NEW YORK (AP) – Wall Street bounded higher Tuesday, propelling the Dow Jones industrials up more than 100 points and past 13,400 for the first time, after mild inflation figures raised hopes the Federal Reserve might cut interest rates later this year.

Investors were encouraged to extend the market’s months-long rally after the Labor Department reported prices paid by consumers rose less than expected in April, and indicated that inflation may be easing as the economy continues to cool. The consumer price index rose 0.4 percent after rising 0.6 percent in March, while core prices – which exclude food and energy – rose 0.2 percent after a 0.1 percent gain.

Stocks have been gaining momentum as investors grow more optimistic that recent economic data – especially numbers like Tuesday’s CPI reading – will convince central bankers that inflation is tame enough to allow for lower rates.

“It’s certainly a good reaction to a lower-than-expected headline inflation number and that gives the Fed some will room if it needs to cut rates,” said Nick Raich director of research at National City Private Client Group, referring to the Federal Reserve’s next move on short-term interest rates.

Investors were undeterred by disappointing first-quarter results from Dow components Home Depot Inc. and Wal-Mart Stores Inc. Both companies are considered to be barometers of consumer spending, and weaker sales were interpreted as another sign of a slowing economy that could also motivate the Fed to cut rates.

In early afternoon trading, the Dow soared 102.39, or 0.77 percent, to 13,449.34, after rising to a new trading high of 13,481.60.

The broader Standard & Poor’s 500 index was up 7.15, or 0.48 percent, at 1,510.30. But high-tech stocks, which lagged the market, held back the Nasdaq composite index, which was up 0.23, or 0.01 percent, at 2,546.67.

Since the Dow broke through 12,000 for the first time in October, it has become almost routine for the blue chip index to set new records. The overall market advance has also lifted the S&P 500 near its record close of 1,527.46, reached in the spring of 2000. However, the Nasdaq still remains well off its closing high of 5,048.62, also reached during the peak of the dot-com boom; the index was overinflated by investors rushing to buy any high-tech stock.

Investors have been driven by optimism that the Fed is done with its campaign of rate hikes, and that it will soon start lowering rates. The enthusiastic atmosphere on Wall Street has even allowed investors to shrug off periodic disappointing economic data and earnings results, while investors focus on the future.

Bonds initially edged higher Tuesday in response to the inflation data, but then pared those gains as stocks surged, making safe-haven investments less attractive. The yield on the benchmark 10-year Treasury note rose to 4.70 percent from 4.69 percent late Monday. The dollar fell against other major currencies, while gold prices advanced.

A barrel of light sweet crude declined 65 cents to $63.11 on the New York Mercantile Exchange. Concerns lingered in the commodities market about refinery problems and uncertainties over whether U.S. gasoline inventories can meet summer driving demand.

Investors were awaiting the National Association of Home Builders housing market index, which was being released later in the session. It could show whether the housing sector is showing any signs of recovery.

On Wednesday, the Commerce Department will report housing starts and building permits that might provide more clues about the housing market.

Fed Chairman Ben Bernanke gave the market no new insights into his views on the economy and inflation Tuesday. He addressed the growth of credit derivatives and other financial instruments during a speech before a financial markets conference in Georgia.

Home Depot, the nation’s largest home improvement chain, posted lower quarterly profit as a sluggish U.S. housing market dented sales. Sales at stores open at least a year, an important measure of how retailers fared, slumped 7.6 percent.

Wal-Mart Stores, the world’s largest retailer, missed Wall Street projections and warned second-quarter results might be disappointing. Last week, it reported April same-store sales were the weakest its history for April.

Shares of Wal-Mart fell 18 cents to $47.66, while Home Depot shed 15 cents to $38.86. Lowe’s Cos., the second-largest home improvement chain, rose 17 cents to $31.16.

Reuters Group PLC agreed Tuesday to a $17.2 billion takeover by Thomson Corp. that would vault the combined entity ahead of Bloomberg to become the world’s largest financial data and news provider. Shares of Reuters rose $2.36, or 3.7 percent, to $74.25; Thomson fell 1 cent to $41.99.

Advancing issues outnumbered decliners by about 7 to 3 on the New York Stock Exchange, where volume came to 636.1 million shares.

The Russell 2000 index of smaller companies fell 0.85, or 0.10 percent, to 821.48.

Overseas, Japan’s Nikkei stock average closed down 0.93 percent. Britain’s FTSE 100 gained 0.20 percent, Germany’s DAX index rose 0.61 percent, and France’s CAC-40 added 0.39 percent.

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