US STOCKS-Wall St falls as hot CPI, Iran tensions weigh on sentiment

* Indexes down: Dow 0.60%, S&P 500 0.57%, Nasdaq 0.92%

* Zebra Technologies (ZBRA) jumps on annual sales growth forecast raise

* US consumer prices increase further in April (Updates after market open)

By Ragini Mathur and Utkarsh Hathi

May 12 (Reuters) - Wall Street's main indexes edged lower on Tuesday, with the S&P 500 and the Nasdaq pulling back from record highs after a hotter-than-expected inflation report and fading hopes for a swift resolution to the Middle East conflict.

U.S. consumer prices rose at a brisk pace for a second straight month in April, pushing annual inflation to its highest level in nearly three years and reinforcing expectations that the Federal Reserve will keep interest rates unchanged for longer.

The Consumer Price Index increased 3.8% last month on an annual basis, while economists polled by Reuters had expected a 3.7% rise.

"We believe the financial markets have been a little slow to appreciate the economic damage that is building with higher prices, oil prices, raw materials, all those things that could accelerate global inflation," said Doug Beath, global equity strategist, Wells Fargo Investment Institute. "April had the highest S&P 500 returns since 2020. Obviously, earnings continue to exceed expectations. But I do think even though it (CPI)is a little bit higher than expected, it could be more important because of the fact the negotiations are still in limbo."

Although a strong earnings season has supported sentiment, stalled negotiations between Washington and Tehran remain a concern for market watchers as surging oil prices fuel worries of higher inflation.

President Donald Trump said a ceasefire with Iran was "on life support" after Tehran rejected a U.S. proposal to end the conflict, keeping oil prices elevated as the key Strait of Hormuz shipping route remained closed.

Ahead of the war, traders had expected two rate cuts, per CME Group's FedWatch Tool, but currently expect the Federal Reserve to keep interest rates steady through the end of the year.

With the first-quarter earnings season drawing to a close, investors are turning to macroeconomic cues. Producer prices and retail sales data are also due this week.

At 10:00 a.m. ET, the Dow Jones Industrial Average fell 297.98 points, or 0.60%, to 49,406.49, the S&P 500 lost 43.98 points, or 0.57%, to 7,368.86 and the Nasdaq Composite lost 240.76 points, or 0.92%, to 26,038.27.

Eight of the eleven main S&P 500 sectors traded in the red, with consumer discretionary stocks leading losses, down 1.1%.

All three major U.S. indexes advanced on Monday, with the S&P 500 and Nasdaq closing at record highs, supported by optimism around artificial intelligence and corporate earnings.

But the technology sector fell 0.9% on Tuesday. Chip stocks were mixed, with Nvidia (NVDA) rising 1.7%, while Intel (INTC) shares eased 2% after climbing more than 17% in the previous two sessions. Qualcomm (QCOM) dropped 6% after hitting a record high in the previous session.

Among other movers, Zebra Technologies (ZBRA) jumped 15% after the barcode scanner maker raised its annual sales growth forecast, betting on robust demand for its products that help automate manufacturing workflows.

Hims & Hers Health (HIMS) tumbled 12.3% after the telehealth firm missed Wall Street estimates for first-quarter revenue and posted a surprise loss.

Venture Global (VG) rose 4.7% after the LNG exporter raised its annual adjusted core profit forecast.

Declining issues outnumbered advancers by a 3.14-to-1 ratio on the NYSE, and by a 2.69-to-1 ratio on the Nasdaq.

The S&P 500 posted 8 new 52-week highs and 19 new lows while the Nasdaq Composite recorded 32 new highs and 81 new lows. (Reporting by Ragini Mathur and Utkarsh Hathi in Bengaluru; Editing by Devika Syamnath)