(Recasts with preliminary close of trading)

* Eli Lilly ( LLY ) advances after CVS brings back Zepbound

coverage

* Microsoft ( MSFT ) up on report company will release new coding

model next week

* U.S. inflation rises at its fastest pace in three years

By Saeed Azhar, Twesha Dikshit and Utkarsh Hathi

NEW YORK, May 28 (Reuters) - The S&P 500 and the Nasdaq

posted record closing highs on Thursday after news reports said

the U.S. and Iran had reached a draft agreement to extend their

ceasefire for 60 days, while investors also digested key

inflation data.

The news was first reported by Axios, which said that

negotiations on Iran's nuclear program would be held during the

truce period, but that the plan still needed the approval of

President Donald Trump.

"Traders are on a hair trigger with the back-and-forth on

deal news, and have been leaning long to avoid getting trampled

by a better-than-expected outcome. The harder part is that the

inflationary forces may not abate as fast as markets want," said

Jamie Cox, managing partner at Harris Financial Group.

Economic data showed U.S. inflation increased at its fastest

pace in three years in April, driven by higher energy prices

amid the Iran war.

Meanwhile, U.S. GDP for the first quarter was revised lower to a

1.6% annualized increase, with momentum expected to slow this

quarter.

According to preliminary data, the S&P 500 gained

43.50 points, or 0.58%, to end at 7,563.71 points, while the

Nasdaq Composite gained 239.79 points, or 0.91%, to

26,917.47. The Dow Jones Industrial Average rose 24.11

points, or 0.04%, to 50,666.29.

The S&P 500 healthcare index posted strong gains. Eli

Lilly ( LLY ) advanced after CVS Health ( CVS ) said it would

restore the drugmaker's weight-loss injection, Zepbound, to its

coverage and add its newly approved obesity pill Foundayo.

Tech shares also moved higher. Microsoft ( MSFT )

gained after news website the Information reported that the

company would release a new coding model next week.

Marvell Technology ( MRVL ) rose after UBS raised its target

price to $230 from $195.

The company's shares have more than doubled so far this

year.

Snowflake shares soared after the data analytics

firm lifted its annual product revenue forecast and announced a

five-year AI infrastructure deal worth $6 billion with Amazon

Web Services.

Peers Datadog ( DDOG ) and MongoDB ( MDB ) also climbed.

Renewed confidence in AI and earnings growth momentum have

underscored the recent rally despite the Middle East tensions,

which have increased inflationary expectations.

"Markets continue to look through these risks because the

global economy and corporate earnings remain relatively

resilient," said Jitania Kandhari, deputy CIO, solutions and

multi-assets, at Morgan Stanley Investment Management.

"Geopolitical instability could ultimately accelerate

spending in areas tied to AI, including cybersecurity, defense

technology, energy infrastructure and supply-chain resiliency,

reinforcing the long-term investment case."

While the S&P 500 is trading at roughly 21 to 22 times

forward earnings versus a trailing 10-year average of 19.7

times, investors are less concerned because earnings

expectations are rising faster than stock prices, Kandhari said.

Among other movers, Dollar Tree ( DLTR ) climbed after the

discount retailer lifted its full-year profit forecast, while

Best Buy ( BBY ) also rose after the electronics vendor forecast

second-quarter sales above estimates.

Drone companies rose after the Wall Street Journal reported that

the Trump administration was in talks to fund drone firms.

Shares of Unusual Machines ( UMAC ) surged.