By Medha Singh and Shashwat Chauhan
(Reuters) -Wall Street's main indexes were mixed on Wednesday, as Alphabet slid and as signs of moderating inflation kept bets alive that the U.S. Federal Reserve would begin its policy easing cycle next month, albeit with a smaller rate cut.
The Google-parent dropped 3.6% after a media report said the U.S. Department of Justice is considering options that include breaking up the online search engine.
Losses in Alphabet weighed on the Nasdaq and pulled the communication services sector down 1.3%, the most among the 11 major S&P 500 sectors.
A rebound in megacap and technology stocks have helped markets recoup most of their losses from a global market rout earlier this month that was partly caused by data showing a surge in U.S. unemployment rate in July.
Latest data showed U.S. consumer prices rose moderately in July and the annual increase in inflation slowed to below 3% for the first time since early 2021.
"There is nothing in here that should prevent the Fed from proceeding with a rate cut in September," said David Doyle, head of economics at Macquarie.
"The pace of magnitude of easing will depend broadly on incoming data with inflation and employment figures taking on particular importance."
Money markets now see a 55% chance of a 25-basis point (bps) rate cut at the Fed's Sept. 17-18 meeting, as per the CME FedWatch Tool. Before the data, traders were nearly evenly split between a 25-bps and 50-bps cut.
Both the S&P 500 and the Nasdaq clocked their fourth straight session of gains on Tuesday following softer-than-expected producer prices data that indicated inflation continued to moderate, although it is yet to reach the U.S. central bank's 2% target.
At 11:18 a.m. ET, the Dow Jones Industrial Average rose 92.75 points, or 0.23%, to 39,858.60, the S&P 500 gained 6.16 points, or 0.11%, to 5,440.63 and the Nasdaq Composite lost 29.61 points, or 0.19%, to 17,155.69.
The Cboe volatility index, Wall Street's fear gauge, stayed below its long term average of 20 points for the second day at 16.49 after hitting its highest since 2020 just last week.
AI stocks Nvidia, Super Micro and Dell reversed early gains after staging a strong recovery this week, while most megacap and growth stocks were mixed.
Kellanova surged over 7.7% after family-owned candy giant Mars said it would buy the Cheez-It and Pringles maker in a nearly $36 billion deal.
Cardinal Health gained 5.2% after the drug distributor raised its 2025 profit forecast.
TurboTax parent Intuit slipped 1.9% after Morgan Stanley downgraded its rating to "equal-weight" from "overweight".
Advancing issues outnumbered decliners by a 1.25-to-1 ratio on the NYSE, while declining issues outnumbered advancers by a 1.46-to-1 ratio on the Nasdaq.
The S&P 500 posted 24 new 52-week highs and two new lows, while the Nasdaq Composite recorded 45 new highs and 92 new lows.
(Reporting by Medha Singh and Shashwat Chauhan in Bengaluru; Editing by Maju Samuel)
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