By Sue Chang, MarketWatch , Ryan Vlastelica

Major indexes on track for second straight weekly advance

U.S. stocks retreated from near record levels on Friday as the dollar continued to charge higher. Investors taking profits on the recent rally also pressured major indexes.

The stock market opened higher, with the Nasdaq Composite notching an intraday record, but failed to defend its gains. Still, key indexes are on track for their second straight weekly advance, and the Russell 2000 will chalk its 11th straight daily advance if it closes higher. The index has hit a series of records of late, as investors increasingly favor small-cap stocks (http://www.marketwatch.com/story/stock-market-investors-turn-to-small-caps-after-trump-win-2016-11-15).

The market has been steadily rising all month but the uptrend accelerated after the unexpected election of Donald Trump. Many investors think that Trump's policy proposals--including massive cuts to corporate tax rates and financial and environmental deregulation--will spur growth, inflation and higher interest rates. More than half (http://www.marketwatch.com/story/stock-markets-trump-rally-is-mostly-a-bank-rally-2016-11-17) of the S&P 500's postelection gains have come from the financial sector.

"A lot of speculation is now embedded in the markets" that led to a sharp rise in stocks, said Kent Engelke, chief economic strategist at Capitol Securities Management Inc.

"Some of this speculation now has to be reversed as reality begins to sink in" since many of Trump's campaign promises can't be implemented overnight, he said.

The Dow Jones Industrial Average fell 38 points to 18,865, while the S&P 500 fell 5 points to 2,181 and the Nasdaq Composite Index shed 13 points to 5,320. Earlier, the Nasdaq traded as high as 5,346.60--an intraday record.

For the week, the Dow is mostly flat while the S&P is up 0.8% and the Nasdaq is up 1.6%.

Read:Here are Goldman's 2017 forecasts for stocks, oil and more--in one chart (http://www.marketwatch.com/story/here-are-goldmans-2017-forecasts-for-stocks-oil-and-more-in-one-chart-2016-11-18)

"You can make the case that we'll have a more business-friendly environment in Washington, and at the same time, economic data has already been getting better, so our backdrop seems strong as well," said Art Hogan, chief market strategist at Wunderlich Securities.

While Hogan said that market could pull back in the near term as investors take profits, he added that "this feels like a rally that can continue."

Investors are watchingthe U.S. dollar, which has seen the ICE Dollar index hit its highest level since 2003. A stronger dollar can erode the profitability of large-cap companies, which is one reason why investors have been moving to small-cap stocks (http://www.marketwatch.com/story/stock-market-investors-turn-to-small-caps-after-trump-win-2016-11-15) since the election. The index rose 0.4% on Friday, a move that comes after Federal Reserve Chairwoman Janet Yellen signaled Thursday that a December interest-rate hike (http://www.marketwatch.com/story/yellen-says-fed-may-hike-interest-rates-relatively-soon-2016-11-17) was likely to go ahead.

Need to know:The S&P 500 is also getting ever-so-close to a record (http://www.marketwatch.com/story/a-trump-trade-war-why-goldman-thinks-investors-shouldnt-believe-the-hype-2016-11-18)

In a continuation of Thursday's action, the yield on the 10-year Treasury note rose to 2.33%.

Fed speakers ahead: Investors might lookfor guidance from more policy makers on Friday. St. Louis Fed President James Bullard said at a conference in Frankfurt that he's leaning toward the likelihood of an interest-rate hike in December, according to a report from CNBC (http://www.cnbc.com/2016/11/18/feds-bullard-says-hes-leaning-toward-supporting-a-december-rate-hike.html).

Dallas Fed President Rob Kaplan will speak at 1:30 p.m. Eastern Time in Houston, while Kansas City Fed President Esther George is set to talk at the Dallas Fed.

Also on the docket is Fed Gov. Jerome Powell, who is scheduled to appear at the San Francisco Fed.

Stocks to watch: Health care stocks were the weakest of the day, with the S&P health care sector down 1%. Energy stocks were the top gainers of the day, up 0.3%. Chevron Corp.(CVX) rose 1.1%.

Abercrombie & Fitch Co.(ANF) shares sank 15% as profit dived and the company announced a rebranding (http://www.marketwatch.com/story/abercrombie-fitch-profit-tumbles-as-it-rebrands-2016-11-18).

Salesforce.com Inc.(CRM) rose 3.4% after the cloud-computing company posted rising revenue and boosted its outlook (http://www.marketwatch.com/story/salesforce-posts-rising-revenue-lifts-outlook-2016-11-17-1948519).

Read:Salesforce sets finish line in race to $10 billion (http://www.marketwatch.com/story/salesforce-sets-finish-line-in-race-to-10-billion-2016-11-17)

Gap Inc.(GPS) slid 16% after the retailer posted a weak outlook. late Thursday. (http://www.marketwatch.com/story/gap-shares-fall-on-weak-outlook-2016-11-17)

Shares of Ross Stores Inc.(ROST) rallied 4% after the retailer reported better-than-expected quarterly earnings (http://www.marketwatch.com/story/ross-shares-rise-on-better-than-expected-earnings-2016-11-17).

Other markets: European stocks (http://www.marketwatch.com/story/banks-commodity-stocks-slide-put-pressure-on-european-markets-2016-11-18) pulled back slightly on Friday,led by banking and commodity names. European Central Bank President Mario Draghi (http://www.marketwatch.com/story/ecbs-draghi-signals-stimulus-will-be-extended-2016-11-18) signaled Friday that the central bank's stimulus will be extended for the region, whose economy remains clouded by risks.

Asian markets (http://www.marketwatch.com/story/asian-markets-rise-nikkei-hits-10-month-high-in-intraday-trading-2016-11-17) had a mixed day, though yen weakness gave a boost to the Nikkei 225 index , which rose 0.6%.

The dollar's move higher took a toll on gold (http://www.marketwatch.com/story/gold-slides-toward-1200-as-us-rate-hike-looks-imminent-2016-11-18), which dipped 0.7%.

--Barbara Kollmeyer contributed to this report.

(END) Dow Jones Newswires

November 18, 2016 12:47 ET (17:47 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.