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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 0.66%, S&P 0.86%, Nasdaq 0.97%

(Updated at 11:20 a.m. ET/ 1520 GMT)

By Bansari Mayur Kamdar and Shristi Achar A

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

Nasdaq touched record highs on Wednesday after a

lower-than-expected increase in a key inflation metric

buttressed hopes that the Federal Reserve will cut interest

rates this year.

The blue-chip Dow was set to breach the 40,000-mark

for the first time, while the two other major indexes surpassed

all-time peaks 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 again in December.

"The first downside surprise in inflation since the turn of

the year will be a relief to the niggling concerns that

inflation was starting to trend upwards again," said Seema Shah,

chief global strategist at Principal Asset Management.

"It will inevitably be well received by the market,

given that it puts 2024 Fed cuts back on the table."

Separately, 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 11:20 a.m. ET, the Dow Jones Industrial Average

was up 261.81 points, or 0.66%, at 39,819.92, the S&P 500

was up 44.95 points, or 0.86%, at 5,291.63, and the Nasdaq

Composite was up 160.59 points, or 0.97%, at 16,671.77.

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

Powell's assessment of U.S. growth and inflation 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.

Rate-sensitive real estate and technology stocks

outpaced other sectoral indexes with a 1.6% gain each.

Most megacap growth and technology stocks also climbed, with

Nvidia ( NVDA ) leading the gains.

Meanwhile, retail investor darling GameStop ( GME ) fell

31.7%, 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 ) dropped 24% each.

Advancing issues outnumbered decliners by a 3.07-to-1 ratio

on the NYSE and by a 1.76-to-1 ratio on the Nasdaq.

The S&P index recorded 64 new 52-week highs and no new lows,

while the Nasdaq recorded 101 new highs and 47 new lows.