* Trump Media, crypto stocks, prison operators jump
* Goldman Sachs rises after results
* Macy's falls after ending discussions with Arkhouse and Brigade
NEW YORK, July 15 (Reuters) - Wall Street closed higher on Monday, building on Friday's rally as increasing expectations of a second Donald Trump presidency in the wake of a failed assassination attempt raised hopes of a looser regulatory environment.
The growing probability that the U.S. Federal Reserve will begin cutting its key interest rate as soon as September also helped feed risk appetite.
All three major U.S. stock indexes ended well below session highs.
Economically sensitive small caps and transportation stocks handily outperformed the broader market.
An assassination attempt in Pennsylvania on Saturday of Trump, the presumptive Republican nominee for president, appeared to improve his chances for election. A Trump presidency would presumably result in a more hawkish trade policy, an extension of tax cuts and deregulation in a host of areas ranging from climate change to cryptocurrencies.
Online betting site PredictIt showed bets of an election win at 67 cents for Trump, up from Friday's 60 cents, with a victory for Democratic U.S. President Joe Biden at 26 cents.
"The headline event - the attempted assassination of Donald Trump - did not result in a bottom line event," said Sam Stovall, chief investment strategist of CFRA Research in New York. "There's no change to GDP forecasts, no change to expectations that the Fed will start to cut rates in September, corporate profits are coming in ahead of expectations."
"So the momentum in the market remains based on investor optimism," Stovall added.
Sentiment was also buoyed by ongoing optimism that the U.S. Federal Reserve will enter its expected interest rate cutting phase as early as September, with as many as three total cuts by the end of the year.
"A September (rate) cut has been all but cemented," said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. "We're sitting almost exactly where we were seven months ago, which is the promise of Fed rate cuts without a recession. It’s still very much predicated to the Fed coming to the party."
Speaking before the Economic Club of Washington, Fed Chair Jerome Powell reiterated on Monday his belief that the U.S. economy can avoid recession, and recent data readings show progress in bringing inflation down to the central bank's 2% goal. According to preliminary data, the S&P 500 gained 17.12 points, or 0.30%, to end at 5,632.47 points, while the Nasdaq Composite gained 77.41 points, or 0.42%, to 18,475.86. The Dow Jones Industrial Average rose 221.30 points, or 0.55%, to 40,222.20.
Goldman Sachs' shares rose after its second-quarter profit more than doubled, beating analyst estimates on solid debt underwriting and fixed-income trading.
Shares of Macy's Inc tumbled following the department store's decision to scrap buyout talks with Arkhouse Management and Brigade Capital.
The prospect of a second Trump presidency sent shares of Trump Media & Technology Group soaring.
Crypto stocks also fared well, with Coinbase Global , Marathon Digital Holdings and Riot Platforms notching solid gains.
Other stocks expected to benefit from a possible Trump presidency climbed, including gunmaker Smith & Wesson and prison operator GEO Group.
On the downside, solar energy firms slid as the prospect of Trump's election dimmed prospects for renewable energy U.S. subsidies.
U.S.-listed shares of Chinese companies also declined on fears of tightened trade restrictions under another Trump administration. (Reporting by Stephen Culp in New York Additional reporting by Lisa Mattackal and Ankika Biswas in Bengaluru Editing by Shinjini Ganguli and Matthew Lewis)
