*

GameStop ( GME ) falls after reporting decline in quarterly

revenue

*

US consumer prices rise moderately in May

*

S&P 500 dips after source says U.S. embassy in Iraq

preparing

for evacuation

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S&P 500 -0.34%, Nasdaq -0.56%, Dow -0.02%

(Updates with details of afternoon trading)

By Noel Randewich and Kanchana Chakravarty

June 11 (Reuters) - Wall Street dipped on Wednesday,

with investors spooked by Middle East tensions, while a tame

inflation report calmed concerns around tariff-driven price

pressures and traders awaited more details on China-U.S. trade

talks.

The S&P 500 erased modest gains after a U.S. source said the

U.S. embassy in Iraq was preparing for evacuation due to

heightened security risks in the region. A senior Iranian

official said earlier that Tehran will strike U.S. bases in the

region if nuclear negotiations fail and conflict arises with the

United States.

Data showed consumer prices increased only marginally in

May, while economists expect inflation to accelerate in the

coming months due to the Trump administration's import tariffs.

Annually, headline inflation stood at 2.4%, lower than the

2.5% rise estimated by economists polled by Reuters.

"There's still concern about Trump's tariffs being

inflationary but this report was better than expected and it

fuels hope that the Federal Reserve will be able to step in with

rate cuts later on this year," said Robert Pavlik, senior

portfolio manager at Dakota Wealth.

Traders project a 70% chance that the Federal Reserve will

cut interest rates by its September policy meeting, according to

the CME Group's FedWatch tool.

A day after officials from Washington and Beijing agreed on

a framework to put their tariff truce back on track, President

Donald Trump said the U.S. deal with China was done, with

Beijing to supply magnets and rare earth minerals.

With investors betting the United States will reach trade

agreements that reduce Trump's steep trade barriers, the S&P 500

is now trading just below its February record high.

"The worst-case scenario is probably behind us. There's a

little bit of face-saving for both sides," said John Praveen,

managing director at Paleo Leon in Princeton, New Jersey. "They

got an agreement. The question is whether it will be

implemented."

According to a White House official, the agreement with

China allows the U.S. to charge a 55% tariff on imported Chinese

goods, including a 10% baseline "reciprocal" tariff, a 20%

tariff for fentanyl trafficking and a 25% tariff reflecting

pre-existing tariffs. China will charge a 10% tariff on U.S.

imports, the official said.

The U.S. stock market has rallied in recent weeks,

recovering from a slump in April sparked by Trump's "Liberation

Day" tariffs.

The S&P 500 was down 0.34% at 6,018.27 points.

The Nasdaq declined 0.56% to 19,605.32 points, while the

Dow Jones Industrial Average was down 0.02% at 42,857.30 points.

Of the 11 S&P 500 sector indexes, eight declined, led lower

by consumer discretionary, down 1.06%, followed by a

0.94% loss in materials.

"Stable inflation, range-bound interest rates and rising

earnings provide valuation support and - in our view - a basis

for stocks to trend higher," said Terry Sandven, chief equity

strategist at U.S. Bank Wealth Management.

Nine of the 11 major S&P 500 sub-sectors rose, led by a 0.4%

gain in information technology shares.

Tesla was up 0.5% after CEO Elon Musk said he

regretted some of the negative social media posts he made last

week about

Trump

as they had gone "too far".

Software development platform provider GitLab ( GTLB ) lost

6% after its quarterly results disappointed investors.

Shares of videogame retailer GameStop ( GME ) fell 3.9%

after it reported a decline in first-quarter revenue.

Declining stocks outnumbered rising ones within the S&P

500 by a 1.9-to-one ratio.

The S&P 500 posted 10 new highs and 2 new lows; the

Nasdaq recorded 77 new highs and 34 new lows.