(Recasts with preliminary market close, adds analyst comment)

By Sinéad Carew and Purvi Agarwal

Nov 13 (Reuters) - The Dow and the S&P 500 rose slightly

on Wednesday after October data showed consumer prices rising in

line with expectations, adding support to bets that the U.S.

Federal Reserve will cut interest rates in December.

The consumer price index (CPI) rose 0.2% in October for the

fourth straight month and advanced 2.6% on an annual basis, the

Labor Department's Bureau of Labor Statistics said. Excluding

the volatile food and energy components, the CPI increased 0.3%

in October, meeting economists' forecasts.

After the report, traders' bets reflected a more than 82%

probability for a 25 basis-point interest rate cut at the Fed's

December meeting, up from 58.7% on Monday, according to CME

group's FedWatch tool.

While some Fed officials sounded more cautious on Wednesday,

Minneapolis Fed President Neel Kashkari told Bloomberg TV that

he was confident inflation was headed down, noting that the CPI

data "confirms" that downward path.

"There's some relief inflation didn't come in ahead of

expectations. That was a concern coming into today's CPI

report," said Angelo Kourkafas, senior investment strategist at

Edward Jones. "The fact we got a right in-line number helped

alleviate some of those fears. Nothing we saw today from today's

data argues against a December rate cut."

Outperformance in the consumer discretionary sector index

, up more than 1% on the day, was likely due to bets on

rate cuts, according to Kourkafas.

Still, Dallas Federal Reserve President Lorie Logan said the

U.S. central bank should proceed cautiously on further interest

rate cuts to keep from inadvertently re-igniting inflation.

St. Louis Fed President Alberto Musalem said the Fed is in

the "last mile" of its inflation fight though recent data raised

the risk that progress may slow or reverse, on Wednesday.

According to preliminary data, the S&P 500

gained 2.98 points, or 0.05%, to end at 5,986.97 points,

while the Nasdaq Composite lost 45.18 points, or 0.23%,

to 19,236.22. The Dow Jones Industrial Average rose 50.22

points, or 0.11%, to 43,960.43.

Also implying December rate cut bets, U.S. Treasury

2-year yields fell sharply after the inflation

report.

However, the benchmark 10-year yield regained

ground it lost after the data and rose as high as 4.46% as

investors focused on longer-term expectations that

President-elect Donald Trump's policies could exacerbate

inflation.

Despite inflation worries, investors are hopeful of a

pro-business stance and possible tax cuts from the incoming U.S.

president. Media outlets projected on Wednesday that the

Republican Party had won a majority in the House of

Representatives as well as the Senate.

"The market has already reacted quite positively to the

election news," said Venu Krishna, head of U.S. equity strategy

and global equity-linked strategies at Barclays. "A lot of the

optimism is baked in but what's not baked in fully is some of

the uncertainty that comes with certain significant policy

postures."

But while Krishna sees upside momentum for risk assets from

Republican policies, he said the market is contending with

concerns that "rates, inflation and valuations are bigger

headwinds now than they were in 2016, the last time Trump became

president."

In individual shares, Spirit Airlines' ( SAVE ) shares

plunged on Wednesday after a report the U.S. carrier is

preparing to file for bankruptcy protection, while the company

said it is talking with creditors.

Shares of EV maker Rivian soared after Volkswagen

on Tuesday raised its investment in the company by

16% to $5.8 billion.