By Stephen Culp

NEW YORK (Reuters) – Wall Street headed higher on Wednesday, powered by a rebound in market-leading growth stocks as investors digested hot inflation data and a mixed bag of quarterly earnings.

The tech-heavy Nasdaq led all three major U.S. stock indexes higher, with semiconductors handily outperforming the broader market.

JPMorgan Chase & Co set the first-quarter earnings season off to an inauspicious start, reporting a 42% drop in quarterly profit. The downbeat results from the biggest U.S. lender sent its shares down 3.2%.

On the brighter side, Delta Air Lines’ results beat expectations and it forecast a current-quarter return to profit due to “historically high” demand. Its 5.9% share jump was contagious; the broader S&P 1500 airline index surged 6.5%.

“There’s some hope with regards to the earnings season and how well companies have been able to manage this volatility,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. “There is still quite a bit of pent-up demand for a sense of normalcy on the part of the consumer, and folks are finally starting to step out and travel.”

Strong demand also drove the Labor Department’s producer price index to a blistering 11.2% year-on-year growth rate, the hottest annual reading since the Labor Department started tracking annual data in 2010.

Core PPI and other major indicators have risen beyond the Federal Reserve’s average annual 2% inflation target.

GRAPHIC: U.S. inflation gauges

Minutes from the most recent Fed policy meeting and subsequent remarks from its members have market participants setting easy odds for a series of 50-basis-point interest rate hikes in the coming months, as the central bank treads the delicate tightrope of curbing inflation without provoking a recession.

“The rhetoric has telegraphed a more hawkish Fed but with that in mind they are focused on their dual mandate of full employment price stability,” Keator added. “The question is how much of the Fed’s anticipated moves this year are already baked into the cake.”

The Dow Jones Industrial Average rose 235.04 points, or 0.69%, to 34,455.4, the S&P 500 gained 34.33 points, or 0.78%, to 4,431.78 and the Nasdaq Composite added 212.79 points, or 1.59%, to 13,584.36.

Among the 11 major sectors of the S&P 500, consumer discretionary stocks were enjoying the largest percentage gains.

Analyst estimates for the corporate earnings season have grown less optimistic. Aggregate annual S&P 500 earnings growth for the first three quarters of 2022 is estimated at 5.4% as of Wednesday, down from 7.5% at the beginning of the year.

On Thursday, the holiday-shortened week will end with results from a swath of big banks, including Morgan Stanley, Citigroup Inc, Goldman Sachs Group Inc, and Wells Fargo & Co.

Advancing issues outnumbered declining ones on the NYSE by a 2.99-to-1 ratio; on Nasdaq, a 3.02-to-1 ratio favored advancers.

The S&P 500 posted 19 new 52-week highs and 11 new lows; the Nasdaq Composite recorded 37 new highs and 155 new lows.

(Reporting by Stephen Culp; additional reporting by Bansari Mayur Kamdar and Praveen Paramasivam in Bengaluru; Editing by Lisa Shumaker)