A strong showing for megacaps helped equities rise Wednesday though major indexes retreated from their best levels on comments from a Federal Reserve official. The Dow Jones industrial average firmed 0.5 percent, the S&P 500 percent gained 0.6 percent, and the Nasdaq was up 0.8 percent. US Treasury yields and the dollar rose while oil prices fell.

Better risk appetite this week continued to provide support Wednesday after profit-taking pressures undercut equities last week. Underlying bullishness flows from the view that a soft landing is under way and US rates are headed lower this year. That view took a knock late Wednesday after New York Fed President John Williams repeated that the Fed needs to keep rates where they are until there are clearer signs that inflation is coming back to target. The comments and others over the weekend from Dallas Fed President Lorie Logan came across as more hawkish than investors have hoped.

Trading Wednesday was marked by caution as the market looks forward to consumer price figures on Thursday and earnings from money center banks starting on Friday. Oil prices came off to bolster the market after figures showing an unexpected rise in oil inventories. Small- and mid-cap sectors outperformed, reflecting improved risk appetite.

Among sectors, best were communications services, consumer discretionary, real estate and industrials. Lagging were energy, materials, health care and utilities.

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.