* July U.S. producer prices rise; industrial output up
* King Digital, El Pollo Loco slump as results disappoint
* J.C. Penney, Nordstrom rise after strong results
* Indexes: Dow up 0.2 pct, S&P up 0.09 pct, Nasdaq down 0.1 pct (Adds details, changes comment, updates prices)
By Tanya Agrawal
Aug 14 (Reuters) - Wall Street was mostly higher on Friday as a raft of positive economic data indicated a healthy start to the third quarter.
The Dow and the S&P 500 were on track to post slight gains for the week, but the Nasdaq was set to close flat in a choppy week during which China devalued its currency, hitting markets and derailing predictions of a rate hike.
U.S. producer prices rose for a third straight month in July, suggesting the drag on inflation from weaker oil prices was easing, while industrial output advanced at its strongest pace in eight months in July.
Inflation has been persistently running below the Fed's 2 percent target.
Most traders and economists are expecting a September rate hike, but macro concerns have prompted some to argue that the Fed may wait until December to hike interest rates for the first time in nearly a decade.
"While the case for a near-term correction in U.S. equity markets is increasingly significant, long-term prospects remain strong," said Andrew Barber, chief market strategist at Eagleview Capital.
"Despite the prospect of rising rates the credit boom that we have lived through since 2008 shows no signs of abating, and this is likely to continue to fuel buybacks and other financial engineering that can keep sending equities higher."
At 10:55 a.m. ET (1455 GMT) the Dow Jones industrial average was up 29.53 points, or 0.17 percent, at 17,437.78
The S&P 500 was up 1.81 points, or 0.09 percent, at 2,085.2 and the Nasdaq Composite was down 6.30 points, or 0.13 percent, at 5,027.26.
Seven of the 10 major S&P sectors were higher, with the financial index's 0.3 percent rise leading the advancers.
With the second-quarter earnings season drawing to a close, Corporate America's profit is estimated to have increased 1.2 percent, while revenue is expected to have slipped 3.5 percent, according to Thomson Reuters estimates.
King Digital's shares slumped 10.6 percent to $13.60, while El Pollo Loco fell 17.9 percent to $15.07 a day after the companies reported quarterly results.
J.C. Penney was up 8.7 percent at $8.77 after the department store operator reported a smaller-than-expected quarterly loss.
Nordstrom shares rose 6 percent $79.44 after the upscale department store chain posted better-than-expected quarterly results.
Advancing issues outnumbered decliners on the NYSE by 1,537 to 1,251. On the Nasdaq, 1,299 issues fell and 1,211 advanced.
The S&P 500 index showed ten new 52-week highs and eight new lows, while the Nasdaq recorded 31 new highs and 72 new lows. (Reporting by Tanya Agrawal in Bengaluru; Editing by Savio D'Souza)