Equities recovered morning losses and rallied into the close Wednesday after an as-expected Federal Reserve rate increase plus comments from Fed Chair Jerome Powell that investors judged market-supportive. The Dow Jones industrial average closed flat, the S&P 500 gained 1.1 percent, and the NASDAQ was up 2.0 percent. US Treasury yields, the dollar, and oil prices all fell.

Investors had been bracing for Powell to push back against loosening financial conditions and recent equity market gains, but when he did not, and when Powell appeared to suggest inflation could continue to come down without a big economic slowdown, equities rallied across the board, paced by megacaps. The as-expected 25 basis point rate hike cheered investors as it suggested the Fed's tightening campaign was ebbing. US Treasuries surged on the Powell comments, led by the short end, with the 2-year note yield down about nine basis points on the day.

Only energy stocks retreated as oil fell back. Among sectors, best were consumer discretionary, technology, and communications services. Chipmakers were notably higher, with a boost from AMD, which rose on better than expected quarterly results. Meta was a notable winner as markets expected a strong quarterly report after the close.

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.