Stocks dropped Friday in a risk-off move on rising concern about inflation and weakening business conditions. Many investors saw the market as ripe for correction after its run to new highs on the major averages. The Dow Jones industrial average and the S&P 500 both fell 1.7 percent and the Nasdaq was down 0.5 percent. US bond yields declined, the dollar was mixed while oil prices dropped.

University of Michigan consumer sentiment figures showed consumers losing confidence in the economic outlook and seeing rising inflation, both largely in response to President Trump's tariffs. The consumer sentiment report added to the narrative that depressed consumer stocks Thursday after Walmart warned that consumers were pulling back. Softer than expected existing home sales and services PMI reports added to the bearish view. Trump's latest tariff threats in digital services and news reporting suggesting Trump sees tariffs as an ongoing source of revenue were additional negatives.

Megacaps had a bad day to weigh on the major averages. Among sectors, worst were materials, energy, health care, consumer discretionary and materials. Consumer staples fared best. UnitedHealth was a notable decliner on a Wall Street Journal report that the US is investigating the company for its Medicaid billing practices.

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.