Another late-afternoon rally propelled stocks higher after news of a mild increase in consumer prices suggested that the Federal Reserve might raise interest rates only modestly when it meets this month.

The Dow Jones industrial average rose 70.29 to close at 11,117.08. Earlier in the session, the blue-chip index fell as much as 35 points from Monday's close, but traders blamed Hewlett Packard for most of the decline. The nation's No. 2 computer maker fell as investors took profits after a solid earnings report.

Broader indicators ended higher after trading in a narrow range for most of the day. The Standard & Poor's 500-stock index rose 13.39, to 1344.16, and the Nasdaq composite index rose 25.94, to 2671.22.

Stocks initially rose after the Labor Department said its consumer price index, a closely watched gauge of inflation, rose 0.3 percent in July. [Story, Page E1.]

Stocks regained momentum as investors took their cues from the inflation-sensitive bond market. The yield on the 30-year Treasury bond fell to 6.01 percent, from 6.08 percent late Monday, as the CPI report helped to boost its price by $10.63 per $1,000 invested.

Financial services stocks, among the first affected by changing interest rates, rose. American Express led the Dow's gains, up 4 3/8, to 140 1/4; Chase Manhattan rose 2 3/4, to 83.

Those gains were outweighed by big losses in the technology sector.

Hewlett Packard, which helped the Dow to a 73-point gain Monday, plunged 5 3/4, to 104 1/2. After the close of trading Monday, the company reported earnings that beat analysts' expectations, and many investors chose to lock in profits.

Chipmaker Micron Technology fell 2-3/16, to 57 3/4. But online brokerage E-Trade rose 3 3/8, to 30 1/4, after announcing it will offer individual investors access to after-hours trading through Instinet.

Network Solutions rose 1 3/4, to 57 1/8. The No. 1 company that assigns Internet addresses will offer services to users of Go2Net's HyperMart and Virtual Avenue services, which comprise about 445,000 small and medium-size businesses.