U.S. stocks finished higher on Wednesday after an indecisive trading session that saw the major averages spend time on both sides of the flatline throughout the day.

When the closing bell rang on Wall Street, the S&P 500 was up 0.3%, the Dow up 0.1%, and the tech-heavy Nasdaq higher by 0.7%.

This more muted action followed Tuesday's wipeout, which saw the Nasdaq fall more than 5% during the stock market's worst day since June 2020. Tuesday's drop came after after hotter-than-expected inflation data for August likely clinched another 0.75% rate hike from the Fed this month.

The Consumer Price Index (CPI) for August showed consumer prices rose 0.1% over the prior month and 8.3% over the prior year last month, beating expectations for a month-on-month decline and an 8.1% rise over last year.

"This CPI report put cold water on a building market narrative that a potential easing in inflation data could provide the Federal Reserve (Fed) cover to ease up on its aggressive tightening campaign," wrote Keith Lerner, chief market strategist at Truist Advisory Services, in a note to clients early Wednesday.

"This report will keep the Fed squarely focused on enemy number one – inflation. Indeed, earlier this year, Fed Chair Powell said the current backdrop is 'not a time for tremendously nuanced readings of inflation,' and the Fed will keep tightening policy until inflation comes down in 'a convincing way.'"

As of Wednesday morning, investors were pricing in a roughly 30% chance of the central bank raising rates by 100 basis points next week as inflation pressures in some pockets of the economy appear to be entrenching.

In recent appearances, Powell has said the Fed will raise interest rates "until the job is done" bringing inflation back towards the Fed's 2% goal. As of August, "core" inflation — the Fed's preferred measure as it strips out the volatile costs of food and gas — was up 6.3% over the prior year.

In the bond market, the 10-year yield moderated on Wednesday, settling near 3.4%, down about 6 basis points from earlier in the day. The 2-year yield, which shot up more than 15 basis points on Tuesday, stood near 3.79% on Wednesday afternoon.