Wall Street choppy as inflation data lifts small-cap stocks
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CPI numbers show inflation eased in June
PepsiCo dips on quarterly revenue miss
Conagra Brands falls after annual forecasts below estimates
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 .RUT 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.O, Microsoft MSFT.O, Alphabet GOOGL.O and Nvidia NVDA.O fell between 0.5% and 0.7%, after rising briefly in premarket trading after the data.
S&P 500 Real Estate .SPLRCR jumped2.4%, topping sectoral gainers, while Communication Services .SPLRCL 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 forpolicy easing in September, butreiterated that such adecision would be data-dependent.
Among headlining stocks, Delta Air Lines DAL.N slumped8.2%, on track for its biggest one-day fall since mid-January, after forecasting lower-than-expectedprofits in the current quarter.
United Airlines Holdings UAL.O, American Airlines Group AAL.O, Spirit Airlines SAVE.N, Alaska Air Group ALK.N and JetBlue Airways JBLU.O fell between 4% and 6%.
Hopes for interest rates to be lowered, continued economic resilience and exuberancearound 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 .DJI was down 9.47 points, or 0.02%, at 39,711.89, the S&P 500 .SPX was up 2.36 points, or 0.04%, at 5,636.27, and the Nasdaq Composite .IXIC was down 7.70 points, or 0.04%, at 18,639.74.
PepsiCo PEP.O shed1.4% after the soda and snacks maker missed expectations for second-quarter revenue.
Conagra Brands CAG.N fell4.1% after the packaged foods makerforecast annual revenue and profit below estimates, while Citigroup C.Nslipped 2% after U.S. bank regulatorsfined the lender $136 million.
Advancing issues outnumbered decliners by a 5.98-to-1 ratio on the NYSE, and by a4.06-to-1 ratio on the Nasdaq.
The S&P index recorded33 new 52-week highs and one new low, while the Nasdaq recorded 79 new highs and 13 new lows.
Reporting by Lisa Mattackal and Ankika Biswas in Bengaluru; Editing by Pooja Desai
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