What effect did Dally’s death have on Ponyboy?
The deaths of Dally and Johnny affected Ponyboy deeply. He began to see things that he had been blinded to before and to realize that people are not always who they seem to be.
...Two friends of mine had died that night: one a hero, the other a hoodlum. But I remembered Dally pulling Johnny through the window of the burning church; Dally giving us his gun, although it could mean jail for him; Dally risking his life for us, trying to keep Johnny out of trouble. And now he was a dead juvenile delinquent and there wouldn't be any editorials in his favor. Dally didn't die a hero. He died violent and young and desperate, just like we all knew he'd die someday. Just like Tim Shepard and Curly Shepard and the Brumly boys and the other guys we knew would die someday. But Johnny was right. He died gallant.
In addition, Ponyboy suffered extreme absent-mindedness, quit eating because he never felt hungry and "everything tasted like baloney," and let his grades drop drastically. His view of the world had changed drastically, and he seemed to need to find a way to make sense of his new understanding of reality.