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CPI numbers show inflation eased in June

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PepsiCo ( PEP ) dips on quarterly revenue miss

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Conagra Brands ( CAG ) falls after annual forecasts below

estimates

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Indexes: Dow down 0.02%, S&P up 0.04%, Nasdaq down 0.04%

(Updated at 9:48 a.m. ET/1348 GMT)

By Lisa Pauline Mattackal and Ankika Biswas

July 11 (Reuters) -

Wall Street's main stock indexes struggled for direction on

Thursday as investors favored rate-sensitive small-cap stocks

over expensive megacaps after a softer-than-expected inflation

reading bolstered hopes for monetary policy easing in September.

A Labor Department report showed

U.S. consumer prices

fell unexpectedly and that the annual increase was the

smallest in a year, reinforcing views that the disinflation

trend was back in play.

The data is a welcome sign for Federal Reserve

policymakers looking for evidence that inflation is back on

track to their 2% goal, leading traders to

increase bets

on a September rate cut.

The Russell 2000 spiked 2.1% to an over one-month

high on expectations that interest-rate cuts would improve

conditions for small- and mid-cap companies.

"There is a realization we are about to have a much

stronger earnings quarter, and if we have a strong GDP print in

a few weeks, the Fed will likely signal in July that they are

going to hold course. A 3% CPI print is still well above their

target," said Scott Helfstein, head of investment strategy at

Global X.

"We would prefer to have stronger earnings and economic

data than an earlier cut."

Bets of a September cut spiked to 88%, from a 70% chance

before the data was released.

Meanwhile, megacap stocks including Apple ( AAPL ),

Microsoft ( MSFT ), Alphabet and Nvidia ( NVDA ) fell

between 0.5% and 0.7%, after rising briefly in premarket trading

after the data.

S&P 500 Real Estate jumped 2.4%, topping

sectoral gainers, while Communication Services was the

worst hit.

The S&P 500 and the Nasdaq scaled fresh record highs

when markets opened, in range-bound trading.

Federal Reserve Chair

Jerome Powell on Wednesday raised expectations for policy

easing in September, but reiterated that such a decision would

be data-dependent.

Among headlining stocks, Delta Air Lines ( DAL ) slumped

8.2%, on track for its biggest one-day fall since mid-January,

after forecasting lower-than-expected profits in the current

quarter.

United Airlines Holdings ( UAL ), American Airlines

Group ( AAL ), Spirit Airlines ( SAVE ), Alaska Air Group ( ALK )

and JetBlue Airways ( JBLU ) fell between 4% and 6%.

Hopes for interest rates to be lowered, continued economic

resilience and exuberance around artificial intelligence-linked

stocks have kept Wall Street's main indexes at or near record

highs this year.

Investors will also scrutinize the Producer Price Index

reading for insights into the inflation trajectory, along with

second-quarter earnings from big banks, both due on Friday.

At 9:48 a.m. ET, the Dow Jones Industrial Average was

down 9.47 points, or 0.02%, at 39,711.89, the S&P 500 was

up 2.36 points, or 0.04%, at 5,636.27, and the Nasdaq Composite

was down 7.70 points, or 0.04%, at 18,639.74.

PepsiCo ( PEP ) shed 1.4% after the soda and snacks

maker missed expectations for second-quarter revenue.

Conagra Brands ( CAG ) fell 4.1% after the packaged

foods maker forecast annual revenue and profit below estimates,

while Citigroup ( C/PN ) slipped 2% after U.S. bank regulators

fined the lender $136 million.

Advancing issues outnumbered decliners by a 5.98-to-1

ratio on the NYSE, and by a 4.06-to-1 ratio on the Nasdaq.

The S&P index recorded 33 new 52-week highs and one new

low, while the Nasdaq recorded 79 new highs and 13 new lows.