A better than expected inflation report lifted stocks Tuesday and bolstered expectations for Federal Reserve rate cuts starting in September. The Dow Jones industrial average gained 1.0 percent, the S&P 500 rose 1.7 percent, and the Nasdaq rallied 2.4 percent. Bond yields slipped, the dollar rose, and oil prices retreated after Monday's advance.

News that the producer price index excluding food & energy was flat in July from a year ago, below expectations for a 0.2 percent rise, suggested inflation continues to ease and helped restore risk appetite after last week shaky showing. Investors will watch consumer price figures due Wednesday and retail sales due Thursday for more signals on the economic outlook.

Big technology shares resumed their leading position as the market bounced up, including the Magnificent Seven, with AI favorite Nvidia up strongly again to lead the chip sector higher. Other rising sectors included restaurants, lifted by Starbucks, up 25 percent on news of a new chief executive. Other outperformers included software, autos & suppliers, homebuilders and apparel. Lagging were energy, health & personal care, aerospace & defense, grocery stores, and discount stores.

Among Dow stocks, Home Depot advanced 1.2 percent on a revenues and earnings beat despite soft guidance.

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.