Wall Street is powering more than 1 per cent higher in afternoon trade after shaking off early jitters as investors digested inflation data.

Prices rose by a quicker-than-forecast 2.1 per cent year-on-year in January for the headline inflation reading, while the core measure that strips out volatile food and energy was steady at 1.8 per cent.

Stocks initially turned south on the view the pace of inflation would quicken the expected pace of monetary tightening by the Federal Reserve this year, but soon steadied and motored higher.

The S&P 500 was up 1.1 per cent in mid-afternoon trade at 2,691.70. The Dow Jones Industrial Average gained 0.8 per cent to 24,840 and the Nasdaq Composite added 1.6 per cent to 7,124.

Bonds sold off as investors priced in the likelihood of higher interest rates. The yield on the benchmark 10-year US Treasury crossed was up 6.4 basis points to 2.91 per cent, around its highest level in four years.

However, the dollar index, a measure of the greenback against a weighted basket of peer currencies, was down 0.6 per cent at 89.16.

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