(Reuters) -The benchmark S&P 500 and the Nasdaq gained on Thursday after softer-than-anticipated producer prices data soothed investor jitters about sticky inflation, keeping hopes of rate cuts from the U.S. Federal Reserve this year alive.

A Labor Department report showed the Producer Price Index(PPI) for final demand rose 0.2% in March, against forecasts of a 0.3% increase, according to economists polled by Reuters. Annually, it rose to 2.1%, versus an estimate of 2.2%.

"The producer prices came in a little bit better than expected and it was really a surprise, given the rise that we've seen in commodity prices and a lot of input prices," said Paul Nolte, senior wealth advisor and market strategist for Murphy & Sylvest.

"Some of this will flow through to PCE in a couple weeks, so the PCE might be a little bit better than expected."

A separate report showed the number of Americans filing new claims for unemployment benefits came in at 211,000 for the week ended April 6, against an estimate of 215,000.

Wall Street sold off sharply in the last session after data showed U.S. consumer prices increased more than expected in March, leading the financial markets to surmise that the central bank might delay cutting interest rates until September this year.

Several brokerages have shifted their rate-cut outlooks, with UBS Global Wealth Management now expecting the Fed to start cutting interest rates in September, compared to June earlier, while BNP Paribas anticipates the first cut in July.

Yields across government bonds eased after Wednesday's spike, with the 10-year note last at 4.5314%.

Futures contracts that settle to the central bank's policy rate still point to the Fed's September meeting as the most likely starting point to rate cuts.

However, traders now see nearly even chances that the Federal Reserve will cut rates in its late-July meeting.

Investors will also watch for comments from Richmond Fed President Thomas Barkin and Atlanta Fed President Raphael Bostic for hints on the central bank's rate trajectory.

The first-quarter earnings season will pick up pace on Friday, when a trio of big banks - JPMorgan Chase & Co, Citigroup and Wells Fargo - is slated to post quarterly results.

At 9:38 a.m. ET, the Dow Jones Industrial Average was down 10.58 points, or 0.03%, at 38,450.93, the S&P 500 was up 5.24 points, or 0.10%, at 5,165.88, and the Nasdaq Composite was up 61.00 points, or 0.38%, at 16,231.36.

Of the 11 S&P 500 sectors, five ticked higher, with information technology leading advances with a 0.5% gain.

Among single stocks, biotech firm Alpine Immune Sciences is set to be acquired by Vertex Pharmaceuticals for about $4.9 billion in cash, both companies said. Alpine surged 36.4%.

Advancing issues outnumbered decliners by a 1.86-to-1 ratio on the NYSE and by a 1.70-to-1 ratio on the Nasdaq.

The S&P index recorded two new 52-week highs and two new lows, while the Nasdaq recorded 19 new highs and 24 new lows.