NEW YORK (CNN/Money) - Weak technology shares and a continued decline in the U.S. dollar punished stocks Friday afternoon, pushing markets to a second week of losses despite some decent economic news in the morning.

The Nasdaq composite (down 37.13 to 1362.42, Charts) lost about 2.6 percent, while the Dow Jones industrial average (down 104.69 to 8433.71, Charts) lost about 1.2 percent and the Standard & Poor's 500 index (down 12.10 to 889.48, Charts) lost about 1.3 percent.

For the week, the Nasdaq lost 4.2 percent, the Dow lost 2.5 percent and the S&P 500 lost 2.5 percent.

The Dow had closed higher for eight weeks in a row from October through early December, while the Nasdaq and S&P 500 had closed higher for three weeks, before all three indexes closed lower last week.

Next week brings economic reports on consumer prices, housing starts and building permits, and a final reading on third-quarter gross domestic product.

A few companies will release quarterly reports next week, as well, with a large concentration in retail and financial, including Best Buy (BBY: down $0.17 to $25.80, Research, Estimates), Circuit City (CC: down $0.22 to $8.17, Research, Estimates), Bear Stearns (BSC: down $1.08 to $59.93, Research, Estimates), Morgan Stanley (MWD: down $0.93 to $41.80, Research, Estimates), chipmaker Micron Technology (MU: down $0.58 to $12.99, Research, Estimates) and handheld-device maker Palm (PALM: down $0.14 to $17.15, Research, Estimates).

Stocks were under pressure Friday on tech selling and as the dollar continued to slide, edging lower versus the euro and losing more substantially versus the Japanese yen.

"When the dollar declines, there's less incentive for international investors to hold U.S. companies' assets because they decline in value," said Peter Green, a market analyst at MKM Partners. "It also impacts perception. People want to see a stronger dollar to show America can stand on its own, particularly when there is all this uncertainty about North Korea, Iraq and Bush's new economic team."

In corporate news, J.P. Morgan began coverage of both Intel (INTC: down $0.61 to $17.58, Research, Estimates) and Advanced Micro Devices (AMD: down $0.43 to $7.32, Research, Estimates) with a "neutral" rating, within a largely negative note on the semiconductor sector. The firm said the top three end markets within chips should remain depressed through the first quarter of 2003. It also said the Philadelphia Semiconductor Index, or Soxx, has not reached its bottom yet.

Also hitting the sector was a warning from chipmaker Cirrus Logic (CRUS: down $1.18 to $3.08, Research, Estimates). The firm said third-quarter revenue will not meet analysts' estimates or its own projections due to reduced or canceled orders for a number of audio and video products.

The downward trend impacted a variety of large-cap technology shares, including Microsoft (MSFT: down $1.67 to $52.50, Research, Estimates).

Dow component Coca-Cola (KO: down $0.02 to $45.85, Research, Estimates) reaffirmed its outlook for fiscal 2002 and 2003, but also said it no longer will provide revenue and earnings forecasts. The stock tumbled in early trade but closed mostly flat.

Shares of Dow issue United Technologies (UTX: down $2.06 to $60.10, Research, Estimates) fell in active trade. In its mid-quarter update late Thursday, the maker of aerospace industry parts said fiscal 2002 results will meet estimates and that 2003 estimates will be in a range of $4.55 to $4.80 per share, while analysts were looking for $4.69. The company also said it expects the commercial airline industry to stay uncertain throughout 2003.

The University of Michigan's preliminary reading on consumer confidence in December rose to 87.0 from 84.2 in November. Economists surveyed by Briefing.com were expecting a rise to only 85. Stocks briefly recovered some of their losses following the release but soon resumed their downward trend.

Also affecting sentiment was news that U.S. producer prices dropped unexpectedly in November. It was the biggest drop in six months and was attributed largely to declines in the prices of energy and passenger cars. Economists surveyed by Briefing.com were expecting the PPI to be unchanged from the previous month.

"There's no real incentive for people to be in the market right now," said MKM's Green. "There's no urge to splurge and not much urge to short that much, although we saw a little of that this week. Basically, no one wants to move much until the new year, so that's why you don't see the market doing much."

Light crude oil futures gained 46 cents to $28.45 a barrel in New York. Gold gained, after surging more than $6 on Thursday.

Treasury prices fell, pushing the yield on the 10-year note up to 4.06 percent.

Market breadth was negative on light volume. On the New York Stock Exchange, decliners beat advancers by more than 2 to 1 as 1.24 billion shares traded. On the Nasdaq, losers beat winners by more than 11 to 5 as 1.32 billion shares changed hands.