NEW YORK (AP) — Wall Street rebounded Thursday, rising sharply as oil prices fell and investors took advantage of bargains in financial stocks after two straight days of heavy declines.

Crude backtracked as traders who sent oil soaring Wednesday in response to declining gasoline supplies realized that demand for fuel is still falling. Light, sweet crude fell 99 cents to settle at to $115.01 a barrel on the New York Mercantile Exchange. The pullback helped reassure stock traders who are concerned that rising oil and gas prices would force consumers to keep paring back their spending.

Stocks initially fell after the Labor Department reported another hefty jump in consumer prices. The 0.8 percent overall rise in July's Consumer Price Index was not as large as June's increase, but it was twice as high as the market expected, and brings inflation to its highest annual pace in 17 years. The core index, which eliminates food and energy prices, is not up as much, but it still rose by 0.3 percent last month — slightly more than forecast.

But the market turned higher as investors began looking more positively at stock prices that were beaten down the past two sessions amid rising anxiety about credit losses at banks and brokerages.

"The greater fear right now is missing the next big rally," said Richard Dickson, senior analyst at Lowry Research in Florida. "Inflation numbers were bad, but they are probably going to get better. The fact that the market has not sold off with any strength, investors are saying, 'Hey, let's go ahead and buy."'

Still, Wall Street has been highly volatile for months, and investors found it hard to hold to their enthusiasm; stocks came off their highs late in the day as some uncertainty about financials crept back into the market.

"(Investors) have different opinions as to what the value of those companies are given the tremendous difficulties they face," said Kevin Dorwin, a principal with San Francisco-based Bingham, Osborn & Scarborough.

According to preliminary calculations, the Dow Jones industrial index rose 82.97, or 0.72 percent, to close at 11,615.93, after rising more than 180 points earlier in the day. It lost a total of nearly 250 points on Tuesday and Wednesday.

The Standard & Poor's 500 index rose 7.10, or 0.55 percent, to 1,292.93, and the Nasdaq composite index rose 25.05, or 1.03 percent, to 2,453.67.

On the New York Stock Exchange, a relatively light 1.01 billion shares exchanged hands. Advancing issues outnumbered decliners by about 2 to 1 on the NYSE, and about 3 to 2 on the Nasdaq Stock Market.

Bonds rose higher after the Labor Department's data. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.90 percent from 3.94 percent late Wednesday.

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

The Labor Department also said Thursday that first-time claims for unemployment benefits fell by 10,000 last week — less than anticipated and a sign that the labor market is still pinched because of the weak economy. But investors seemed relatively unfazed by the latest economic data, as it reflects conditions in July, when oil prices hovered around a high of $140 a barrel.

With oil prices falling since mid-July, investors have grown optimistic and are looking ahead, anticipating that August's economic data will reflect this decline.

"There has been a sufficient amount of pessimism to warrant a short-term rally," said Chris Johnson, chief executive and chief investment strategist at Johnson Research. "Money is on the sideline waiting to move in."

Reports of more credit losses at banks such as UBS AG and JPMorgan Chase & Co. had sent shares tumbling earlier this week. But those declines made many companies look more attractive Thursday. Moreover, with many investors on vacation, and therefore fewer people trading, price moves were exaggerated.

JPMorgan Chase and Morgan Stanley became the latest financial firms to settle with regulators over their sale of auction-rate securities when they agreed Thursday to repurchase a combined $7 billion of the investments. The companies will also pay a combined $60 million in fines.

JPMorgan Chase rose 90 cents to close at $37.81, while Morgan Stanley rose 49 cents to $40.64.

Investors were pleased with Wal-Mart Stores Inc.'s earnings; the world's largest retailer reported a 17 percent rise in second quarter profit and raised its full-year outlook. The discounter has benefited from the economic slowdown, as U.S. shoppers search for lower prices.

Wal-Mart gained 22 cents to $58.10. The news pulled up other retailers, including Target Corp., which rose $1.58, or 3.3 percent, to $49.65. Macy's Inc., which on Wednesday posted a lower second-quarter profit and warned that its full-year earnings will fall short of expectations, jumped 56 cents, or 2.7 percent, to $21.22.

Airlines also showed sharp gains Thursday, buoyed by the falling price of oil.

AMR Corp., the parent company of American Airlines, gained 42 cents, or 3.9 percent, to $11.28, while UAL Corp., operator of United Airlines, rose 62 cents, or 5.1 percent, to $12.68. Delta Air Lines Inc. rose 48 cents, or 5.8 percent, to $8.82.

The Russell 2000 index, which primarily tracks small companies, rose 6.69, or 0.89 percent, to 754.38.

Overseas, Japan's Nikkei stock average fell 0.51 percent. Britain's FTSE 100 rose 0.90 percent, Germany's DAX index rose 0.31 percent, and France's CAC-40 rose 0.41 percent.