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CPI numbers show inflation eased in June

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Indexes: Dow up 0.15%, S&P down 0.74%, Nasdaq down 1.58%

(Updated at 12:12 pm ET/1612 GMT)

By Lisa Pauline Mattackal and Ankika Biswas

July 11 (Reuters) -

The Nasdaq and the S&P 500 fell from record highs on

Thursday, weighed by megacap stocks, as investors favored

small-caps after a softer-than-expected inflation reading

bolstered hopes that the U.S. central bank would cut interest

rates in September.

A Labor Department report showed

U.S. consumer prices

fell unexpectedly and the annual increase was the smallest

in a year, reinforcing the view that the disinflation trend was

back in play.

The data is a welcome sign for Federal Reserve

policymakers seeking evidence that inflation is back on track to

their 2% goal, leading traders to

increase bets

on a September rate cut.

Despite the positive news on the inflation front,

megacap stocks slumped, with Apple ( AAPL ), Microsoft ( MSFT ),

Alphabet and Nvidia ( NVDA ) down between 2.6% and

4.9%.

However, the Russell 2000, which has

significantly lagged the benchmark index this year, jumped 3.1%

to an over three-month high, on expectations that interest-rate

cuts would improve conditions for smaller companies.

Wall Street's rally this year has primarily been driven

by its largest stocks, with other sections of the market

underperforming, leading some to question whether such narrow

gains could be sustained.

"We've said for some time that the concentration (in

tech) was getting really extreme. If the Fed is now shifting

tack from tightening to loosening, eventually that should mean

brighter economic days ahead and a rotation away from this

narrow group of companies to a wider berth of opportunities,"

said Sameer Samana, senior global markets strategist at Wells

Fargo Investment Institute.

The S&P 500 Real Estate Index jumped 2.7%,

topping sectoral gainers and trimming its year-to-date losses to

under 1%. Communication Services and Information

Technology lost over 2.4% each.

The S&P 500 and the Nasdaq scaled fresh record highs in

range-bound trading when markets opened.

Among headlining stocks, Delta Air Lines ( DAL ) slumped

5.3%, on track for its biggest one-day fall since mid-January,

after forecasting lower-than-expected profits in the current

quarter.

Other major airline stocks also tumbled, with an index

of S&P 500 passenger airline companies falling 4.1%.

"This might be a place where consumers are getting

pinched by inflation. That's showing up in discretionary funding

on things like air tickets," said Scott Helfstein, head of

investment strategy at Global X.

Investors will now look ahead to the Producer Price

Index reading for insights into the inflation trajectory, along

with second-quarter earnings from big banks, both due on Friday.

At 12:12 p.m. ET, the Dow Jones Industrial Average

was up 58.88 points, or 0.15%, at 39,780.24, the S&P 500

was down 41.57 points, or 0.74%, at 5,592.34, and the

Nasdaq Composite was down 293.95 points, or 1.58%, at

18,353.50.

Tesla slumped over 6% after a report the EV

maker was delaying the launch of its Robotaxi, while Citigroup ( C/PN )

slipped 1.6% after U.S. bank regulators fined the lender

$136 million.

Conagra Brands ( CAG ) fell 2.6% after the packaged

foods maker forecast annual revenue and profit below estimates.

Advancing issues outnumbered decliners by a 5.30-to-1

ratio on the NYSE, and by a 3.00-to-1 ratio on the Nasdaq.

The S&P 500 index recorded 47 new 52-week highs and one

new low, while the Nasdaq recorded 126 new highs and 34 new

lows.