(Updates with closing prices)

* Indexes up: Dow 0.02%, S&P 500 0.38%, Nasdaq 0.90%

* June CPI lands below consensus

* JPMorgan ( JPM ) rises on higher Q2 profit

* Goldman Sachs ( GS ) jumps as Q2 profit tops estimates

* IBM ( IBM ) tumbles after forecasting Q2 revenue below estimates

By Stephen Culp and Avinash P

NEW YORK, July 14 (Reuters) - The S&P 500 and the Nasdaq

advanced on Tuesday as solid big bank results and a

cooler-than-expected inflation report boosted risk appetite amid

rising Middle East tensions.

A rebound in chip shares put the Nasdaq out front,

while the Dow's gains were more subdued.

The Labor Department's Consumer Price Index showed inflation

cooled more than analysts expected in June, largely due to

abating energy price pressures amid last month's signs of

progress in U.S.-Iran peace negotiations.

U.S. Federal Reserve Chair Kevin Warsh sat for his first

congressional testimony since his confirmation, in part to lay

out the central bank's plan to contain upward price pressures.

Warsh's testimony occurred while the battle for control over the

Strait of Hormuz has led to ramped-up airstrikes between the

United States and Iran and boosted crude oil prices, reviving

fears of upward price pressures.

Still, following the CPI report, financial markets were

pricing in an 83.4% likelihood that the Fed will let its key

interest rate stand at the conclusion of its July policy

meeting, up from 58.3% on Monday. Markets expect at least one

25-basis-point rate hike before year-end, according to CME's

FedWatch tool.

"The inflation report seems to have weakened the argument

that the Fed is going to raise rates," said Chuck Carlson, chief

executive at Horizon Investment Services in Hammond, Indiana.

"It gives the Fed cover, for now."

"(Warsh) is saying we can bring down inflation, and that's

what the people he was speaking to want to hear," Carlson added.

"And maybe inflation is going to come down without having to

raise rates."

EARNINGS SEASON KICKS OFF

Second-quarter earnings season began with five big U.S. banks

reporting solid results, buoyed by trading strength and

dealmaking.

Goldman Sachs ( GS ) surged 9% after it surpassed second-quarter

profit expectations, as dealmaking picked up pace and

geopolitical uncertainties boosted its trading business.

JPMorgan Chase ( JPM ) and Bank of America ( BAC ) advanced 2.5%

and 1.9%, respectively, after delivering consensus-beating

profits.

Citigroup ( C ) slid 5.3% as worries over expenses overshadowed

its profit beat, while Wells Fargo ( WFC ) dropped 2.7%.

"It's a big earnings week, so we finally get to hear from

corporate America," said Tom Hainlin, national investment

strategist at U.S. Bank Asset Management in Minneapolis. "What

we continue to look for from the banks is what are they seeing

in terms of consumer health? So far, good news on that front."

IBM ( IBM ) shares tumbled 25.2% after the company warned

second-quarter revenue would fall below estimates.

The Dow Jones Industrial Average rose 10.02 points,

or 0.02%, to 52,508.66, the S&P 500 gained 28.55 points,

or 0.38%, to 7,543.89 and the Nasdaq Composite gained

233.83 points, or 0.90%, to 26,107.01.

Among the 11 major sectors of the S&P 500, tech shares

registered the biggest percentage gain, while

healthcare stocks were the biggest laggards.

Advancing issues outnumbered decliners by a 1.78-to-1 ratio

on the NYSE. There were 205 new highs and 108 new lows on the

NYSE.

On the Nasdaq, 2,651 stocks rose and 2,103 fell as advancing

issues outnumbered decliners by a 1.26-to-1 ratio.

Volume on U.S. exchanges was 16.38 billion shares, compared

with the 21.66 billion average for the full session over the

last 20 trading days.