* JPMorgan, Wells Fargo, Citigroup lower after quarterly results
* June CPI comes in below expectations
* Retail sales fall for second straight month in June
* Indexes up: Dow 0.4 pct, S&P 0.5 pct, Nasdaq 0.7 pct (Updates to late afternoon)
By Kimberly Chin
July 14 (Reuters) - U.S. stocks were up in late afternoon trading on Friday, with the Dow and S&P 500 both hitting intraday record highs after weak economic data dulled prospects of more interest rate hikes this year.
A decline in bank shares limited the day's gains, however.
Data showed consumer prices were unchanged in June and retail sales fell for a second straight month, pointing to tame inflation and subdued expectations of strong economic growth in the second quarter.
"The data is pointing to this continuation of fairly accommodative policy which has obviously served the market well over the last few years. So as far as the market is concerned, it's sort of more of the same," said Lee Ferridge, head of macro strategy for North America at State Street Global Markets in Boston.
Chances of a rate hike in December fell to 48 percent after the release of data, from 55 percent late Thursday.
Earlier this week, the market rose after Federal Reserve Chair Janet Yellen said future rate hikes could be gradual in the face of persistently low inflation.
Among the day's biggest drags were shares of banks following their results. JPMorgan Chase & Co reported a better-than-expected quarterly profit, boosted by strong loan growth and higher interest rates, though it reported its net interest income for the year would be lower than expected. Its stock was down 1.1 percent.
Shares of Citigroup were down 0.6 percent and Wells Fargo fell 1.3 percent, despite reporting quarterly profits that beat analysts' expectations.
The S&P 500 financial index fell 0.6 percent and was the only laggard among the 11 major S&P sectors.
The Dow Jones Industrial Average rose 89.11 points, or 0.41 percent, to 21,642.2, the S&P 500 gained 12.15 points, or 0.50 percent, to 2,459.98 and the Nasdaq Composite added 40.69 points, or 0.65 percent, to 6,315.12.
Bank of America, Goldman Sachs and Morgan Stanley will report results next week.
"The bar for earnings is higher this time around, especially after the phenomenal (profit) growth we saw in the first quarter. So companies that miss expectations or guide down will be overly punished," said Michael Scanlon, portfolio manager at Manulife Asset Management. Analysts estimate second-quarter earnings for the S&P 500 companies rose 8.1 percent from a year earlier. First-quarter earnings posted their best performance since 2011, according to Thomson Reuters I/B/E/S.
Earnings will be closely watched to see if high valuations are justified in the face of tepid inflation and a recent patch of mixed economic data.
The S&P 500 is trading at 17.3 times forward earnings, above the long-term average of 15 times, according to Thomson Reuters data.
Advancing issues outnumbered declining ones on the NYSE by a 3.24-to-1 ratio; on Nasdaq, a 1.53-to-1 ratio favored advancers. (Additional reporting by Caroline Valetkevitch in New York and Tanya Agrawal in Bengaluru; Editing by Arun Koyyur and Nick Zieminski)