US STOCKS-Wall Street muted after hot inflation douses early rate-cut hopes

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Rising services costs boost US producer inflation in Jan

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Roku slides on forecasting bigger first-quarter loss

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Coinbase surges after first profit in 2 years

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Indexes: Dow and S&P flat, Nasdaq down 0.24%

(Updated at 1:47 p.m./ 1847 GMT)

By Carolina Mandl, Amruta Khandekar and Ankika Biswas

Feb 16 (Reuters) -

U.S. stocks were muted on Friday with the Nasdaq showing the largest decline after a hotter-than-expected producer prices report frustrated market speculation of imminent interest rate cuts by the U.S. Federal Reserve.

A Labor Department report showed producer prices increased more than expected in January amid strong gains in costs of services, heightening fears that inflation was picking up after months of cooling.

The producer price index data gave Fed policymakers fresh validation for their wait-and-see approach to cutting rates after a hot consumer prices report sparked a selloff in equity markets earlier this week. A slump in January retail sales did provide some relief on Thursday.

"Investors had their second surprise of the week on inflation. The theme of higher for longer is really the continuing market narrative," said Greg Bassuk, Chief Executive Officer at AXS Investments.

Treasury yields spiked after the report, with the yield on the benchmark 10-year note last at 4.297%, as traders added to bets that the Fed may defer the first rate cut until after June.

Two Fed officials set the tone for careful policymaking moves. Atlanta Fed President Raphael Bostic noted more data is needed to convince him inflation pressures are truly falling, but he is open to lowering rates at some point in the next few months. Federal Reserve Bank of San Francisco President Mary Daly said on Friday that "there is more work to do" to ensure stable prices, despite remarkable progress.

"The earliest time frame for the Fed to potentially embark on a cutting cycle is going to be the June meeting," said Jeffrey Schulze, director and investment strategist at ClearBridge Investments.

At 01:47 p.m. the Dow Jones Industrial Average fell 2.47 points, or 0.01%, to 38,770.65, the S&P 500 gained 0.82 points, or 0.02 %, to 5,030.55 and the Nasdaq Composite lost 37.44 points, or 0.24 %, to 15,868.73.

Most megacap stocks dropped, with Meta Platforms falling 2.3% and dragging the S&P 500 communication services index down 1.4%.

Robust corporate earnings and a surge in enthusiasm around the potential for artificial intelligence has helped the S&P 500 close above the 5,000-point mark for the fourth time this year.

Applied Materials jumped 8.2% after the semiconductor equipment supplier forecast better-than-expected second-quarter revenue on strong demand for advanced chips used in AI.

Vulcan Materials gained 6.1% after forecasting a higher full-year profit, aiding a 1% rise in the S&P 500 materials sector index.

Roku slumped 22.3% after forecasting a bigger first-quarter loss, while crypto exchange Coinbase Global jumped 13.3% on posting its first quarterly profit since 2021.

DoorDash dropped 8.3% as the delivery firm forecast a quarterly profitability metric below expectations, hurt by higher labor costs.

(Reporting by Amruta Khandekar and Ankika Biswas in Bengaluru; Editing by Maju Samuel and Chizu Nomiyama)