The Consumer Price Index out Thursday showed little inflation in the near-term, while retail sales barely rose Wednesday.
"One of the slightly disappointing things around the U.S. consumer is they haven't been spending ... at the rate that we thought they would," said Ben Pace, chief investment officer at HPM Partners. "There's been some downgrades to a lot of GDP forecasts at many of the Wall Street firms, but when we take it to the markets anything that seems to delay a rate hike is viewed favorably."
"I think the markets are trading on a daily basis on the daily statistics, forecasts and the earnings. I think it's looking at fundamentals more than anything," he said.
Robert Pavlik, chief market strategist at Boston Private Wealth, also noted support for stocks from dovish comments by European Central Bank policymaker Ewald Nowotny, who said it was "obvious" the bank must search for more ways to stimulate the euro zone economy.
"It's more of those dovish comments and then it's going to focus on the earnings and a little less about economic data," Pavlik said. "If it weren't for trepidation as far as earnings season is concerned we'd probably see the market higher right now, because people are a little nervous."
The euro turned lower against the dollar on Nowotny's remarks, before extending losses on U.S. data.
U.S. CPI declined 0.2 percent in September, matching expectations. Ex-food and energy, the price index rose 0.2 percent for the month, following a 0.1 percent rise in August.
"Low inflation continues to say the Fed's not in a rush to raise interest rates and investors are taking that as a positive sign," said Kate Warne, investment strategist at Edward Jones. "However, I would point out that a lot of the low inflation (numbers) are due to low oil prices."
"We keep seeing very low inflation numbers. That's certainly good news for consumers, workers whose wages aren't rising very quickly," she said. "But with oil prices flattening, we're not going to see inflation as low as it has been. It will move closer to the Fed's 2 percent number more quickly than people are anticipating and that's a reason the Fed will say there's a reason to raise in 2016."
In another sign of continued strength in the labor market, weekly jobless claims declined to 255,000, falling back to a 42-year low.
New York Fed President William Dudley said at an event hosted by the Brookings Institution Thursday morning he would favor a rate hike this year if the economy performs in line with forecasts. However, he said recent economic news did suggest economic slowdown.
"Overall his comments that the economy is slowing are consistent with investors' views that the Fed will wait and not raise interest rates in December," Warne said.
In pre-market trade, U.S. stock index futures trimmed gains, with the Dow futures up about 50 points amid the morning data releases and earnings from major banks such as Citigroup and Goldman Sachs.
"It's a mixed picture for earnings and economic data," said Peter Cardillo, chief market economist at Rockwell Global Capital. It's a "market that's still searching for direction and that direction is basically being impaired by economic reports."
The October Empire State Index posted a read of negative 11.36. The index showed negative 14.67 in September.
The Philly Fed index posted negative 4.5 for October.
Read MoreInternal split at Fed adds to confusion in markets
Treasury yields edged higher, with the 10-year near 2.01 percent and the 2-year around 0.60 percent.
"The 2-year yield is a view of the data," Krosby said. "It's obviously saying this is going a little more where the Fed may surprise everyone in December."
The U.S. dollar traded about half a percent higher against major world currencies, with the euro trading around $1.14 and the yen at 118.55 yen against the dollar.
Gold settled higher, up $7.70 at $1,187.50 an ounce.
Crude oil futures settled down 26 cents, or 0.56 percent, at $46.38 a barrel. The U.S. government reported a jump in U.S. stockpiles. However, the increase was not as large as suggested by industry data the day before. Brent held lower near $48.80 a barrel.
Overseas, the pan-European Stoxx 600 index closed up nearly 1.5 percent on Thursday. In Asia, Japan's Nikkei finished 1.15 percent higher, while in China the Shanghai Composite closed 2.32 percent higher.