US STOCKS-Wall Street rises sharply as dollar loses ground

* Dollar falls to a near 4-month low

* S&P 500 on track to record-high close

* Avon spikes on purported offer; company denies receiving offer

* Indexes up: Dow 1 pct, S&P 1 pct, Nasdaq 1.3 pct (Updates to mid-afternoon)

By Noel Randewich

May 14 (Reuters) - U.S. stocks rose sharply on Thursday afternoon and the S&P 500 was on track for a record-high close as a weaker dollar offered the possibility of stronger sales for U.S. multinationals.

The dollar moved to its lowest since January against a basket of currencies of major U.S. trading partners - good news for companies that have large foreign sales.

A report showing a dip in initial claims for state unemployment benefits last week did little to change broad expectations that the U.S. Federal Reserve would not increase interest rates before the second half of 2015 at the earliest.

The S&P 500 was on track to break its all-time high closing level of 2,108.92 set on April 24.

"There's a 50-50 chance they're not going to raise rates this year, so why are we spending two years discussing this? Let's focus on the fact that the economy is doing okay," said Steve Goldman, principal of Goldman Management in Short Hills, New Jersey. "The path of least resistance is higher."

Wall Street's top banks expect the Federal Reserve to begin raising interest rates in September, according to a Reuters poll last week.

At 2:41 p.m., the Dow Jones industrial average rose 178.54 points, or 0.99 percent, to 18,239.03.

The S&P 500 gained 20.43 points, or 0.97 percent, to 2,118.91 and the Nasdaq Composite added 63.43 points, or 1.27 percent, to 5,045.12.

All of the 10 major S&P 500 sectors were higher, with the tech index's 1.57 percent rise leading the way. Apple (Swiss: AAPL.SW - news) shares rose 2.22 percent, making the stock the biggest driver on both the Nasdaq and S&P 500.

Apple (NasdaqGS: AAPL - news) 's quarterly dividend, which many shareholders reinvest, was payable on Thursday.

Avon Products (NYSE: AVP - news) briefly jumped as much as 27.4 percent after a regulatory filing from a firm said it had offered to buy the cosmetics company for nearly three times its market value. Avon said it had not received an offer.

Shake Shack (NYSE: SHAK - news) rose 3.01 percent to $70.42 after the hamburger chain reported a surprise adjusted quarterly profit. The stock debuted in January at a listing price of $21.

Advancing issues outnumbered declining ones on the NYSE by 2,350 to 703, for a 3.34-to-1 ratio on the upside; on the Nasdaq, 1,937 issues rose and 783 fell for a 2.47-to-1 ratio favoring advancers.

The benchmark S&P 500 index was posting 27 new 52-week highs and 5 new lows; the Nasdaq Composite was recording 87 new highs and 24 new lows. (Editing by Saumyadeb Chakrabarty)