Even amid earnings season, concerns over energy prices and inflation have been simmering in the back of investors' minds. And so it wasn't decent earnings that helped the major indices push convincingly higher Wednesday. Instead, it was the Federal Reserve's beige book survey, which showed the economy growing strongly while remaining free of inflationary pressures.

After hovering above break-even prior to the 2 p.m. EDT release of the beige book report, major averages jumped in reaction. The Dow Jones Industrial Average ( DJI) rose 57.32 points, or 0.5%, to 10637.09. The S&P 500 ( SPX) rose 5.63 points, or 0.5%, to 1236.79, a new four-year high for the index. The Nasdaq Composite ( Nasdaq) advanced 10.23 points, or 0.5%, to 2186.22. The tech-heavy index is two points below its 2005 closing high, hit last week.

Earnings are coming in above expectations on average, but still have not seemed to convince market players to push stock averages much higher. That was evident Wednesday in the cautious moves of the Nasdaq. The tech-heavy index, which has led the market of late, failed to move convincingly higher even as Amazon.com ( AMZN) rose more than 15% after the company's strong results Tuesday night.

Investors have been rewarding the stocks of firms that beat by a wide margin -- such as Amazon -- and punishing those that miss, including InfoSpace ( INSP), which plunged more than 30% after it issued disappointing guidance.

The bifurcated reaction to earnings is resulting in choppy action in the market lately.

Absent a convincing earnings-led momentum, the biggest swings in the major averages were seen after the release of economic data. First, a strong rebound in durable goods orders in June had market players hopeful about the economy and profits in the second half of the year and stocks trended higher.

The major averages were then dragged lower midmorning by a "sell the news" trade in the housing sector after the Commerce Department reported that new-home sales soared to a record high in June.

But the broad market recovered and surged in the afternoon after the release of the Fed's survey. The beige book, a survey of economic conditions in the Fed's 12 districts, showed broad strength continuing through the middle of July. Most importantly, it showed price pressures have remained contained, with only the transportation sector successfully passing along higher energy prices to consumers.

Bond prices felt a temporary reprieve after the benign report but still finished lower. The benchmark 10-year Treasury ended down 7/32 while its yield rose to 4.26%.

The Treasury market, more sensitive to inflation risks than the stock market on a daily basis, had the correct reading. Both the durable goods and the new-home sales data confirmed that the Fed is not about to relax its campaign to raise short-term rates.

The stock market, meanwhile, "is showing incredible resilience which means that there's still some money being put to work," says Barry Hyman, equity strategist at Ehrankrantz King Nussbaum. "But it's getting very crowded in the long side of the market."

The relief to stocks provided by the inflation picture Wednesday is telling. The post-beige book rally could be seen as evidence that concerns about the Fed's persistent intention to raise short-term rates to stay ahead of inflation are beginning to take their toll.

As noted by Bear Stearns equity strategist Francois Trahan, "those in the bullish camp point to the recent string of encouraging economic reports and the relative attractiveness of the S&P 500's valuation, while those on the bearish side remain focused upon the continuing Fed tightening cycle and the uncertainty it brings to the earnings outlook."

Trahan, meanwhile, takes from both sides to compile his own approach. He believes that the risk vs. reward equation for equities remains unappealing as long as the Fed is in tightening mode. But "valuation could provide some support in the event of a market slide," he wrote.

Like an increasing number of market strategists, Trahan believes that the stock market's overbought conditions will soon lead to at least a pullback, if not a full-fledged correction in stocks. "No matter how you slice it, the S&P 500 is overbought, and we believe the near-term outlook will prove challenging," he wrote.

To view Aaron Task's video take on today's market, click here .

In keeping with TSC's editorial policy, Godt doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He appreciates your feedback; click here to send him an email.