* Indexes: Dow flat, S&P 500 up 0.5%, Nasdaq up 0.7%

* Eli Lilly ( LLY ) advanced after CVS brings back Zepbound

coverage

* Microsoft ( MSFT ) up on report co to release new coding model

next week

* U.S. inflation rises at its fastest pace in three years

(Updates with analyst comment, prices)

By Twesha Dikshit and Utkarsh Hathi

May 28 (Reuters) - The S&P 500 and the Nasdaq rose on

Thursday after a report said the U.S. and Iran had reached a

deal, while investorsalso digested key inflation data.

Axios reported that Washington and Tehran had reached an

agreement to extend the ceasefire and launch negotiations on

Iran's nuclear program, but President Donald Trump still needed

to give final approval.

"Traders are on a hair trigger with the back and forth on

deal news, and have been leaning long to avoid getting trampled

by a better-than-expected outcome. The harder part is that the

inflationary forces may not abate as fast as markets want," said

Jamie Cox, managing partner at Harris Financial Group.

Economic data showed U.S. inflation increased at its fastest

pace in three years in April, driven by higher energy prices

amid the Iran war.

Meanwhile, U.S. GDP for the first quarter was revised lower

to a 1.6% annualized increase, with momentum expected to slow

this quarter.

At 11:31 a.m. ET, the Dow Jones Industrial Average

fell 13.29 points, or 0.03%, to 50,630.99, the S&P 500

gained 36.98 points, or 0.49%, to 7,557.34 and the Nasdaq

Composite gained 174.76 points, or 0.66%, to 26,849.49.

The S&P 500 healthcare index gained 1.2%. Eli Lilly ( LLY )

advanced 4.2% after CVS Health ( CVS ) said it would

restore the drugmaker's weight-loss injection Zepbound to its

coverage and add its newly approved obesity pill Foundayo.

Tech shares also moved 1.3% higher. Microsoft ( MSFT )

gained 2.8% after The Information reported the company

would release a new coding model next week.

Marvell Technology ( MRVL ) dipped after first-quarter

results. The company's shares have more than doubled so far this

year.

Snowflake soared 36.3% after the data analytics

firm lifted its annual product revenue forecast and announced a

five-year AI infrastructure deal worth $6 billion with Amazon

Web Services.

Peers Datadog ( DDOG ) , and MongoDB ( MDB ) rose 2.7% and

9.8%, respectively.

Five of the 11 main S&P 500 sectors were in the green.

Renewed confidence in AI and earnings growth momentum have

underscored the recent rally, with both the S&P 500 and the

Nasdaq hitting intraday record highs.

"When we start to see a lot of the higher energy prices

starting to feed through into other areas within inflation, the

broader market will start to struggle quite a bit more than it

has," said Timothy Chubb, chief investment officer at Girard, a

Univest Wealth Division.

"Earnings growth and estimates have continued to outpace

obviously a lot of those concerns. And I think the divergence

between equities and rates is really one of the more important

things happening right now."

Among other movers, Dollar Tree ( DLTR ) climbed 17.6% after

the discount retailer lifted its full-year profit forecast,

while Best Buy ( BBY ) added 17% after the electronics vendor

forecast second-quarter sales above estimates.

Drone companies rose after the Wall Street Journal reported

that the Trump administration was in talks to fund drone firms.

Unusual Machines ( UMAC ) jumped 52% while AeroVironment ( AVAV )

and Kratos Defense & Security Solutions added

18% and 15%, respectively.

Advancing issues outnumbered decliners by a 1.41-to-1 ratio

on the NYSE and by a 1.48-to-1 ratio on the Nasdaq.

The S&P 500 posted 13 new 52-week highs and 9 new lows while

the Nasdaq Composite recorded 85 new highs and 55 new lows.

(Reporting by Twesha Dikshit and Utkarsh Hathi in Bengaluru and

Saeed Azhar in New York; Editing by Joyjeet Das and Devika

Syamnath)