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* Banks gain as yields rise
* Illumina tumbles on weak preliminary revenue estimate
* Altria rises on Goldman Sachs upgrade
* Futures up: Dow 0.30%, S&P 0.22%, Nasdaq 0.20%
By Shreyashi Sanyal
July 12 (Reuters) - Wall Street looked set to open higher on Friday, putting the three indexes on track to extend this week's strong run fueled by rising expectations of an interest rate cut this month.
In his two-day testimony before Congress, Federal Reserve Chairman Jerome Powell said the U.S. economy was still under threat from disappointing factory activity, tame inflation and a simmering trade war and that the central bank stood ready to "act as appropriate."
"He (Powell) has said everything he can, short of saying flat out that we are going to cut interest rates," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
"Fed fund futures were telling us for a month that was going to happen, but Powell has pretty much confirmed that's the case."
The S&P 500 index traded above the 3,000 level for a second day in a row on Thursday, with stronger-than-expected U.S. inflation data failing to shake expectations of a rate cut.
Keeping investors on edge was Beijing's threat to impose sanctions on U.S. firms that sell arms to Taiwan after Washington approved possible sales of $2.2 billion in tanks, missiles and related equipment.
In the latest evidence that the U.S.-China trade dispute was impacting growth, data showed that China's exports fell in June and imports shrank more than expected.
U.S. Treasury yields ticked higher, extending Thursday's gains after an auction of $16 billion 30-year bonds saw weak demand.
Morgan Stanley, JPMorgan Chase & Co, Goldman Sachs Group rose between 0.5% and 1.4% in premarket trading. The shares were also boosted after Citigroup raised price targets for the lenders ahead of earnings next week.
At 8:43 a.m. ET, Dow e-minis were up 81 points, or 0.3%. S&P 500 e-minis were up 6.75 points, or 0.22%, and Nasdaq 100 e-minis were up 15.5 points, or 0.2%.
Second-quarter earnings season start next week against the backdrop of warnings of the trade war hurting corporate profits. S&P 500 companies are expected to report a 0.4% dip in profits from a year earlier, according to Refinitiv IBES data.
A Labor Department report showed U.S. producer prices rose slightly in June, leading to the smallest annual increase in producer inflation in nearly 2-1/2 years.
Producer price index (PPI) for final demand edged up 0.1% last month against a forecast of unchanged PPI, according to economists polled by Reuters.
Among other stocks, gene sequencing company Illumina Inc tumbled 14.7% after its preliminary second-quarter revenue came in below estimates.
Altria Group Inc rose 1.5% on a report that Goldman Sachs upgraded the Marlboro maker's stock to "buy" from "neutral."
Ford Motor Co rose 0.8% after the automaker and Volkswagen AG joined forces to develop autonomous and electric cars. (Additional reporting by Amy Caren Daniel and Manas Mishra in Bengaluru; Editing by Sriraj Kalluvila)