NEW YORK (Reuters) - U.S. consumer prices increased less than expected in April, suggesting that inflation resumed its downward trend at the start of the second quarter in a boost to financial market expectations for a September interest rate cut.

U.S. retail sales, on the other hand, were flat month-on-month in April, compared with expectations for a 0.4% increase.

MARKET REACTION:

STOCKS: U.S. stock index futures gained after the reports.BONDS: U.S. Treasury yields fell, 10-year yield last at 4.378%.FOREX: The dollar slid after both numbers came out.

COMMENTS:

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN"Inflation was lower and retail sales were flat. The economy is back on track to lower inflation, but the consumer is feeling the pinch. The consumer paid the price with higher inflation and now the consumer is paying the price with slower activity. Inflation adjusted retail sales haven't been as spectacular as the headline numbers suggest. This past month they were downright ugly. Even the buoyant food and drinking establishments category is losing some air."

JASON PRIDE, CHIEF OF INVESTMENT STRATEGY AND RESEARCH, GLENMEDE, PHILADELPHIA

"What the data does for the Fed is it establishes the first in what they are going to need to be a series of softer CPI reports for them to be able to cut later this year. If there were concerns that they weren't going to cut at all, this just alleviated some of those concerns.""What it doesn't do is put the Fed on a trajectory to begin cutting immediately. They're going to need a couple more reports to get some confidence."

ART HOGAN, CHIEF MARKET STRATEGIST, B RILEY WEALTH, NEW YORK

"The CPI report for the month of April is at the very worst in-line with expectations, and at the very best, no upside surprise, and in certain aspects better than had been anticipated."

"One of the things that started a down draft (in markets) in April was a hot CPI and this one is very much in line. This is not at all a hot read, and markets at some juncture this morning will be celebrating that."

"We haven't made significant progress this year in our battle against inflation... and this is a step in the right direction to get the Fed more comfortable. They have enough data facing them before the September meeting and that may well be the time that they decide to finally pull the trigger and cut rates once."

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

"We didn't have a report that was hotter than expected, it was in line with expectations."

"These numbers indicate that inflation will continue to move downward as we enter the second half of 2024 and it bodes well for at least one rate cut from the Fed by the end of the year."

"The markets are going to welcome this data."

"As long as inflation is moving in the right direction, inching closer to the Fed's target, we'll have one rate cut this year. if the number improves grossly there's a possibility of two rate cuts."

"The retail sales report indication that high rates are beginning to take a bite out of the consumer's pocketbook."

(Compiled by the Global Finance & Markets Breaking News team)