* Indexes up: Dow 0.52%, S&P 500 0.50%, Nasdaq 0.60%

* February PCE at 2.8% on annual basis, meets estimates

* Constellation Brands ( STZ ) jumps after smaller drop in Q4

sales

(Updates with late morning trade, Israel- Lebanon truce talks)

By Avinash P and Purvi Agarwal

April 9 (Reuters) - Wall Street's main indexes gained

broadly across sectors on Thursday as investors assessed

developments in the Middle East conflict that improved risk

appetite.

Israeli Prime Minister Benjamin Netanyahu said he has

instructed Israel to begin peace talks with Lebanon that would

also include the disarming of Hezbollah.

The comments follow Iran's warning that no peace deal could

be reached unless Israel ceased bombings on Lebanon, putting

President Donald Trump's fragile two-week ceasefire with Iran

into jeopardy.

Following the news, oil prices slipped by more than $4 a

barrel, after gaining earlier in the session, with the S&P 500

energy index down 1.2%

"The truce may have bought some time, but it does not fully

remove the risk of renewed escalation," said analysts led by Dr.

Murat Ulgen, global head of macro strategy at HSBC.

"If the ceasefire breaks down, markets would quickly have to

reprice back towards a more persistent supply shock, especially

if renewed disruption keeps the Strait of Hormuz effectively

closed," said Ulgen.

At 12:40 p.m. ET, the Dow Jones Industrial Average

rose 247.66 points, or 0.52%, to 48,155.97, the S&P 500

gained 33.67 points, or 0.50%, to 6,816.48 and the Nasdaq

Composite gained 134.55 points, or 0.60%, to 22,770.06.

Consumer discretionary stocks led broader gains on the S&P

500, supported by a 4.3% gain in Amazon.com ( AMZN ) after its

CEO said AI services at its cloud-computing unit were generating

annualized revenue of over $15 billion.

Technology stocks on the S&P 500 pared declines to

trade flat. Software stocks, however, were still under pressure

with the iShares Expanded Tech-Software ETF down 4.2%.

"The Iran conflict happened and software stocks didn't sell

off as much as others... maybe there's just some profit-taking

and repositioning in those names," said Dustin Thackeray,

partner and head of portfolio management at Crewe Advisors.

Gains in Caterpillar ( CAT ) and Honeywell ( HON ) countered

declines in Salesforce ( CRM ) and IBM ( IBM ), buoying the Dow.

The moves come a day after the S&P 500 and Nasdaq marked

their biggest one-day jumps in over a week, and the Dow in a

year.

Meanwhile, data showed U.S. inflation increased as expected

in February and likely rose further in March amid the Iran war,

while economic growth slowed more than previously estimated in

the fourth quarter.

Friday's consumer prices index number for March will grab

the spotlight as investors wait to see the economic impact of

elevated oil prices stemming from the conflict.

Money market participants are expecting only about 30%

chances of a 25 basis-point interest rate cut by end-2026,

compared with a 56% chance a day ago, per LSEG-compiled data.

They expected two cuts this year before the war broke out,

while bets for a rate hike in December had also risen during the

conflict.

Among other movers, Constellation Brands ( STZ ) jumped 7.3%

after the Corona beer maker posted a smaller-than-expected drop

in fourth-quarter sales.

Brown-Forman ( BF/A ) jumped 11.7% after a report said

alcoholic beverage maker Sazerac is exploring a deal with the

Jack Daniel's maker.

Advancing issues outnumbered decliners by a 1.77-to-1 ratio

on the NYSE and by a 1.29-to-1 ratio on the Nasdaq.

The S&P 500 posted 42 new 52-week highs and 19 new lows

while the Nasdaq Composite recorded 117 new highs and 119 new

lows.

(Reporting by Purvi Agarwal, Avinash P and Sruthi Shankar in

Bengaluru; Editing by Shinjini Ganguli and Devika Syamnath)