The Dow Jones Industrial Average rose 235.83 points, or 0.61 percent, to 39,005.49. The S&P 500 added 57.33 points, or 1.12 percent, to 5,175.27. The Nasdaq Composite Index increased 246.36 points, or 1.54 percent, to 16,265.64.
Seven of the 11 primary S&P 500 sectors ended in green, with technology and communication services leading the gainers by going up 2.54 percent and 1.17 percent, respectively. Meanwhile, utilities and real estate led the laggards by dropping 0.99 percent and 0.37 percent, respectively.
The latest U.S. consumer price index (CPI) in February revealed a 0.4 percent of month-on-month increase in prices and a 3.2 percent rise from the same period last year, surpassing expectations and accelerating from January's 0.3 percent monthly rise and 3.1 percent annual increase. This represents the most substantial monthly surge since September.
"I think the market still feels that the Fed is going to cut rates at some point - not by a lot," said Craig Sterling, a portfolio manager and head of equity research at Amundi US. However, given the Federal Reserve's policy rate is unlikely to return to the lows seen in the past 15 years, companies might encounter the dual challenge of increased borrowing expenses and the loss of pricing leverage associated with peak inflation.
"Companies can certainly hide a lot when you can raise prices," Sterling said, a nod to the pandemic boom in earnings as inflation climbed to a peak above 9 percent in 2022. "But that's going to be harder."
The U.S. Treasury yields climbed, reversing the declines seen last week, following tepid interest from investors in the government's recent debt issuance. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, inched up to 4.154 percent.
In terms of individual stocks on Tuesday, all members of the so-called "Magnificent Seven" experienced gains, with Nvidia leading the pack with a more than 7 percent increase in its stock price. Oracle surpassed earnings expectations due to increased demand for artificial intelligence, resulting in a 12 percent surge in its share price.
Archer Daniels Midland saw a 3.9 percent rise in its shares after confirming that an internal accounting investigation did not impact its overall earnings.
Meanwhile, Southwest Airlines announced a re-evaluation of its financial guidance, partly due to delayed aircraft deliveries from Boeing, which caused its stock to decline by 15 percent, the sharpest drop in the S&P 500. Similarly, shares of American and United airlines also experienced declines.
Boeing's shares decreased by 4.3 percent, while Spirit AeroSystems, the manufacturer of the fuselage involved in the Alaska Airlines incident, also saw a decline in its stock price.
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