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I searched for text highlighting in all the palettes but could not find this function. The only way I could accomplish highlighting is through the format menu. Am I missing something?

While there isn't any palette that changes the highlighting, you can use the highlighter toolbar item. You may need to add this toolbar item if it does not currently show.

Thanks Martin.
I submitted a feedback to request this functionality added to the palette. I get a bit tripped up having to look in different places for each function.