At 14:00 ET (19:00 GMT), Dow Jones Industrial Average rose 283 points, or 0.7%, S&P 500 traded 1% higher, and the NASDAQ Composite rose 1.3%, with the latter two reaching intraday record highs.

Cooling CPI helps boost rate cut hopes, sends Treasury yields lower

The overall consumer price index slowed to 0.3% pace in April from 0.4% a month earlier, slower than the 0.4% pace economists had expected, boosting hopes that the disinflation trend is back on track. That took the annual figure to 3.4%, down from a 3.5% pace.  

The core CPI, which strips out volatile food and energy prices, rose 0.3% versus March levels, while the annual core CPI inflation rate eased to 3.6% from 3.8% in March.

The slowdown in consumer prices came a day after a producer price inflation came in hotter than expected. 

But on the heels of the hot producer price report, a "cooler-than-expected consumer price report has immediately eased concerns of rapidly rising inflation, fueling investors’ hopes for rate cuts in the coming months," Stifel said in a Wednesday note.

Traders see a 50.5% chance that the U.S. central bank will start cutting rates in September, according to the CME FedWatch Tool.

Treasury yields fell sharply on the news with the 10-year Treasury down 10 basis point to 4.34%.