NEW YORK (CNN/Money) - Stocks rallied for a third straight day Wednesday as a mild inflation report cheered the bulls and cooled worries that the Federal Reserve would need to speed up its rate-hiking campaign.

Nasdaq and S&P futures pointed to a flat open Thursday, when fair value is taken into account.

The Dow Jones industrial average (up 132.57 to 10,464.45, Charts) added 1.3 percent, closing at its highest point since April 12.

The Nasdaq composite (up 26.50 to 2,030.65, Charts) also jumped about 1.3 percent and the Standard & Poor's 500 (up 11.76 to 1,185.56, Charts) index gained 1 percent.

A slump in oil prices, a bond market rally and strong results from tech bellwether Hewlett-Packard added to Wall Street's upbeat mood.

But "what's driving the advance today is the belief that the Fed won't have to pick up the pace," said Tony Dwyer, equity market strategist at FTN Midwest Research. "That's a big thing. It means that economic growth can continue at a solid pace, and that's lifting stocks."

Consumer prices at the core level were flat in April, the government reported Wednesday, helping to calm worries about inflation.

While overall consumer prices rose 0.5 percent, investors focused instead on the so-called "core" reading, which strips out food and energy. Economists had forecast it would rise 0.2 percent in April.

The news sent stocks higher -- particularly those that are economically sensitive -- and sent Treasury bond yields lower on bets the Federal Reserve could continue raising interest rates at a "measured" pace.

The bond rally lowered the benchmark 10-year note yield to 4.08 percent from 4.11 percent late Tuesday. Bond prices and yields move in opposite directions.

Dwyer said that beyond the hoopla of the past three days, the market has actually been doing pretty well on a more low-key basis for the last couple of weeks, with funds flowing into influential sectors such as financial and information technology. Strength in those sectors is key to extending an advance, he added.

"What this does is buy us some time," he added, noting that the market is through with most of the first-quarter earnings reports, and has just gotten past the most recent Fed meeting and monthly employment report.

Although markets would seem to be on a roll, some analysts caution that it is too soon to say that the advance is sustainable.

"We're heading into the typically slower summer months, and it's slow already," said David Briggs, head of equity trading at Federated Investors. "It's hard to imagine a sustained rally taking hold."

Market breadth was positive and volume was active in the afternoon after a slow morning. On the New York Stock Exchange, winners beat losers three to one on volume of 1.77 billion shares. On the Nasdaq, advancers topped decliners by 11 to five as close to 2 billion shares changed hands.

A number of rate-sensitive stocks and sectors moved higher, including the home-building sector. The Dow Jones Home Construction (up $37.83 to $877.04, Research) index rallied 4.5 percent and was one of the best performing sectors.

Gains in banks and other financial services issues sent the Amex Securities Broker/Dealer (up $3.51 to $145.95, Research) index up 2.5 percent.

Nevertheless, the blue-chip rally was broad, with 26 out of 30 stocks in the Dow industrials rising.

Alcoa (up $0.64 to $27.85, Research), General Motors (up $0.76 to $31.61, Research), Home Depot (up $0.94 to $39.80, Research) and Honeywell (up $0.93 to $36.91, Research) were among the standouts.

The biggest Dow gainer was Hewlett-Packard (up $1.00 to $22.55, Research), which rose 4.6 percent following the release of its earnings late Tuesday. HP, the PC and printer maker, said it earned 37 cents per share, a penny more than expected and three cents more than a year earlier on revenue that also rose and topped estimates.

HP also forecast current-quarter revenue at the low end of its previous range, and issued an earnings forecast that was short of estimates. But investors focused on the positive and shares rose.

Competitors rose, too, including IBM (up $2.07 to $76.36, Research), which added 2.8 percent.

Elsewhere in tech, Applied Materials (down $0.10 to $15.94, Research) also reported earnings and revenue late Tuesday that topped estimates. However, the results fell short of the prior-year period, and shares slipped.

Yet, the broader chip sector was not affected by AMAT's weaker results, and the Philadelphia Semiconductor (up 4.33 to 418.89, Charts) sector added 1 percent.

Also helping stocks was a 3.5 percent slump in oil prices after the government's weekly inventory report showed a larger-than-expected jump in crude and gasoline stockpiles.

U.S. light crude for June delivery tumbled $1.72 to settle at $47.25 a barrel on the New York Mercantile Exchange.

Unsurprisingly, one of the few sectors having a bad day was energy, which fell with the price of the commodity and as investors rotated money out of the recent winner and put it into other sectors.

The Philadelphia Oil Services (Charts) sector index fell 0.7 percent.

In currency trading, the dollar slid versus the euro and yen.

COMEX gold rose $2.10 to settle at $421.90 an ounce.