* Indexes: Dow down 0.53%, S&P 500 up 0.18%, Nasdaq up

0.71%

* US producer prices post biggest gain in four years in

April

* Utilities, real estate led sector losses

(Updates with afternoon trading levels)

By Ragini Mathur, Shashwat Chauhan and Utkarsh Hathi

May 13 (Reuters) - The S&P 500 hovered near its record

highs on Wednesday as chip stocks and megacap tech shares rose,

even though hot producer prices data reinforced bets that the

Federal Reserve would keep monetary policy restrictive.

Alphabet and Tesla climbed 2.6% and 3.6%,

respectively. The Philadelphia SE Semiconductor index was

last up 2.3% and testing a new record high, bouncing back from a

selloff in the previous session.

U.S. producer prices increased more than expected in April,

posting their biggest gain since early 2022, the latest

indication that inflation was accelerating amid the war with

Iran.

The data comes a day after U.S. consumer inflation posted

the sharpest increase in three years in April and knocked the

S&P 500 and the Nasdaq from their record highs.

"Frankly, inflation pressures were already percolating

before the Iran conflict, and while much of the damage can be

undone if we get a quick resolution, today's PPI print is a

reminder of the level and intensity of the coming price

pressures at the consumer level," said Steve Wyett, chief

investment strategist at BOK Financial.

Traders now expect the Fed to stay on hold all through the

year and a 34.3% chance of a rate hike by December, compared

with an around 15% chance seen a week ago, according to the CME

FedWatch Tool.

Markets are expecting a potentially more hawkish central

bank under Kevin Warsh, whom the Senate confirmed to the board

on Tuesday and could move to approve as chair as soon as

Wednesday. Jerome Powell's term ends on Friday.

Meanwhile, President Donald Trump landed in Beijing

accompanied by an entourage that included Nvidia's Jensen Huang

and Elon Musk, after pledging to urge China's Xi Jinping to

"open up" to U.S. business at the start of their two-day summit.

Trump had said ahead of the high-stakes summit that he did

not expect to ask Xi to help resolve the conflict with Tehran.

Wall Street has been wary that a prolonged conflict could

keep energy prices elevated, adding to inflationary pressures

and complicating the U.S. Federal Reserve's policy decisions.

At 11:18 a.m. ET, the Dow Jones Industrial Average

fell 268.56 points, or 0.53%, to 49,494.88, the S&P 500

gained 13.33 points, or 0.18%, to 7,414.29 and the Nasdaq

Composite gained 185.49 points, or 0.71%, to 26,274.14.

Seven of the eleven main S&P 500 sectors traded in the red,

with the S&P 500 utilities sector leading declines

with a 1.7% fall.

Among other movers, Nebius Group ( NBIS ) jumped 15.9% after

the AI cloud firm reported a nearly eightfold rise in quarterly

revenue.

Morgan Stanley raised its annual target for the S&P 500

index to 8,000 from 7,800, saying U.S. stocks have enough room

to rally as companies continue to post strong earnings.

Declining issues outnumbered advancers by a 1.77-to-1 ratio

on the NYSE and by a 1.35-to-1 ratio on the Nasdaq.

The S&P 500 posted 23 new 52-week highs and 44 new lows

while the Nasdaq Composite recorded 79 new highs and 163 new

lows.