WRAPUP 3-US consumer prices edge up in April, energy steady

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* Consumer prices rise smaller-than-expected 0.2 percent

* Stocks up sharply, bond prices dip, while dollar rises

* Energy prices unchanged but food prices post biggest gain since 1990

* U.S. mortgage applications rise a second straight week

By Mark Felsenthal

WASHINGTON, May 14 (Reuters) - U.S. consumer prices were tamer than expected in April on a lower energy price reading, giving the inflation-wary Federal Reserve a little breathing space as it seeks to fortify an anemic economy.

The 0.2 percent rise in the Consumer Price Index was less than the gain that Wall Street analysts polled by Reuters were expecting, a Labor Department report showed on Wednesday. The forecast was for an increase of 0.3 percent, following a March rise of 0.3 percent in the overall CPI. The core CPI, which excludes volatile food and energy prices, gained just 0.1 percent, or half the increase analysts had forecast.

News that price pressures might be more benign than believed drove stocks higher, while bonds prices fell. The dollar rose.