US consumer price figures came in on the low side to trigger a risk-on rally in equities and push down bond yields Wednesday, with big technology shares leading. Other indicators missed to the downside and bulls latched onto the bad news is good news theory in hopes of Federal Reserve rate cuts.

The Dow Jones industrial average rose 0.9 percent, the S&P 500 gained 1.2 percent and the Nasdaq was up by 1.4 percent. The S&P and Nasdaq set record highs and are up 12 and 13 percent year to date, respectively. The dollar and oil prices advanced.

CPI was reported up 0.3 percent in April from March, below the 0.4 percent the market expected, and core CPI gained 3.6 percent, in line with expectations. The figures left forecasts for the Federal Reserve's preferred measure of inflation, the PCE deflator, at 0.2 to 0.3 percent month on month, and renewed the market's confidence that disinflation continues. Separately, retail sales figures, Empire State manufacturing, and the homebuilders index all came in much weaker than expected. Investors have priced back in two rate cuts this year after the latest indicators, with the first coming in September.

Megacaps led the rally and the Nasdaq outperformance. Best sectors were technology, utilities, real estate, financials, industrials and health care. Lagging were materials and consumer discretionary.

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.