Risk aversion headed into the weekend sank stocks Friday to end a week of losses as investors braced for bad news from the Middle East and saw more disfunction in Washington. The Dow Jones industrial average declined 0.9 percent, the S&P 500 fell 1.3 percent, and the Nasdaq dropped 1.5 percent on the day. US Treasury yields, the dollar, and oil prices all fell.

Investors cut back on risk assets on caution that Israel's threatened invasion of Gaza may come soon or that the conflict may widen. More risk aversion flowed from the spectacle of Republicans failing again to agree on leadership to allow the US House of Representatives to do any business.

Megacaps had a bad day to weigh on the major stock indexes. Growth stocks generally have been hit by the steep move up in longer yields that saw the 10-year note yield reach 5 percent this week before falling back. Bank stocks saw notable losses after disappointing quarterly results from regional banks, including Comerica and Regions Financial.

Among sectors, materials, energy, financials, technology, and consumer discretionary lagged while defensive sectors held up relatively well.

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.