* Indexes down: Dow 0.11%, S&P 500 0.09%, Nasdaq 0.21%

* February PCE at 2.8% on annual basis, meets estimates

* Applied Digital ( APLD ) falls after quarterly loss widens

* Constellation Brands ( STZ ) jumps after smaller drop in Q4

sales

(Updates after markets open)

By Purvi Agarwal and Avinash P

April 9 (Reuters) - Wall Street's main indexes inched

lower on Thursday after rallying in the previous session as

doubts around the state of a two-week Middle East ceasefire kept

risk sentiment in check, while investors parsed an in-line

inflation reading.

President Donald Trump vowed to retain military assets in

the Middle East until a peace deal was reached with Iran and

warned of a major escalation if it failed to comply, while

Israel bombed more targets in Lebanon as Tehran warned there

would be no deal unless Tel Aviv ceases bombing the country.

Few signs of traffic moving through the Strait of Hormuz

heightened uncertainty around energy shipments, leading to a

rebound in oil prices, though they remained below $100 a barrel.

The S&P 500 energy sector added 1.3% and utilities

stocks were the biggest percentage gainers, up 1.6%.

"Moving from the brink of a continued escalation in Iran to

a more diplomatic approach has calmed markets down from some

perspective," said Charlie Ripley, senior investment strategist

for Allianz Investment Management.

At 10:04 a.m. ET, the Dow Jones Industrial Average

fell 48.96 points, or 0.11%, to 47,856.44, the S&P 500

lost 5.15 points, or 0.09%, to 6,777.00 and the Nasdaq Composite

lost 45.85 points, or 0.21%, to 22,585.96.

Tech stocks on the S&P 500 were the biggest

weights, with Microsoft ( MSFT ) and Apple ( AAPL ) falling 1.7%

and 0.7%, respectively. Software stocks came under pressure with

the iShares Expanded Tech-Software ETF down 3.3%.

Consumer discretionary stocks were supported by a 1.7% gain

in Amazon.com ( AMZN ) after its CEO said AI services at its

cloud-computing unit were generating annualized revenue of over

$15 billion.

The S&P 500 and the Nasdaq posted their biggest one-day

jumps in over a week on Wednesday, as global markets cheered the

two-week ceasefire, while the Dow marked its steepest rise in a

year.

Meanwhile, data showed U.S. inflation increased as expected

in February and likely rose further in March amid the Iran war,

while economic growth slowed more than previously estimated in

the fourth quarter.

"(This doesn't) really change the narrative from a Fed

perspective in that we have elevated inflation pressures, so

that is going to keep them on hold for the time being," said

Ripley.

Friday's consumer prices index number for March will grab

the spotlight as investors wait to see the economic impact of

elevated oil prices stemming from the conflict.

Money market participants are expecting only about 30%

chances of a 25 basis-point interest rate cut by end-2026,

compared with a 56% chance a day ago, per LSEG-compiled data.

They expected two cuts this year before the war broke out,

while bets for a rate hike in December had also risen during the

conflict.

Among movers, Constellation Brands ( STZ ) jumped 5% after

the Corona beer maker posted a smaller-than-expected drop in

fourth-quarter sales.

Applied Digital ( APLD ) shares dropped 7.1% after the data

center operator's third-quarter net loss widened from a year

earlier.

Declining issues outnumbered advancers by a 1.15-to-1 ratio

on the NYSE and by a 1.59-to-1 ratio on the Nasdaq.

The S&P 500 posted 37 new 52-week highs and 16 new lows

while the Nasdaq Composite recorded 64 new highs and 84 new

lows.

(Reporting by Purvi Agarwal, Avinash P and Sruthi Shankar in

Bengaluru; Editing by Shinjini Ganguli and Devika Syamnath)