*

Consumer prices rise less than expected in April; core CPI

slows

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Retail sales flat in April

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Meme stocks snap sharp rally

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Indexes up: Dow 0.68%, S&P 1.03%, Nasdaq 1.31%

(Updated prices at 02:24 p.m ET/ 1824 GMT)

By Sinéad Carew and Bansari Mayur Kamdar

May 15 (Reuters) - The benchmark S&P 500 and the

Nasdaq traded at record highs on Wednesday after a

lower-than-expected increase in a key inflation metric bolstered

hopes that the Federal Reserve will cut interest rates this

year.

The blue-chip Dow edged closer toward hitting the

40,000 milestone for the first time, while the two other major

indexes surpassed record highs hit in March. Tepid U.S. consumer

prices data for April led traders to raise bets that the Fed

will cut its policy rate in September and December.

"It's not just today's inflation print but a collective sigh

of relief that potentially the last four readings were just an

early year inflation scare rather than something persistent,"

said Tony Welch, chief investment officer of SignatureFD. He

also cited the latest retail sales data and recent signs of

slack building in the U.S. labor market.

"The backdrop is rates don't go up further and at best

come down," Welch said, adding that he thinks year-over year

inflation will not slow down enough to prompt the Fed to cut

rates. "You'd get a rate drop if there's notable weakening in

the economic backdrop."

Also on Wednesday, U.S. retail sales were unexpectedly flat

in April as higher gasoline prices pulled expenditure away from

other goods, indicating that consumer spending was losing

momentum.

At 02:24 p.m. ET, the Dow Jones Industrial Average

rose 269.69 points, or 0.68%, to 39,827.80. The S&P 500

gained 54.22 points, or 1.03%, at 5,300.90 and the Nasdaq

Composite advanced 216.68 points, or 1.31%, to

16,727.86.

Equities built on Tuesday's gains, when Fed Chair Jerome

Powell's assessment of U.S. growth, inflation and the interest

rate outlook reassured investors after hotter-than-expected

producer prices for April.

Stocks have rallied so far this year on better-than-expected

earnings for the first quarter and expectations that the Fed

will be able to cool inflation without damaging growth and

eventually transition to cutting interest rates.

Among the S&P 500's 11 major sector indexes, rate-sensitive

technology stocks and real estate outpaced

the rest with respective gains of 2.3% and 1.8%. Consumer

discretionary was the sole loser, down 0.31%.

Nvidia ( NVDA ), up 3.7%, was the biggest index point

contributor to the tech sector, followed by Microsoft ( MSFT ),

up 1.8%, and Apple ( AAPL ), rising 1.5%.

In earnings, Walmart ( WMT ) was expected to provide more

color on consumer spending when it reports results on Thursday.

The retail giant's shares fell 0.3% on Wednesday, on track for

their third straight session of declines.

Retail investor darling GameStop ( GME ) fell 24%,

snapping this week's sharp rally driven by "Roaring Kitty" Keith

Gill, a central figure behind the 2021 meme stock frenzy -

posting on social media platform X.

Other meme stocks such as AMC Entertainment ( AMC ) and Koss

Corp ( KOSS ) each fell more than 20%.

Advancing issues outnumbered decliners by a 2.83-to-1

ratio on the NYSE where there were 588 new highs and 33 new

lows.

On the Nasdaq, advancing issues outnumbered decliners by

a 1.62-to-1 ratio. The S&P 500 posted 68 new 52-week highs and

no new lows while Nasdaq recorded 244 new highs and 67 new lows.