Another dovish signal from a Federal Reserve official helped stocks extend Friday's gains on Monday as rate cut expectations surged. The Dow Jones industrial average firmed 0.4 percent, the S&P 500 rose 1.6 percent and the Nasdaq rallied 2.7 percent. US Treasury yields and the dollar declined while oil prices rose.

San Francisco Fed President Mary Daly's comment Monday afternoon that she favors a rate cut in December followed a similar comment from New York Fed President John Williams on Friday. Daly's remark was considered a big deal as she has been considered on the hawkish side and she tends to side with Chair Jerome Powell. Daly told the Wall Street Journal that she sees the labor market vulnerable and she said weakness there would be tougher to manage than inflation.

The Daly comments spurred bargain-hunting among megacaps that have sold off lately. Best performing sectors Monday reflected the impact of megacaps: communications services, information technology and consumer discretionary. Lagging were energy 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.