Stocks dropped for a second day Friday and ended near the lows to finish a down week. The Dow Jones industrial average lost 0.7 percent, the S&P 500 fell 1.3 percent, and the Nasdaq dropped 2.2 percent. US Treasury yields rose in short and medium maturities and fell at the long end for a second straight day. The dollar rose and oil prices slipped.

Rising bond yields got some of the blame for the equity market retreat after another batch of surprisingly strong economic reports, including better than expected retail sales and a shockingly strong Empire State manufacturing index. Stocks also reacted poorly to the strong dollar and hawkish comments from Federal Reserve officials. After last week's market euphoria following the sweeping Republican election victory, investors appear to be reckoning with the prospect of higher inflation, costly tariffs, and unpredictable leadership at key government agencies.

Among sectors, big technology led the selloff Friday. Chipmakers had a bad day, paced by Applied Materials after disappointing quarterly earnings. Big pharma shares, especially Moderna and Pfizer, have come under heavy pressure after Trump named vaccine skeptic Robert F. Kennedy Jr. to head the Health and Human Services department.

Other lagging sectors included truckers, software, technology hardware, and life sciences. Best performers included industrial metals, big banks, parcels & logistics, agriculture, tobacco, and health & personal care.

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.