Equities improved Thursday after US consumer price figures confirmed the view that inflation continued to slow into year end. The Dow Jones industrial average and NASDAQ both rose 0.6 percent while the S&P 500 gained 0.3 percent. The gains extended the week's rally based on the view that US interest rates are peaking. US Treasury yields and the dollar declined and crude oil prices rose.

Risk assets improved after news that US CPI declined 0.1 percent and core CPI rose 0.3 percent in December, in line with market expectations. More comments from Federal Reserve officials appeared to support a relatively modest 25 basis point rate increase at the Fed's next policy meeting, though officials continued to push back against expectations for actual Fed rate cuts by year end.

Most sectors advanced with real estate and energy stocks leading. Airlines had a good day after American Airlines guided its revenues higher. Entertainment stocks got a boost from Disney as it rose on news of a proxy fight from investor Nelson Peltz; Netflix gained after an analyst upgrade. Banks outperformed ahead of their quarterly earnings due to start Friday. On the downside, health care, consumer staples, and restaurants were among the day's laggards.

Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.

Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.