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* Microsoft gains on $40 bln share buyback plan
* Oil stocks track recovery in crude prices
* U.S.-China low-level trade talks resume on Thursday
* Indexes up: Dow 0.19%, S&P 0.23%, Nasdaq 0.40% (Updates to open)
By Ambar Warrick and Medha Singh
Sept 19 (Reuters) - Gains in Microsoft shares pushed the benchmark S&P 500 within striking distance of its record high, a day after the Federal Reserve cut interest rates as expected but played down hopes of further monetary easing.
The software giant's plans to buy back $40 billion in shares also boosted the Dow and the Nasdaq, while driving a 0.7% gain in the wider technology sector.
The three main Wall Street indexes have recovered all their losses from August, when renewed U.S.-China trade fears and the prospect of a looming recession had led U.S. stock markets to record their second monthly decline of 2019.
The S&P 500 is now just 10 points shy of an all-time high of 3,027.98 hit in July.
Energy stocks rose 0.2% on the back of higher oil prices, which were supported by supply risks as the market assesses the fallout from last weekend's drone attacks on Saudi oil infrastructure.
On Wednesday, the Fed announced a quarter percentage point cut in interest rates, but Chair Jerome Powell said future reductions would be "largely data-dependent".
New projections showed policymakers at the median expected rates to stay within the new range through 2020. However, traders still see a 42.8% chance of another quarter percentage point cut in October, according to CME Group's FedWatch tool.
"I think the Fed essentially left the door open to do whatever is necessary," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin.
"It all depends on what happens with economic data and the (U.S.-China) trade discussions over the next six weeks or so," he said.
Fresh economic data showed U.S. current account deficit narrowed sharply in the second quarter, while a reading on the Philadelphia Fed business activity index clocked in at 12 for September, slightly above expectations of 11.
U.S. and Chinese deputy trade officials are set to resume face-to-face talks on Thursday for the first time in nearly two months, aiming to lay the groundwork for high-level negotiations planned in early October.
At 9:54 a.m. ET, the Dow Jones Industrial Average was up 51.07 points, or 0.19%, at 27,198.15 and the Nasdaq Composite was up 32.42 points, or 0.40%, at 8,209.81.
Shares of retailer Target Corp edged 0.4% higher after it announced a $5 billion share buyback plan and a quarterly dividend.
Content delivery network provider Akamai Technologies Inc was down 1.5% after KeyBanc analysts downgraded the stock to "sector weight" from "over weight".
Darden Restaurants Inc slipped 3.8% as the restaurant chain operator's quarterly sales missed analysts estimates.
Advancing issues outnumbered decliners by a 1.95-to-1 ratio on the NYSE and a 1.38-to-1 ratio on the Nasdaq.
The S&P index recorded 15 new 52-week highs and no new low, while the Nasdaq recorded 23 new highs and 13 new lows. (Reporting by Ambar Warrick and Medha Singh in Bengaluru; Editing by Anil D'Silva)