U.S. stocks on Friday notched losses for the week as investors braced for tighter monetary policy from the Federal Reserve, and both the S&P 500 and Nasdaq pulled back from three consecutive weeks of gains.

The Dow Jones Industrial Average climbed 137.55 points, or 0.4%, to 34,721.12, while the S&P 500 dipped 0.27% to 4,488.28. The Nasdaq Composite fell 1.34% to 13,711.00.

All major averages declined for the week, with the S&P 500 closing down 1.27% and Nasdaq 3.86%. The Dow dipped 0.28% week-to-date, hitting back-to-back weekly declines.

The market moves came as investors reacted to a changing tone by the Federal Reserve, signaling it will act even more aggressively to fight inflation.

"It's not that anything necessarily 'positive' is happening or that buyers are rushing into the market, but the bad news is fully absorbed for the time being and the market is now waiting for the next data point," wrote Adam Crisafulli of Vital Knowledge.

"We're still of the view that nothing really major occurred this week aside from the [Fed Governor Lael Brainard] remarks Tuesday morning, and the last several days have been a function of digesting her words," he added.

Tech stocks led the day's losses as investors dumped the riskier shares in anticipation of higher interest rates limiting the group's future profit growth. Chipmakers like Nvidia and Micron, which have struggled amid supply chain shortages and concerns of a looming recession, dipped 4.5% and 1.4%, respectively, while shares of Tesla, Alphabet, and Apple slid 3%, 1.9%, and 1.2% lower.

Shares of Robinhood slipped nearly 7% after Goldman Sachs downgraded the trading app to sell from neutral. UPS fell close to 1% on the back of a downgrade from Bank of America citing concerns about weakening demand and declining prices in the industry.

The health-care and consumer staples sectors rallied this week as investors worried about a slowing economy pivoted toward stocks with stable earnings. Merck and UnitedHealth Group inched higher again on Friday. Both stocks closed the week 5% and 6.5% higher, respectively.

Meanwhile, financial sector companies like JPMorgan Chase and American Express rebounded, giving up some of the week's earlier losses.

Friday's moves come after the Fed released minutes from its March meeting on Wednesday, which revealed that policymakers plan to reduce their bond holdings by a consensus amount of about $95 billion. The central bank is also considering interest rate hikes of 50 basis points in future meetings.

Brainard's comments earlier in the week indicated the central bank could start reducing its balance sheet at a "rapid pace" as soon as May.

"Their main tool is the Fed's funds rate, so that's mostly it, but on top of that they're going to start taking liquidity out of the system," said Kathy Bostjancic, chief U.S. economist at Oxford Economics. "They're going to reduce their purchases of treasury securities and mortgage-backed securities by a trillion per year. That's a lot of liquidity that's taken out of the system and private investors are going to have to fill the gap."

The pivot by the Fed has caused rates to shoot higher, with the 10-year Treasury yield hitting a new three-year high Friday, rising above 2.7%. The rate ended last week at 2.38% and started the year at 1.63%.

"The unusually fast hiking cycle indicates that in retrospect, the Fed's (and most economists')'transitory inflation' narrative was too sanguine and the Fed now has to aggressively catch up after falling behind the curve," wrote Maneesh Deshpande, head of U.S. equity strategy at Barclays. "We remain cautious and believe upside is limited."

Oil prices, which have been volatile during the Russia-Ukraine war, rose slightly on Friday. U.S. West Texas Intermediate (WTI) crude added 2.32% and settled at $98.26, while Brent crude gained 2.19% and settled at $102.78. Energy companies including Occidental Petroleum and Halliburton closed higher on Friday.

Investors are looking ahead to earnings season next week, which will kick off with reports from five big banks. JPMorgan will report before the bell on Wednesday. Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo will report before markets open on Thursday.