Stocks rose for the fourth day in a row.
The Dow climbed 253 points Wednesday, and it's back in positive territory for the year.
Investors shrugged off warning signs about inflation. The Labor Department reported consumer prices rose 2.1% over the past year - more than economists had predicted but not enough to freak out the market.
January retail sales came in at their lowest level in 11 months, signaling the economy may not be expanding too quickly.
The Federal Reserve has a target of 2% for inflation. Investors worry that as it inches higher, the Fed will hike interest rates more quickly than planned keep the economy from overheating. Higher interest rates raise the cost of borrowing and put a damper on corporate profits.
"Investors were looking for some hard results on inflationary data, and that's what we got today," said Charlie Ripley, senior investment strategist for Allianz Investment Management. Wall Street will be watching another inflation indicator, the producer price index, on Thursday.
But it's hard to take the data on consumer prices "and say inflation is going to run rampant," Ripley said. "The economic backdrop hasn't really changed. Markets are taking this more in stride."
Rock-bottom interest rates have driven the nine-year bull market and juiced stock prices. The Fed has signaled it will raise rates three times this year for the second year in a row.
The Fed funds futures market, a barometer of how fast investors think the Fed will raise interest rates, ticked up after the consumer price data landed, said Quincy Krosby, chief market strategist at Prudential Financial.
Fear about inflation sparked the market sell-off that began February 2, when the Labor Department reported that wages grew at the fastest pace in nine years. The Dow fell 1,000 points twice last week.
Recent tax cuts have "complicated" the Fed's strategy by adding more fuel to the economy, said PNC Chief Economist Gus Faucher.
The possibility of creeping inflation showed up Wednesday in the bond market, where years of low returns have encouraged investors to put their money into stocks instead of steadier bond yields.
The yield on the 10-year Treasury note immediately jumped following consumer price data, from 2.83% to a four-year high of 2.91%.
In recent weeks, yields and stocks had been moving in opposite directions. Wednesday trading signaled that they may be returning to a more stable relationship.
"The market has done very well with 3% 10-year yields, 4% 10 year-yields and even 5%," Krosby said. "It's the market's job to adjust to the backdrop of interest rates."
Peter Boockvar, chief investment strategist at Bleakley Advisory Group, said Wednesday trading was unusual.
"We had a very vicious sell-off, and now we're having an oversold rally," he said. "I would not be surprised if we gave this back in the next day or so."