Another hotter than expected US inflation report undercut equities Thursday. The Dow Jones industrial average dipped 0.4 percent while the S&P 500 and the Nasdaq both eased 0.3 percent. US Treasury yields and oil prices rose while the dollar declined.

Equities managed to recover from the day's worst levels but the selloff in US Treasuries and attendant rise in market rates weighed on risk appetite. The benchmark 10-year note yield rose 10 basis points, an unusually big move, after producer prices came in much higher than expected, up 0.6 percent on the month, and up 0.3 percent on the month, excluding food and energy. Retail sales came in on the soft side of expectations, which raised concern about the prospect of slowing consumer spending. The view that market positioning remains overstretched to the upside was another negative.

Declines were widespread Thursday. Among the worst off were homebuilders on rising rates. Other weak sectors included chipmakers, media, apparel, discount chain stores, regional banks, airlines, trucking and chemicals. Holding up best were energy, software, aerospace & defense, apparel retailers and online brokers.

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.