* PBMs rise after White House kills rebate rule
* Biotechs, drugmakers drag on healthcare sector
* Fed's Powell resumes testimony before Congress
* Indexes up: Dow 0.74%, S&P 0.22%, Nasdaq 0.19% (Updates to early afternoon)
By Medha Singh
July 11 (Reuters) - U.S. stocks rose on Thursday on improved bets of an interest rate cut following Fed chief Jerome Powell's dovish remarks, while healthcare stocks were mixed after the Trump administration withdrew a rule that would kill rebates.
Shares of pharmacy benefit managers gained as the news meant these companies would continue to benefit from after-market discounts from drugmakers. Health insurers and drug distributors also rose.
A 5.16% gain in UnitedHealth Group Inc helped the Dow Industrials break above 27,000 points for the first time. Cigna Corp surged more than 11%, leading gains in the S&P 500 index, while drug distributors such as McKesson Corp rose 1.2%.
However, drugmakers such as Merck & Co Inc and Pfizer Inc dropped at least 3% each and the Nasdaq biotech index slipped 1.47%.
The lack of progress in Washington suggests that the healthcare industry will face ongoing political pressure, including legislative risks, Morgan Stanley analyst David Risinger said in a note.
"We see no solution to the challenges drug manufacturers face regarding growing rebates."
The healthcare index, which is the worst performing S&P sector this year, was off 0.26%. Six of the 11 major S&P sectors were higher.
Stock markets were also supported by dovish comments from Powell, who on the first of his two days of testimony before Congress said on Wednesday that the central bank stood ready to "act as appropriate" to support record U.S. economic growth. He began the second day of his testimony on Thursday.
"It seems like they (Fed) are getting closer to a decision point where they are more willing to openly communicate the possibility or the likelihood of a rate cut and the market is just taking that in," said Jason Pride, chief investment officer of private wealth at Glenmede in Philadelphia.
At 12:51 p.m. ET, the Dow Jones Industrial Average was up 197.97 points, or 0.74%, at 27,058.17, the S&P 500 was up 6.58 points, or 0.22%, at 2,999.65 and the Nasdaq Composite was up 15.21 points, or 0.19%, at 8,217.74.
Iron Mountain slumped 7.5% after Bank of America Merrill Lynch downgraded the document storage company's shares to "underperform", citing recent declines in recycled paper pricing.
A Labor Department report showed U.S. underlying consumer prices rose by the most in nearly 1-1/2 years in June, but that was unlikely to change expectations the Fed would cut rates this month.
Advancing issues outnumbered decliners by a 1.04-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.19-to-1 ratio on the Nasdaq.
The S&P index recorded 43 new 52-week highs and three new lows, while the Nasdaq recorded 70 new highs and 41 new lows. (Reporting by Medha Singh and Manas Mishra in Bengaluru; Editing by Shounak Dasgupta and Maju Samuel)