Fears of a widening conflict in the Middle East undercut equities and lifted oil prices Friday while bad news on inflation expectations pushed up US bond yields from early lows. Stocks were broadly lower as the Dow Jones industrial average firmed 0.1 percent, the S&P 500 lost 0.5 percent, and the Nasdaq dropped 1.2 percent. US Treasury yields and the dollar declined while oil prices rallied.

Israel's warning to civilians in Gaza to evacuate ahead of an expected ground invasion and concern that others will attack Israel spurred a risk-off rally in US Treasuries and a selloff in risk assets. A surprising surge in inflation expectations for October sent bond yields up from their lows, which weighed on megacaps in particular.

The news appeared to overwhelm the positive effects of a strong start to the quarterly corporate earnings season. JP Morgan, Wells Fargo, and United Health were big winners after better than expected results.

Among sectors, energy fared best as oil prices surged on concern about supply disruptions and tight supplies if the Mideast conflict gets worse. Financials outperformed on the earnings news. Other winners included consumer staples, health care and utilities. On the downside, technology, communications services, consumer discretionary, industrials, and materials 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.