Renewed speculation that the Federal Reserve may kick off its easing cycle with a 50 basis point move next week boosted equities Thursday. The Dow Jones industrial average firmed 0.6 percent, the S&P 500 rose 0.8 percent and the Nasdaq advanced 1.0 percent. Bond yields, the dollar and oil prices all rose.

Follow-through from Wednesday's rebound supported equities Thursday. Stocks saw gains across the board but megacaps and technology shares led the advance for a second day with investors returning to the AI trade after supportive comments from analysts. Software stocks showed notable strength with Oracle continuing to rise after positive earnings news Tuesday. Markets appear to be pricing in about 100 basis points of rate cuts by year end, a relatively aggressive pace.

Among sectors, small caps had a good day along with homebuilders, airlines, entertainment, industrial metals and cruise lines. Lagging were department stores, food and beverage, payments, cosmetics, and regional banks.

In general, the day's indicators bolstered the soft landing narrative. Producer price figures came in somewhat hotter than expected on the core but not so bad as to derail expectations for rate cuts. Jobless claims ticked up just as expected, and Freddie Mac reported mortgage rates fell to their lowest since February 2023, which is expected to support home sales.

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.