Stocks rallied on widespread buying in risk-on trading Wednesday after better consumer price figures revived the disinflation story and renewed hopes for Federal Reserve rate cuts. The Dow Jones industrial average rose 1.7 percent, the S&P 500 gained 1.8 percent and the Nasdaq rallied 2.5 percent.

US Treasury yields dropped after core CPI was reported up 0.2 percent, below the expected 0.3 percent. Elements of the CPI report prompted forecasters to reduce expectations for the personal consumption expenditures price index. Markets moved to price in two rate cuts in 2025, up from one cut before the report. The dollar declined and oil prices rallied.

Megacaps and growth shares were leaders to the upside as interest rates fell on the CPI. Financials also outperformed as Citigroup and JP Morgan Chase advanced on positive quarterly reports to kick off earnings season. Technology, consumer staples and communications services outperformed on the megacap gains while defensive sectors lagged.

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.