The Labor Department's report that consumer prices advanced 0.2 percent in April after rising 0.3 percent in March seemed to alleviate investors' worries that the recent surge in energy costs would force prices throughout the economy to spike higher. The moderation in prices comes despite the largest jump in food prices in 18 years.

Wall Street has been concerned that higher food and energy costs are cutting into consumers' ability to spend. Any pullback is an unnerving prospect for investors because consumer spending accounts for more than two-thirds of U.S. economic activity.

The Dow rose 66.20, or 0.52 percent, to 12,898.38. The Standard & Poor's 500 index rose 5.62, or 0.40 percent, to 1,408.66. The Nasdaq composite index rose 1.58, or 0.06 percent, to 2,496.70.

Light, sweet crude oil fell $1.58 to settle at $124.22 a barrel on the New York Mercantile Exchange.

Bond prices ticked lower as stocks advanced. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.92 percent from 3.94 percent late Tuesday.

The dollar was mixed against other major currencies, while gold prices fell.

Though yesterday's data were comforting and major indexes are approaching their highs of the month, analysts warn that one sector in particular is still being left behind - financials.

Concern that major investment banks and retail banks have more write-downs in coming quarters has put pressure on their stock prices. For instance, Lehman Bros. Holdings Inc. is down about 8.5 percent from its highs this month, while the S&P is down by only 1 percent.

In corporate news, Macy's Inc. reported it lost $59 million in the first quarter because of weaker sales and costs tied to combining businesses. But the results topped Wall Street's expectations and the stock rose 87 cents, or 3.62 percent, to $24.93.

Deere & Co. said its fiscal second-quarter profit rose 22 percent as higher crop prices drove global demand for its farm equipment. But the company said rising costs of raw materials could eat into its profit in the coming months. Deere fell $8.94, or 9.91 percent, to $81.25.

Jack in the Box Inc. fell $2.90, or 10.44 percent, to $24.87 after the fast-food chain said sales at restaurants open at least a year fell short of forecasts for the fiscal second quarter. The company lowered its sales target for the third quarter.

The Russell 2000 index of smaller companies fell 0.78, or 0.11 percent, to 736.07.

Overseas, Japan's Nikkei stock average rose 1.18 percent. Britain's FTSE 100 rose 0.07 percent, Germany's DAX index rose 0.33 percent, and France's CAC-40 advanced 1.13 percent.