Equities rallied Thursday as better than expected retail sales kept alive hopes for a soft landing for the economy. The Dow Jones industrial average gained 1.4 percent, the S&P 500 rose 1.6 percent, and the Nasdaq rallied 2.3 percent. Bond yields, the dollar and oil prices all advanced.

Equities rallied and bond yields jumped on news that retail sales surged by 1.0 percent on the month in July, well above expectations. Separately, Walmart issued better than expected quarterly results and guidance that allayed concerns about slowing consumption. Risk assets also reacted favorably to news of a larger than expected decline in weekly jobless claims, which calmed concerns about a collapsing employment market. The economic reports left intact expectations for rate cuts from the Federal Reserve starting with a 25 basis point move in September. Previously, expectations tended toward an initial 50 basis point cut.

Among sectors, real estate lagged on the uptick in interest rates. Best performers included consumer discretionary and information technology, followed by materials, industrials, financials and consumer staples.

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.