US STOCKS-S&P 500, Nasdaq rise on trade optimism after soft inflation data

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Updates with afternoon trading levels

By Shashwat Chauhan and Pranav Kashyap

May 13 (Reuters) - The S&P 500 and the Nasdaq advanced on Tuesday on softer-than-expected inflation numbers and market optimism spurred by the U.S.-China trade reprieve, renewing expectations that the Federal Reserve would lower borrowing costs soon.

The Dow .DJI fell more than 150 points, bogged down by UnitedHealth's UNH.N 15.8% slide after the insurance bellwether suspended its annual forecast and its CEO stepped down.

U.S. consumer prices rebounded moderately in April, with headline inflation increasing 0.2% last month after dipping 0.1% in March. Economists polled by Reuters had forecast that the CPI would rise 0.3%.

The CPI climbed 2.3% in the 12 months through April, after advancing 2.4% in the 12-month period until March.

"We don't really see much impact from tariffs yet. It's still too early for that, but what we do see is that inflation is holding up decently well," said Mike Reynolds, vice president of investment strategy at Glenmede.

"It's a good sign that inflation isn't a problem heading into an event-driven shock like tariffs," he said.

Traders leaned into bets that the U.S. Federal Reserve would hold off on lowering interest rates until September, while still anticipating two 25-basis-point cuts by the end of the year.

A number of Fed officials are slated to speak this week, including Chair Jerome Powell on Thursday.

At 11:23 a.m. ET, the Dow Jones Industrial Average .DJI fell 167.57 points, or 0.40%, to 42,242.53, the S&P 500 .SPX rose 45.25 points, or 0.77%, to 5,889.44, and the Nasdaq Composite .IXIC gained 278.78 points, or 1.49%, to 18,987.31.

Monday's relief rally came after Washington and Beijing agreed to dial back stringent reciprocal tariffs, signaling a joint effort to stave off a global economic downturn.

The U.S. will pause the extra tariffs it imposed on Chinese imports to 30% from 145% for three months, while Chinese duties on U.S. imports will fall to 10% from 125% in the same period.

After the tariff truce, multiple brokerages lowered their odds of a U.S. recession.

The S&P 500 and the Nasdaq have recovered losses since April 2 - or "Liberation Day" - when U.S. President Donald Trump announced sweeping reciprocal tariffs.

A 90-day pause announced on April 9 for countries other than China, along with solid earnings reports and a limited U.S.-UK trade agreement last week, helped the S&P 500 and the tech-heavy Nasdaq regain lost ground.

The S&P 500 has turned positive on a year-to-date basis for the first time since early March.

Most megacap and growth stocks swung higher, with Nvidia NVDA.O leading the pack with a 5.6% jump.

Crypto exchange operator Coinbase Global COIN.O, which is slated to join the S&P 500 on May 19, was among the top movers, jumping 18.8%.

With more than 90% of S&P 500 companies having reported earnings, numbers from retail giant Walmart WMT.N will be on the radar later this week.

Advancing issues outnumbered decliners by a 1.97-to-1 ratio on the NYSE, and by a 1.39-to-1 ratio on the Nasdaq.

The S&P 500 posted 17 new 52-week highs and six new lows, while the Nasdaq Composite recorded 58 new highs and 49 new lows.

(Reporting by Shashwat Chauhan and Pranav Kashyap in Bengaluru; Editing by Sherry Jacob-Phillips and Pooja Desai)

((Shashwat.Chauhan@thomsonreuters.com;))