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Indexes up: Dow 1.06%, S&P 500 0.87%, Nasdaq 0.99%

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S&P 500, Nasdaq on track for record high close

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US core inflation jumps by 3.1% in July

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Alphabet up after Perplexity offers $34.5 bln for Chrome

browser

(Updates with midday prices)

By Johann M Cherian and Sanchayaita Roy

Aug 12 (Reuters) - Wall Street's main indexes rose on

Tuesday, with the S&P 500 and the Nasdaq at record highs after

data showed inflation rose broadly in line with expectations in

July, bolstering expectations that the Federal Reserve could

lower interest rates next month.

A Labor Department report showed that the Consumer Price

Index (CPI) rose by an expected 0.2% on a monthly basis in July,

while annual inflation came in slightly below forecasts, drawing

calls from President Donald Trump to lower interest rates.

However, there was also some caution, as the data suggested

that underlying inflation rose by its fastest pace in six months

in July as markets look for signs that tariffs and trade

uncertainty were filtering into prices.

Yields on shorter-dated Treasury bonds - a

reflection of interest rate expectations - slipped and interest

rate futures showed traders are giving an 88.8% chance that the

Fed could lower interest rates by about 25 basis points in

September.

"This is still early innings of this process and just as the

Fed will be beginning to cut rates in the autumn, that's when

the inflation data will probably start to be registering some of

these more direct tariff price increases and it's going to

complicate the rate-cutting decision," said John Velis, a macro

strategist at BNY.

The data also comes at a time when there are growing

concerns over the quality of economic data, weeks after Trump

fired the head of the Bureau of Labor Statistics following

downward revisions to previous months' nonfarm payrolls counts.

At 12:00 p.m. ET, the Dow Jones Industrial Average

rose 465.62 points, or 1.06%, to 44,440.71, the S&P 500

gained 55.29 points, or 0.87%, to 6,428.74 and the Nasdaq

Composite advanced 212.21 points, or 0.99%, to

21,597.61.

Nine of the 11 S&P 500 sectors were higher, with

communication services in the lead after a 1.7% rise.

Alphabet rose 1.2% as Perplexity made a $34.5 billion

cash offer to buy the company's Chrome browser.

Further providing some relief, U.S. and China extended their

tariff truce until November 10, staving off triple-digit duties

on each other's goods.

U.S. stocks have rallied in recent weeks, putting the

benchmark S&P 500 on track for its first record high close in

nearly two weeks on the back of strong tech earnings, easing

trade tensions and rate cut expectations.

Reflecting the confidence, data from BofA Global Research

showed that inflows into U.S. stocks last week were the largest

in two years.

Markets are monitoring developments around Trump's nominee

E.J. Antoni to the Bureau of Labor Statistics commissioner post

and potential candidates for the Fed's top job.

Meanwhile, the Russell 2000 index, tracking small-cap

companies, also advanced 2.1% to hit a two-week high.

An index tracking airline stocks surged

7.9%, putting it on track for its biggest one-day rise in over a

month after data showed air fares rose 4% in July.

Cardinal Health ( CAH ) dropped 7% after the drug

distributor said it will buy healthcare management firm Solaris

for $1.9 billion.

Advancing issues outnumbered decliners by a 3.31-to-1 ratio

on the NYSE and by a 2.3-to-1 ratio on the Nasdaq.

The S&P 500 posted 20 new 52-week highs and 11 new lows,

while the Nasdaq Composite recorded 70 new highs and 75 new

lows.