*

PPI rises 0.2% on monthly basis in October

*

Weekly jobless claims lower than forecast

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Industrials lead sector losses with defense stocks

dragging

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Walt Disney ( DIS ) up after beating Q4 earnings estimates

*

Indexes down: Dow 0.31%, S&P 500 0.36%, Nasdaq 0.39%

(Updates to mid-afternoon)

By Sinéad Carew and Lisa Pauline Mattackal

Nov 14 (Reuters) - Wall Street's main indexes lost

ground on Thursday after monthly producer prices rose as

expected, with investors awaiting Federal Reserve Chair Jerome

Powell's comments expected during the last hour of trading for

clues on the outlook for interest rates.

The producer price index for final demand rose 0.2% on a

monthly basis in October, in line with forecasts, though the

annual rise of 2.4% was a touch higher than expectations.

Jobless claims dropped 4,000 to a seasonally adjusted

217,000 for the week ended Nov. 9, lower than forecast.

"There's more and more evidence that inflation remains

higher than the Fed's 2% target," said Melissa Brown, managing

director for Investment Decision Research at SimCorp in New

York. "The numbers were roughly in line with expectations but

sometimes investors step back and say, 'What does this really

mean?' It leads to more uncertainty about what the Fed does

after the December meeting."

Changing inflation expectations have affected the bond

market, with the U.S. 10-year Treasury yield, down

on the day, but trading close to its highest level since July.

Traders now see a roughly 76% chance of a 25-basis point

reduction at the Fed's December meeting, down from 82.5% on

Wednesday, the CME FedWatch tool showed.

A post-U.S. election rally in equities appeared to be

waning, even as focus turned to the potential inflationary

pressures from policies under President-elect Donald Trump's

administration.

As of 2:10 p.m. ET, the Dow Jones Industrial Average

fell 135.01 points, or 0.31%, to 43,823.18, the S&P 500

dropped 21.55 points, or 0.36%, to 5,963.83 and the Nasdaq

Composite slid 74.55 points, or 0.39%, to 19,156.17.

Among the S&P 500's 11 major industry sectors, industrials

was the biggest decliner, off 1.4% with the biggest

drags from defense companies.

RTX Corp ( RTX ) was the biggest drag on industrials, last

down 4.5% at its lowest level since Sept. 19. General Dynamics ( GD )

was the next biggest weight, down 6.5% to its lowest

level since Oct 31.

The blue-chip Dow had some support from a roughly 6% gain in

Walt Disney ( DIS ) after the entertainment giant reported

quarterly earnings that beat Wall Street's estimates and offered

robust guidance for the coming years.

Consumer discretionary stocks also weighed on the

S&P 500, falling more than 1% with some pressure from electric

vehicle makers.

EV maker Tesla declined 5.6% and Rivian Automotive ( RIVN )

was off 12.3% after Reuters reported that Trump's

transition team is planning to kill the $7,500 consumer tax

credit for electric-vehicle purchases as part of broader

tax-reform legislation.

Powell is due to provide an update on his economic outlook

to business leaders in Dallas, a day after some Fed policymakers

shifted their attention back to inflation risks as they weighed

when, and how fast and far, to cut interest rates.

Fed Governor Adriana Kugler said the central bank has made

considerable progress in working to achieve its job and

inflation goals. Richmond Fed President Tom Barkin said high

union wage settlements and the possibility of coming tariff

increases could make Fed officials more cautious about thinking

they have won their battle against high inflation.

Tapestry hit its highest level since 2013, last

trading up 12.6%. The Coach parent said it was terminating its

$8.5 billion deal for Capri Holdings ( CPRI ) after the deal was

blocked by a U.S. judge. Capri's shares rose 5% after reversing

losses.

Declining issues outnumbered advancers by a 1.45-to-1 ratio

on the NYSE where there were 152 new highs and 75 new lows.

On the Nasdaq, 1,477 stocks rose and 2,734 fell as declining

issues outnumbered advancers by a 1.85-to-1 ratio. The S&P 500

posted 25 new 52-week highs and 10 new lows while the Nasdaq

Composite recorded 74 new highs and 155 new lows.