The Russell 2000 (NYSE: IWM) has rebounded from its earlier losses despite news of poor economic reports.

At 12:28 p.m. ET, the small-cap index was up 3.92 points, or 0.56%, to 706.26. The Dow Jones Industrial Average (INDU) was up 20.59 points, or 0.17%, to 12,357.81.

Stocks small and large opened with a drop as investors focused on news of surprisingly strong inflation and largely disregarded expected news that the U.S. housing sector remains troubled.

The Russell 2000 fell to a level below 696 points shortly after 10 a.m. ET, and stayed in the red until a sharp jump at about 12:10 p.m. ET propelled it into positive territory.

Wall Street’s bearish mood in the morning was due to news that the consumer price index added 0.4% in January, above the expected 0.3%.

The U.S. Labor Department also reported that core consumer prices, which exclude the costs of food and energy, increased 0.3%, above the projected 0.2%.

Core prices have added 2.5% on a year-over-year basis, which is beyond the U.S. Federal Reserve’s preferred range of between 1% and 2%. Worse, annual consumer prices growth has accelerated from 2.4% in December 2007.

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