* U.S. CPI falls in Sept; weekly jobless claims down
* Citi rallies after results
* Biotech index up 4.4 pct
* S&P rises to highest in eight weeks
* Indexes up: Dow 1.3 pct, S&P 1.5 pct, Nasdaq 1.8 pct (Updates close with Mattel down after the bell)
By Caroline Valetkevitch
Oct 15 (Reuters) - A tame inflation reading and strong earnings from Citigroup led investors to pile back into stocks on Thursday, pushing Wall Street to its best level in eight weeks.
Equities added to gains late in the session, and eight of the S&P 500 sectors registered increases of more than 1 percent.
More than four stocks rose for every one that fell on both the New York Stock Exchange and the Nasdaq.
The S&P 500 health care index jumped 2.2 percent despite a disappointing forecast from HCA Holdings, which fell 5 percent to $72.21. The Nasdaq Biotech Index jumped 4.4 percent, rallying sharply before the close.
"There's a lot of cash on the sidelines, and we did break through to a new high since the August decline," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York. "Volume picked up as well, which is a strong indicator."
Citigroup rose 4.4 percent to $52.97 after the third-biggest U.S. bank's results beat estimates, while Goldman Sachs was up 3 percent at $184.96, despite weak results.
The financial sector jumped 2.3 percent, recovering from losses on Wednesday, when JPMorgan results disappointed.
U.S. consumer prices declined the most in eight months as gasoline costs fell in September, but a rise in core CPI, which strips out food and energy costs, suggested inflation was starting to firm. Unemployment benefit claims fell in the last week, pointing to a strong labor market.
The data, following a weak retail sales report, added to uncertainty over the timing of an interest rate increase from the Federal Reserve.
The Dow Jones industrial average rose 217 points, or 1.28 percent, to 17,141.75, while the S&P 500 gained 29.62 points, or 1.49 percent, to 2,023.86, its highest level in eight weeks.
The Nasdaq Composite added 87.25 points, or 1.82 percent, to 4,870.10.
Worries about the U.S. earnings outlook had pressured stocks earlier this week.
Also in the healthcare sector, insurer UnitedHealth slipped 1.6 percent to $120.17 even though it reported a slightly better-than-expected profit in the third quarter.
Nike rose 2.3 percent to $128.79. The world's largest sportswear maker said it expects revenue growth to be faster over the next five years.
Netflix slid 8.3 percent to $101.09, a day after the video-streaming service said U.S. subscriber additions came in below expectations for the third quarter. The stock weighed the most on the S&P.
After the bell, shares of Mattel were down 2.4 percent at $22 following its results and guidance.
The S&P 500 posted 11 new 52-week highs and 7 new lows; the Nasdaq recorded 42 new highs and 41 new lows.
About 7.0 billion shares changed hands on U.S. exchanges, below the 7.6 billion daily average for the past 20 trading days, according to Thomson Reuters data. (Editing by Nick Zieminski and Dan Grebler)