Losses in megacaps and growth stocks tanked equities Wednesday as rotation into less popular sectors continued and defensives outperformed too. The Dow Jones industrial average gained 0.6 percent, the S&P 500 lost 1.4 percent and the Nasdaq sank 2.8 percent. Bond yields were mixed with shorter maturities edging up and yields for longer edging down. Oil prices jumped and the dollar slipped.

Part of the ongoing move into cyclicals and value sectors reflected rising expectations for rate cuts that would lift these sectors after soft inflation data. Part of the move reflected perceptions that megacaps have run too far too fast, and remained ripe for profit-taking. The new twist Wednesday came as some chip stocks dropped after former President Trump's comment that Taiwan needed to pay the U.S. for its security, and that Taiwan had stolen U.S. semiconductor business. That followed reports that President Biden was considering new limits on semiconductor sales to China. TSMC, the Taiwan chip leader, Nvidia, and ASML got whacked in response.

Losses in big tech obscured buying in less glamorous sectors, which helped the Dow outperform. Best on the day were real estate, materials, consumer staples, health care, utilities, and energy. Energy shares got a lift from surging oil prices after news of an unexpected drop in oil inventories. Gains in UnitedHealth and Johnson & Johnson buoyed the Dow.

Among the day's worst sectors were consumer discretionary, as Amazon had a bad day. Other weak links included communications services, information technology, and industrials.

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.