US STOCKS-Wall Street dips again, inflation data calms nerves

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* CPI and core CPI rises less-than-expected in September

* Indexes dip: Dow 0.11 pct, S&P 0.27 pct, Nasdaq 0.05 pct

* Treasury yields extend drop after CPI data

* Tech and FAANG stocks lead market gainers

* Walgreens and Delta climb after quarterly results (Updates to open)

Oct 11 (Reuters) - U.S. stocks steadied slightly after their worst day in eight months on Thursday as a smaller-than-expected rise in consumer prices suggested inflationary pressures were easing, weakening the case for an aggressive campaign of further interest rate rises.

The Consumer Price Index (CPI) increased 0.1 percent last month, Labor Department data showed, as did core CPI, which excludes volatile food and energy components. Both were below economists' forecasts of a 0.2 percent climb.

The main U.S. stock indexes were still slightly lower after opening, but U.S. Treasury yields, whose rise above 3 percent has been a key factor weakening demand for U.S. stocks, retreated further after the numbers.

"At least for right now, inflation fears seem to be taking a pause. There is a tendency in the markets to overact in both-ways in the short-term which is what we saw last week," aid Art Hogan, chief market strategist at B. Riley FBR in New York.

Five of the 11 major S&P sectors rose, with some of the biggest losers from Wednesday's slump leading the gainers.

The technology sector increased 0.65 percent and the communication services sector gained 0.50 percent.

The two sectors house four of the five high-growth FAANG stocks. Facebook, Apple, Netflix and Alphabet were up between 1 percent and 1.9 percent. Amazon, part of consumer discretionary, was down 0.6 percent.

At 10:20 a.m. ET the Dow Jones Industrial Average was down 28.70 points, or 0.11 percent, at 25,570.04, the S&P 500 was down 7.61 points, or 0.27 percent, at 2,778.07 and the Nasdaq Composite was down 3.93 points, or 0.05 percent, at 7,418.12.

Energy stocks fell 1 percent as oil prices hit two-week lows after an industry report showed U.S. crude inventories rose more than expected.

Walgreens was up 0.4 percent, reversing premarket losses, after the drugstore chain's profit soared 88.5 percent as more people brought prescription medicines and it benefited from its acquisition of Rite Aid stores.

Delta Air Lines rose 4.6 percent after reporting a third-quarter profit that beat estimates as strong demand for air travel and tight control over costs helped the airline battle rising fuel expenses.

Declining issues outnumbered advancers for a 1.57-to-1 ratio on the NYSE and a 1.08-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week highs and 36 new lows, while the Nasdaq recorded 5 new highs and 154 new lows. (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Shounak Dasgupta)