Wall Street had feared that the Labor Department's Producer Price Index, which measures wholesale prices, would show inflation taking hold in the economy. But while the PPI rose 0.7 percent for March due to higher energy and food prices, the closely watched "core" PPI without those volatile costs grew just 0.1 percent, less than the 0.2 percent economists expected.

"We're finally seeing some numbers that point to less inflation in the pipeline," said Lincoln Anderson, chief investment officer at LPL Financial Services in Boston. "Coupled with a pretty strong earnings outlook for the quarter, this hopefully puts a floor on the market and gets things turned around again. The fundamentals of the economy remain good."

The Dow Jones industrial average rose 56.16, or 0.56 percent, to 10,127.41, coming off of four straight down sessions and a loss of 436 points.

Broader stock indicators also gained ground. The Standard & Poor's 500 index was up 6.80, or 0.59 percent, at 1,152.78, and the Nasdaq composite index gained 19.44, or 1.02 percent, to 1,932.36.

Worries about U.S. oil refining capacity pushed crude futures sharply higher, keeping stock gains somewhat in check. A barrel of light crude settled at $52.29, up $1.92, on the New York Mercantile Exchange.

The lack of a major selloff as crude futures climbed nearly $2 per barrel showed that Wall Street may no longer be concerned about the inflationary effects of oil. And analysts said the PPI report may be showing a clear end to the market's inflation worries — as long as tomorrow's Consumer Price Index, measuring retail prices, also comes in better than expected.

"I believe oil is disinflationary, just because when you spend more on gasoline, you spend less on other things," said John Lynch, chief market analyst at Evergreen Investments. "More importantly, wage growth is moderate, so demand is kept in check. And with demand low, you can't raise prices or trigger inflation. I think we're seeing that in the PPI."

The bond market surged after the PPI report, with the yield on the 10-year Treasury note falling to 4.20 percent from 4.27 percent late yesterday. The dollar fell against most major currencies, while gold prices were higher.

The Federal Reserve's steady interest rate hikes, designed to shore up the dollar and combat inflation, may be starting to take their toll on the booming housing market. New housing construction tumbled 17.6 percent in March, according to the Commerce Department, far more than the 4.8 percent drop Wall Street expected. Part of the drop could be attributed to the weather, but rising rates, which have been slow to creep into long-term debt like mortgages, was considered a much larger factor.

In earnings news, an 11 percent hike in sales helped Johnson & Johnson to a strong first-quarter profit. The healthcare company beat Wall Street's profit expectations by 5 cents per share. Johnson & Johnson edged a penny higher to $69.05.

Coca-Cola Co. climbed $1.43 to $42.40 although profits fell 11 percent from a year ago. Investors, however, had been more concerned with flagging sales, and the world's largest beverage maker said an aggressive marketing campaign helped boost sales overseas. The company beat analysts' forecasts by 4 cents per share.

Drug maker and Dow industrial Pfizer Inc. had a far worse quarter, with profits plunging 87 percent due to numerous one-time charges related to suspending sales of its pain reliever Bextra due to health risks. Charges aside, Pfizer still beat Wall Street forecasts by a penny per share. Pfizer was down 18 cents at $27.42.

Struggling automaker General Motors Corp. lost 10 cents to $26.09 after reporting a $1.1 billion quarterly loss. The Dow component's quarterly results, the worst since 1992, were hammered by spiraling healthcare costs and disappointing North American sales, but the company nonetheless beat Wall Street's sharply reduced loss estimates by a penny per share.

Wall Street firm Merrill Lynch & Co.'s profits fell 3 percent, primarily due to March's shaky stock market, but still surpassed analysts' estimates by 3 cents per share. Merrill Lynch, which also announced a dividend hike and stock buyback program, climbed 80 cents to $54.04.

Advancing issues outnumbered decliners by about 5 to 2 on the New York Stock Exchange, where preliminary comnsolidated volume came to 2.15 billion shares, compared with 2.18 billion traded yesterday.

The Russell 2000 index of smaller companies was up 9.61, or 1.64 percent, at 594.94.