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Indexes up: Dow 1.1%, S&P 500 1.05%, Nasdaq 1.26%

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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 billion for

Chrome

browser

(Adds fund manager's quotes in paragraph 4-5, updates prices)

By Johann M Cherian, Sanchayaita Roy and Saeed Azhar

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

on Tuesday, with the S&P 500 and the Nasdaq hitting record

highs, as news that July inflation rose broadly in line with

expectations bolstered bets on a Federal Reserve interest rate

cut next month.

The

Labor Department said the Consumer Price Index (CPI) rose

0.2% on a monthly basis in July, while annual inflation came in

slightly below forecasts, drawing calls from U.S. President

Donald Trump to lower interest rates.

Yields on shorter-dated Treasury bonds - a

reflection of interest rate expectations - slipped and rate

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

could lower rates by about 25 basis points in September.

"The CPI data is supportive for equities overall, getting

some good news with the Fed looking more on track to cut in

September and potentially more transitory inflation," said

Katherine Bordlemay, co-head of client portfolio management,

fundamental equities at Goldman Sachs Asset Management.

"The first thing I'd guide is continue to lean into the

theme of the big are getting bigger. We continue to have

conviction around mega-tech and technology."

Alphabet rose 1.3% as Perplexity made a $34.5

billion cash offer to buy the company's Chrome browser.

Intel Corp ( INTC ) climbed 4% after Trump said he met its

CEO, Lip-Bu Tan, on Monday, praising Tan and calling the meeting

"very interesting."

Last week, Trump had demanded Tan's

immediate resignation

, calling him "highly conflicted" over his ties to Chinese

firms.

At 2:03 p.m. ET, the Dow Jones Industrial Average

rose 509.74 points, or 1.16%, to 44,485.32. The S&P 500

gained 66.78 points, or 1.05%, at 6,440.23 and the Nasdaq

Composite climbed 268.51 points, or 1.26%, to 21,653.92.

The quality of economic data remains a concern weeks after

Trump fired the head of the Bureau of Labor Statistics following

downward revisions to previous months' nonfarm payrolls counts.

Markets are monitoring developments around Trump's nominee, E.J.

Antoni, to the bureau commissioner post and potential candidates

for the Fed's top job.

"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.

Relief came as the 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 increased rate cut expectations.

Inflows into U.S. stocks last week were the largest in two

years, BofA Global Research data showed.

The Russell 2000 index, tracking small-cap companies

, also advanced 2.4% to hit a two-week high.

An index tracking airline stocks surged 8%,

putting it on track for its biggest one-day rise in over a month

after data showed airfares rose 4% in July.

Bank stocks rallied, with the S&P 500 Banks index

up 2.2%, as analysts said a steepening of the yield

curve could help bank earnings as lenders could borrow cheap and

lend at a higher rate.

Cardinal Health ( CAH ) dropped 7.7% after the drug

distributor said it will buy healthcare management firm Solaris

for $1.9 billion.

Advancing issues outnumbered decliners by a 3.71-to-1 ratio

on the NYSE. There were 377 new highs and 53 new lows on the

NYSE.

On the Nasdaq, advancing issues outnumbered decliners by

a 2.37-to-1 ratio.

The S&P 500 posted 23 new 52-week highs and 11 new lows

while the Nasdaq Composite recorded 89 new highs and 83 new

lows.