Encouraging signs of slowing inflation lifted equities and pushed down US Treasury yields Wednesday though stocks ended well down from morning highs. The Dow Jones industrial average firmed 0.3 percent, the S&P 500 gained 0.7 percent, and the Nasdaq rose 1.2 percent. The dollar and oil prices rallied.

Better than expected consumer price index data, including monthly core CPI rising a modest 0.2%, the lowest rate since August 2021, spurred buying in US Treasuries, which helped megacaps lead the day's broad-based equity advance. The news did not alter expectations for another Federal Reserve rate increase in July but it bolstered the soft-landing narrative and moved up expectations for the Fed to cut rates earlier in 2024.

Energy stocks were among the day's winners after oil prices perked up. Other best sectors included consumer discretionary, technology, and communication services. Lagging were consumer staples, industrials, and health care.

Comments from equity analyst suggesting the market has gotten a bit ahead of itself appeared to weigh on risk appetite as the day proceeded, and the major indexes pulled back. Investors were also inclined to trim positions headed into Friday's start of earnings season, with big banks getting things under way on Friday.

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.