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Indexes up: Dow 0.23%, S&P 500 0.13%, Nasdaq 0.09%

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Bank stocks mixed after Q2 earnings

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U.S June PPI unchanged on a monthly basis

(Updates with early afternoon prices)

By Pranav Kashyap and Nikhil Sharma

July 16 (Reuters) -

U.S. stocks clawed back into positive territory on Wednesday

after President Donald Trump swiftly denied reports of a Federal

Reserve shakeup, calling it "highly unlikely" he would fire

Chair Jerome Powell - just moments after reports suggested

otherwise.

The main U.S. stock indexes fell sharply earlier, the dollar

plunged and Treasury yields rose after Bloomberg News reported

the possibility of replacing Powell, citing an unidentified

White House official.

Separately, Reuters News reported, citing a source, that

Trump is open to the idea of firing Powell.

Trump was quick to deny the reports, even as he

unleashed a new barrage of criticism against the Fed chair for

not cutting interest rates.

"Any rhetoric between and Jerome Powell and Donald Trump

is noise to me. We aren't making any portfolio considerations or

changes," said David Wagner, head of equities at Aptus Capital

Advisors LLC.

"The market understands that the new Fed chair tends to be

announced a year ahead of time which should be upcoming in the

next few months. There is no reason for Trump to negate the

arm's-length distance between the Fed and the executive branch

in the wake of a new Fed Chair being named in the next month or

two."

The benchmark S&P 500 fell as much as 1%, while the

Nasdaq dropped as much as 1.1%, following the reports, but

clawed back from those losses following Trump's comments.

At 1:03 p.m. ET, the Dow Jones Industrial Average

rose 100.89 points, or 0.23%, to 44,124.18, the S&P 500

gained 7.89 points, or 0.13%, to 6,251.65 and the Nasdaq

Composite gained 18.29 points, or 0.09%, to 20,696.09.

The CBOE Volatility Index, Wall Street's "fear

gauge," hit an over a three-week high earlier but eased from

those levels.

Trump has repeatedly criticized Federal Reserve monetary

policy in recent months, angry over the central bank's refusal

to cut interest rates. Fed officials have resisted cutting rates

until there is clarity on whether Trump's tariffs on U.S.

trading partners reignite inflation.

A recent Supreme Court ruling suggests no change to the

long-held understanding that the law prohibits a president from

firing a Fed chair over a policy difference.

Before the Bloomberg report, the session was rather

choppy as investors found themselves on edge after a mixed bag

of inflation data muddied the economic outlook. Producer prices

flatlined

in June, as tariff-driven goods costs were balanced out by

weaker service prices.

Just a day earlier,

unexpectedly

strong consumer inflation had already dented hopes for

deeper Federal Reserve rate cuts, with Trump's tariffs partly

fueling the uptick in prices.

Money markets pricing show traders are betting on 47

basis points of Fed easing by year-end, with a July rate cut off

the table and the odds of a September move increased to 60%

Meanwhile, Wall Street's big banks rode a wave of market

volatility to stronger profits in the second quarter.

Goldman Sachs ( GS ) inched 0.2% higher after notching a

22% earnings surge, while Bank of America's ( BAC ) profits beat

estimates also fueled by gains at its desks. Morgan Stanley ( MS )

joined the trend with a profit boost from wild market

swings, though its shares slipped 2.6%.

Trade tensions also remained in focus after Trump

announced a 19% tariff on Indonesian goods as part of a new

deal, one of several rushed agreements ahead of an August 1

deadline for broader tariff hikes. Meanwhile, the European Union

was preparing retaliatory measures should talks with Washington

falter.

Meanwhile, Trump said that there may be another deal

with India, while EU trade chief Maros Sefcovic headed to

Washington for tariff talks.

Investors lately have shown resilience in recent weeks,

largely ignoring Trump's ongoing tariff rhetoric and instead

focusing on potential trade agreements that could de-escalate

the global trade conflict.

Advancing issues outnumbered decliners by a 1.06-to-1

ratio on the NYSE and by a 1.34-to-1 ratio on the Nasdaq.

The S&P 500 posted seven new 52-week highs and six new

lows, while the Nasdaq Composite recorded 47 new highs and 60

new lows.