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* Private firms add more jobs than expected in May
* Monthly jobs data for May expected on Friday
* Fed Governor Powell expects three rate hikes in 2017
* Palo Alto Networks rises after forecast beats expectations
* Indexes up: Dow 0.24 pct, S&P 0.39 pct, Nasdaq 0.46 pct (Updates to early afternoon)
By Sweta Singh and Tanya Agrawal
June 1 (Reuters) - U.S. stocks were higher in late afternoon trading on Thursday, with the S&P 500 and Nasdaq hitting record highs, as better-than-expected private sector hiring pointed to strength in the labor market.
The ADP private sector employment report showed that 253,000 jobs were added in May, well above the 185,000 jobs estimated by economists polled by Reuters.
The report acts as a precursor to the much-awaited nonfarm payrolls data, due on Friday, that includes hiring in both public and private sectors.
"The ADP numbers were good today and often times, but not always, they are a good indication of the monthly jobs data," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
Another report showed factory activity ticked up in May, after slowing for two straight months, and suggested the economy was regaining speed after struggling at the start of the year.
San Francisco Federal Reserve Bank President John Williams said on Wednesday that while he sees three interest rate hikes this year as his baseline scenario, four rate increases would also be appropriate if the economy got an unexpected boost.
Fed Governor Jerome Powell, an influential policymaker, told CNBC that he expects three rate hikes this year.
Forecasts from Fed officials suggest that a median of two more hikes are planned before the end of the year.
Traders priced in a 96 percent chance of a rate hike in the upcoming Fed meeting on June 14, and a 50 percent chance of a hike before the end of 2017, according to CME Group's FedWatch tool.
At 12:33 p.m. ET (1633 GMT), the Dow Jones Industrial Average was up 50.22 points, or 0.24 percent, at 21,058.87.
The S&P 500 was up 9.43 points, or 0.39 percent, at 2,421.23. It had hit a record of 2421.88.
The Nasdaq Composite was up 28.42 points, or 0.46 percent, at 6,226.94, slightly easing from its all-time high of 6228.18.
Nine of the 11 major S&P 500 sectors were higher, with the health and materials sectors leading the gainers.
Deere's shares were up 2.1 percent at $125.08 after the farm and construction major said it would buy privately held German road construction company Wirtgen Group for $5.2 billion, including debt.
Hewlett Packard Enterprise fell 6 percent to $17.67 after the company reported a steep fall in its quarterly revenue.
Palo Alto Networks jumped as much as 18 percent to a more than four-month high of $139.97 after the cybersecurity company's profit forecast topped expectations.
Advancing issues outnumbered decliners on the NYSE by 2,261 to 589. On the Nasdaq, 2,101 issues rose and 669 fell.
The S&P 500 index showed 28 new 52-week highs and 11 new lows, while the Nasdaq recorded 82 new highs and 70 new lows. (Reporting by Sweta Singh and Tanya Agrawal in Bengaluru; Editing by Saumyadeb Chakrabarty and Anil D'Silva)