Demand for small- and mid-cap stocks and value sectors lifted the broader market Tuesday while rotation out of megacaps held back the major indexes. The Dow Jones industrial average gained 1.9 percent, the S&P 500 gained 0.6 percent and the Nasdaq firmed 0.2 percent. Bond yields, oil prices, and the dollar all declined.

Risk appetite gained and interest rate cut hopes solidified after last week's inflation readings and despite Tuesday's retail sales figures on the strong side of expectations, which suggested consumer spending is holding up. US Treasury yields dropped, led by the long end, with support from weak German and UK data that fueled new bets that rate cuts are coming globally. Strength in U.S. Treasuries was notable given growing sentiment that Republicans will win control of Congress and the White House with a range of policies expected to fuel inflation.

Bank stocks advanced on earnings news from BankAmerica, Morgan Stanley, and PNC, and health care got a boost from favorable results at United Health. Other winning sectors included industrials, health care, utilities, consumer discretionary, and materials. Lagging were information technology, especially chipmakers and software, and communications services.

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.