NEW YORK (CNNMoney.com) - Stocks mounted a late day rally Wednesday, continuing a pattern of volatility, following a key inflation report that came in above forecasts but at least provided some certainty the Federal Reserve would continue raising rates.

The Dow Jones Industrial Average (up 110.78 to 10,816.92, Charts) gained 1 percent to go positive again for the year while the broader Standard & Poor's 500 index (up 6.35 to 1,230.04, Charts) advanced 0.5 percent. The Nasdaq composite (up 13.53 to 2,086.00, Charts) rose about 0.7 percent, snapping an eight-session losing streak. Both the Nasdaq and the S&P were down just an hour before the close.

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Oil prices rose, the dollar slipped and Treasurys sank.

Some investors took the volatility of the last several sessions as a sign that the market downturn, originally predicted by many for this fall, was simply happening now and that the decline is reaching its bottom.

"It's oversold, underloved, definitely due for a bounce," said Bryan Piskorowski, a market analyst at Wachovia Securities. "We'll be coming back to support levels and trying to get a toe hold here."

The market has fallen for six of the past eight sessions - on Tuesday the 30-stock Dow fell into negative territory for the year, about 8 percent off its May high. Wednesday's finish puts the Dow back on the plus side for the year, although just by 0.9 percent.

The Nasdaq is still 12 percent below its April high, putting it firmly in "correction" territory.

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

Piskorowski discounted talk of inflation and higher interest rates, and said the market is simply factoring in an economic slowdown forecast for later this year.

While he thought the market was reaching a bottom, he also didn't see any major catalyst in the near future to provide that bounce and suggested markets could remain volatile for a while.

"It sets us up for a long hot summer," he said.

Traders will watch for Bear Stearns (Research) to mirror its peers and post significantly higher profit when the investment bank reports earnings before the opening bell Thursday.

Economic reports on tap for Thursday include initial jobless claims and industrial production.

Earlier Wednesday, the government said its key measure of retail prices, the Consumer Price Index, rose 0.4 percent in May, in line with economists' forecasts.

But the closely watched core CPI, which strips out often volatile food and energy prices, rose 0.3 percent, which was more than the 0.2 percent economists had forecast. (Full story)

The higher core CPI reading makes it all but certain the Federal Reserve will raise rates for the 17th consecutive time when it meets again later this month.

"Everybody has accepted that the Fed is going to do it," said Tony Dwyer, an equity market strategist as FTN Midwest.

Several Fed officials have said recently that they don't know how much further rates would have to rise to quell inflation, causing confusion in financial markets.

Worries about inflation and rates have fueled a worldwide stock selloff in recent weeks, as investors worry that the Fed will raise rates too far, cutting off cheap money for businesses and hurting corporate profits. (full story)

In addition, the uncertainty about how high rates might go has been just as poisonous to investors as any worries about inflation itself.

"That was a major number, and now it's out of the way," said Dwyer, referring to the CPI. "It does take some uncertainty out of it."

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

In its "beige book," or summary of economic conditions, the Fed said Wednesday that energy prices were being passed along to consumers but the overall economy remained healthy, news that was expected.

And slowing home construction and appreciation will dampen economic growth this year, Federal Reserve Board Governor Susan Schmidt Bies said Wednesday in remarks prepared for the Mortgage Bankers Association, Reuters reported.

Bies also restated her feeling that core inflation is a little too high for her comfort level.

All of this fed investor fears that the economy is slowing and inflation is picking up.

Elsewhere, oil prices moved higher despite a report showing a larger-than-expected rise in U.S. gasoline stocks.

U.S. crude for July delivery gained 58 cents to settle at $69.14 a barrel on the New York Mercantile Exchange.

And gold held its ground following steep losses Tuesday. The COMEX August contract slipped 30 cents an ounce to settle at $566.50 after plunging $44.30 Tuesday.

In corporate news, aircraft maker Boeing (up $5.03 to $82.01, Research) jumped over 6 percent after its main rival Airbus warned Tuesday of new delays of at least six months in deliveries of its A380 superjumbo.

Software provider Microsoft (up $0.37 to $21.88, Research) warned of eight "critical" security flaws in its Windows operating system and Office software after the market close Tuesday, but shares nonetheless rose 1.7 percent Wednesday.

Ethanol producer VeraSun Energy priced its initial public offering at $23 per share, above the its previous forecast range of $21 to $22. VeraSun (up $7.00 to $30.00, Research) shares surged 30 percent in their first day of trade.

Treasury prices tumbled, lifting the yield on the benchmark 10-year note to 5.06 percent from the 4.96 percent late Tuesday as bond investors bet rates are headed higher after the inflation news.

The dollar fell against the yen and the euro.

Overseas, major markets closed mostly higher in Asia, as stocks rebounded after a sell-off. Major European shares ended mixed.

Luxembourg-based steelmaker Arcelor said 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.

Market breadth was positive, although just barely. On the New York Stock Exchange, advancers narrowly topped decliners on volume of 1.97 billion shares. On the Nasdaq, winners also edged out losers as 2.14 billion shares changed hands.

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