US STOCKS-S&P 500, Nasdaq climb as Apple gains, inflation meets expectations

For a Reuters live blog on U.S., UK and European stock markets, click LIVE/ or type LIVE/ in a news window.

Updates with mid-session trading levels

By Shashwat Chauhan and Sukriti Gupta

Jan 31 (Reuters) - The S&P 500 and the Nasdaq rose on Friday, as Apple gained following a strong sales forecast and a reading of the U.S. central bank's favored inflation gauge reinforced expectations that the Fed would keep interest rates unchanged for longer.

U.S. prices increased as expected in December, while consumer spending surged, suggesting that the Federal Reserve has the leeway to delay cutting borrowing costs for an extended period this year.

Traders kept their bets on the Fed waiting until June to resume rate cuts at 70% after the data was released, futures that settle to the central bank's policy rate showed.

The central bank held interest rates steady in its latest rate decision earlier this week, with Fed Chair Jerome Powell saying there would be no rush to lower them again until inflation and jobs data made it appropriate to do so.

Apple AAPL.O lost some steam and was up 0.7% after upbeat executive comments in its earnings on Thursday, in a sign the company expects to recover from a dip in iPhone sales as it rolls out AI features.

"We saw continued softness in China (and) that's always been a pain point for Apple," said Mark Malek, chief investment officer at Muriel Siebert & Co.

"But the reasons that they gave for the slide in iPhone sales in China have more to do with supply-chain problems, less to do with demand. So the demand appears to be there."

Fed Governor Michelle Bowman acknowledged before Friday's data that inflation risks were on the upside, while Chicago Fed President Austan Goolsbee said the data was a bit better than expected, indicating that inflation was on the path to the 2% target.

Keeping gains in check on the Dow, Chevron CVX.N dropped 3.7% after reporting fourth-quarter earnings below estimates.

Exxon Mobil XOM.N also fell 0.6% after quarterly results, pulling the energy sub-sector .SPNY down 1.2%.

At 11:28 a.m. ET, the Dow Jones Industrial Average .DJI fell 3.40 points, or 0.01%, to 44,878.73, the S&P 500 .SPX gained 41.36 points, or 0.68%, to 6,112.53, and the Nasdaq Composite .IXIC gained 248.11 points, or 1.26%, to 19,929.86.

All three indexes were set for a flat-to-higher weekly finish, as most AI-linked stocks recouped some losses following a rout after Chinese startup DeepSeek unveiled a breakthrough in low-cost artificial-intelligence models, triggering a selloff.

Despite this week's volatility, all three major indexes were on track for monthly gains, with the S&P 500 being less than 1% short of its all-time high, hit last week.

Meanwhile, global markets stayed vigilant ahead of U.S. President Donald Trump's Saturday deadline to impose a 25% tariff on imports from Mexico and Canada.

Among other stocks, Atlassian TEAM.O jumped 18.1% after the enterprise software developer projected third-quarter sales above estimates and raised its annual revenue forecasts.

Advancing issues outnumbered decliners by a 1.28-to-1 ratio on the NYSE, and by a 1.28-to-1 ratio on the Nasdaq.

The S&P 500 posted 25 new 52-week highs and two new lows, while the Nasdaq Composite recorded 55 new highs and 51 new lows.