An as-expected decline in inflation fueled hopes for interest rate cuts and helped stocks rebound broadly Friday. The Dow Jones industrial average rose 1.6 percent, the S&P 500 gained 1.1 percent and the Nasdaq was up 1.0 percent. Bond yields and oil prices declined while the dollar rose.

News that personal consumption expenditure prices rose 2.5 percent and core PCE prices rose 2.6 percent in June from a year ago, basically in line with expectations, reassured investors that disinflation continues in a way that is increasingly likely to allow the Federal Reserve to proceed with a 25 basis point rate cut in September, followed by more cuts later in the year.

The market also reacted favorably to earnings news released after Thursday's close. Among the best S&P 500 performers on earnings beats were Bristol Myers, Centene and GE Vernova. The rotation trade that has boosted value and cyclicals at the expense of growth and megacaps remained in evidence Friday even as megacaps and big technology shares stabilized after steep losses this week. Investors were underwhelmed by quarterly results this week from Alphabet and Tesla in the Magnificent Seven, which has been leading the market rally this year.

Best sectors Friday included media, homebuilders, multiline industrials, rails, semiconductors real estate and managed care. Lagging were energy, airlines, trucking, and obesity medicine makers.

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.