive in the short term as it could reduce the potential for interest rate hikes,” said Nancy Davis, chief investment officer at Quadratic Capital Management LLC in Greenwich, Connecticut.

“At the same time, the statement acknowledges that Fed ‘has less scope to support the economy during a downturn by simply cutting the federal funds rate’.”

Rate-sensitive bank stocks jumped 2.5% as the Fed’s move steepened the U.S. Treasuries yield curve.

Losses in tech-focused Apple Inc, Netflix Inc Inc and Facebook Inc weighed on the S&P 500 and the Nasdaq.

Both the indexes have recovered their pandemic losses even as the U.S. economy struggles with its worst downturn since the Great Depression.

Data on Thursday showed weekly jobless claims hovered around 1 million last week, suggesting the labor market recovery was stalling.

At 13:18 a.m. ET, the Dow Jones Industrial Average was up 158.42 points, or 0.56%, at 28,490.34. The blue-chip index briefly turned positive on the year during the session.

The S&P 500 was up 2.15 points, or 0.06%, at 3,480.88 and the Nasdaq Composite was down 74.47 points, or 0.64%, at 11,590.59.

Walmart Inc jumped 5.3% after the retail giant said it was partnering with Microsoft Corp in the software maker’s bid to buy Bytedance-owned TikTok. Microsoft rose 2.2%.

Boeing Co rose 1.7% after the European Union Aviation Safety Agency announced plans to begin flight tests of its 737 MAX plane, a move viewed as a key milestone toward its return to service.

Advancing issues outnumbered decliners by a 1.00-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.47-to-1 ratio on the Nasdaq.

The S&P index recorded 37 new 52-week highs and no new low, while the Nasdaq recorded 57 new highs and 18 new lows. (Reporting by Medha Singh and Devik Jain in Bengaluru; Editing by Saumyadeb Chakrabarty, Sagarika Jaisinghani and Arun Koyyur)