NEW YORK (CNNMoney.com) - Stocks opened modestly higher Wednesday after a key inflation report came in slightly higher than expected but at least added clarity as to the direction of interest rates.

The Dow Jones Industrial Average (up 45.46 to 10,751.60, Charts) gained 0.5 percent, while the broader Standard & Poor's 500 index (up 2.73 to 1,226.42, Charts) rose slightly.

The Nasdaq composite (up 7.01 to 2,079.48, Charts) rose 0.4 percent.

Tuesday the Dow entered negative territory for the year, and closed down more than 8 percent from highs reached in May. The Nasdaq finished more than 12 percent lower from highs reached in April, putting it firmly in "correction" territory.

A correction is a drop of more than 10 percent while a 20 percent decline is widely seen as a bear market.

The Consumer Price Index, the government's key measure of retail prices, posted a 0.4 percent rise in May, compared to the 0.6 percent rise reported in April. That was in line with forecasts of economists surveyed by Briefing.com. (Full story)

But the even more closely watched core CPI, which strips out often volatile food and energy prices, rose 0.3 percent, the same as the rise seen in April that has fueled a sell-off in worldwide equity markets for the last month. Economists had forecast only a 0.2 percent increase in May.

The higher-than-expected CPI report fuels expectations that the Federal Reserve will continue to raise interest rates in a bid to fight inflation.

But many investors have been nervous in recent weeks that the Fed will raise interest rates too far, cutting off cheap money for business and hurting corporate profits.

The unease, combined with uncertainty over the Fed's next move, has helped fan the stock sell off that began in May.

On Tuesday, the Producer Price Index report, which measures inflation at the wholesale level, came in mixed and failed to ease fears that another rate hike was on the way. (Full story)

Oil prices were higher ahead of the weekly report on U.S. fuel inventories due at 10:30 a.m. ET.

U.S. crude for July delivery rose 32 cents to $68.88 in early electronic trading, while the July contract for Brent crude gained 2 cents to $66.94.

Major markets closed mostly higher Wednesday in Asia, as stocks rebounded from the sharp sell-off there Tuesday. Major European fell sharply in midday trading.

Steelmaker Arcelor announced it was holding new talks with hostile bidder Mittal Steel (Research) about a possible merger. And French insurer AXA (Research) agreed to buy Winterthur from Credit Suisse Group (Research) for $9.9 billion.

But aircraft maker Airbus warned after the close Tuesday of new delays of at least six months in deliveries of its A380 superjumbo. Shares of European Aeronautic Defense and Space Co., which owns 80 percent of Airbus, were down 27 percent in Paris trading.

Treasury prices were lower, lifting the yield on the benchmark 10-year note to 5.01 percent from the 4.96 percent level reached late Tuesday. The dollar was lower against the yen and the euro.

In other corporate news, software provider Microsoft (Research) warned of eight "critical" security flaws in its Windows operating system and Office software after the market close Tuesday.

Ethanol producer VeraSun Energy priced its initial public offering at $23 per share, above the its previous forecast range of $21 to $22, while apparel retailer J. Crew Group, signaled it is planning its own IPO of up to 18.8 million shares for $15 to $17.

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