* Indexes down: Dow 0.36%, S&P 500 0.88%, Nasdaq 1.7%

* Zebra Technologies ( ZBRA ) jumps on annual sales growth

forecast raise

* US consumer prices increase further in April

(Updates with afternoon levels)

By Ragini Mathur and Utkarsh Hathi

May 12 (Reuters) - The S&P 500 and the Nasdaq pulled

back from record highs on Tuesday, with technology stocks

leading declines, after a hotter-than-expected inflation report

and stalled efforts to resolve the Middle East conflict weighed

on sentiment.

U.S. consumer prices rose at a brisk pace for a second

straight month in April, pushing annual inflation to its highest

level in nearly three years and reinforcing expectations that

the Federal Reserve will keep interest rates unchanged for

longer.

While a strong earnings season has helped underpin market

sentiment in recent weeks, investors remained on edge as

negotiations between Washington and Tehran have shown little

sign of progress.

President Donald Trump said a ceasefire with Iran was "on

life support" after Tehran rejected a U.S. proposal to end the

conflict, keeping crude prices elevated and fueling inflation

worries.

"The market is now looking at the Fed and saying the next move,

if there is one, it might be a hike, not a cut. And that

certainly would be a change of framework for the markets," said

Scott Welch, chief investment officer of Certuity.

Ahead of the war, traders had expected two rate cuts, per

CME Group's FedWatch Tool, but currently expect the Federal

Reserve to keep interest rates steady through the end of the

year.

At 12:30 p.m. ET, the Dow Jones Industrial Average

fell 177.42 points, or 0.36%, to 49,527.05, the S&P 500

lost 65.48 points, or 0.88%, to 7,347.36 and the Nasdaq

Composite lost 448.73 points, or 1.71%, to 25,825.79.

Technology stocks were a big drag on the markets

on Tuesday, with chip stocks that have skyrocketed in recent

days falling sharply.

The Philadelphia SE Semiconductor index tumbled almost 6%

but still remained up about 50% so far this quarter. The sector

was also knocked by news that South Korea's presidential policy

adviser Kim Yong-beom floated an idea of "citizens dividend", as

he argued in a social media post that excess earnings in the era

of AI should be redistributed to all citizens.

"There's been such a remarkable rally in the semiconductor

and mega cap tech stocks over the last several weeks, that I

think investors are starting to take some profits," Welch added.

Intel ( INTC ) tumbled 9.7% after climbing more than 17%

over the previous two sessions, while Qualcomm ( QCOM ) dropped

13.7% after hitting a record high on Monday.

Looking ahead, markets are keeping a close eye on Trump's

visit to China, which begins on Wednesday, with expectations low

for progress on Iran or on the trade front.

Among other movers, Zebra Technologies ( ZBRA ) jumped 16.8%

after the barcode scanner maker raised its annual sales growth

forecast, betting on robust demand for its products that help

automate manufacturing workflows.

Hims & Hers Health ( HIMS ) tumbled 15.2% after the telehealth

firm missed Wall Street estimates for first-quarter revenue and

posted a surprise loss.

Declining issues outnumbered advancers by a 2.84-to-1 ratio on

the NYSE, and by a 2.76-to-1 ratio on the Nasdaq.

The S&P 500 posted 11 new 52-week highs and 28 new lows

while the Nasdaq Composite recorded 43 new highs and 126 new

lows.