The Dow jumped 1.4%, the S&P 500 added 1.9% and the Nasdaq soared nearly 2.4%.

Data from the Labor Department showed the smallest rise in underlying inflation in two years... with no month-to-month uptick for consumer prices.

But Lisa Erickson, Head of Public Markets Group at U.S. Bank Wealth Management, says that while the Fed may feel a quote, "sense of relief," the battle over inflation may still not be over.

"If you look at today's number, while very positive both in the core and headline numbers in terms of price pressures, you also see that the absolute numbers, they're still higher than the Fed's, 2% target - around 4% for core and still in the 3s for headline. And so there still is some way to go. So again, a positive report in terms of potentially making a pause in the Fed rate rises come a little bit sooner, but not conclusive."

Among individual movers, shares of Snap jumped 7.5% following news that Amazon will allow Snapchat users in the U.S. to buy some products listed on the ecommerce company directly from the social media app.

Home Depot gained nearly 5.5% after the home improvement chain beat quarterly profit estimates.

Also outperforming the broader market were shares of Tesla, which jumped more than 6%.

The small-cap Russell 2000 index and rate-sensitive S&P 500 real estate sector both added more than 5%, while the utilities sector rose nearly 4%.

All three registered their biggest daily percentage increases in a year.