Stocks logged their worst week since March, when the rally began, as worries about earnings, China and a tightening grip from Washington rattled Wall Street.
Also at play wasuncertainty about Bernanke's confirmation, which could come as early as next week.
Today's descent was initially shallow but became steeper as the day went on and the market's fear level rose. The Dow Jones Industrial Average lost 216.90, or 2.1 percent, to close at 10,172.98, bringing its loss for the week to more than 4 percent. This was the biggest weekly drop since March 6, 2009, just before the recovery rally began.
The S&P 500 and Nasdaq each lost more than 3.5 percent this week.
Today's leaders and laggers were a reflection of the broader market trend: GE, McDonald's and P&G led the small troop of Dow gainers as the VIX volatility gaugespiked to nearly 28 and investors returned to some comfort foods and products. American Express, one of last year's most stellar performers, was at the bottom of the pack, along with Alcoa and Intel.
Today's volatility is a sign of things to come, said Jeff Kleintop, chief market strategist at LPL Financials, as the market grapples with earnings, China and a tighter grip from Washington.
"Volatility is going to be a key characteristic of 2010," Kleintop said. "I think we've got to get used to that kind of market."
Obama proposed limiting banks' size and risk-taking ability, including preventing them from trading with their own money and owning hedge funds.
"While the financial system is far stronger today than it was one year ago, it is still operating under the exact same rules that led to its near collapse," Obama said Thursday. "Never again will the American people be held hostage by a bank that is too big to fail."
This could be the first in a string of global moves to clamp down on banks, Pimco's Mohamed El-Erian said on CNBC this morning.
We as investors have to be able to navigate these new factors, because that's the reality," said El-Erian, CEO of the world's largest bond fund. "This thing is going to intensify. You're going to read about it in other countries."
There was some good news on the earnings front: Dow components General Electric and McDonald's beat expectations this morning, following beats by both Google and American Express last night.
General Electric reported its earnings fell for an eighth straight quarter but topped expectationsfor both earnings and revenue as cost-cutting measures helped offset sluggish demand for jet engines and other heavy equipment.
McDonald's edged past forecasts for both earnings and revenue as global same-store sales rose 2.3 percent.
Overall, it's been a decent earnings season: With about a quarter of the S&P 500 reporting, about 80 percent of the companies have beat expectations.
Still, Kleintop said they're not beating by as much as expected — in other words, they're failing to hit the "whisper numbers"— and that has taken a toll on the stocks of some companies that beat.
After the bell Thursday, Google and American Express beat estimates but both stocks fell sharply today.
AMD and Capital One beat but experienced double-digit percentage declines today.
Suntrust Banks held onto a modest gain after the regional bank reported its loss narrowed in the most recent quarter but said conditions remained challenging.
Regional banks did well yesterday in a down market amid the perception that they would be affected far less by President Obama's planned reforms than big banks, and amid some signs of improving credit trends.
What are investors looking at for next week? Click on the video at left.
The TV food fight between Cablevision and Scripps Networks finally ended today as the companies reached an agreement to return Food Network and HGTV to Cablevision customers.
And at the candy counter, Hershey will not counterbid for Cadbury, , the Financial Times reported. Earlier this week, Cadbury agreed to be bought by Kraft Foods in a $19 billion deal.
Get ready to pay more to fly the friendly skies: American Airlines has raised domestic fares by approximately $16 per round trip, with competitor United matching. If the fare increase spreads, it would be the first industrywide hike of 2010.
In addition to worries about earnings, China and U.S. regulatory reforms, investors will have a slew of earnings and economic news to digest.
Apple, Amazon, Ford, Microsoft and Chevron are among the companies reporting next week and Apple is also expected to debut a highly anticipated tablet computer next week.
On the economic calendar, reports are due out on existing-home sales, consumer confidence and GDP, among others. Plus the Fed meets next week but isn't expected to change much of its statement or raise rates.
Kleintop says he doesn't think the Fed will take out the "extended period" language, referring to how long it will keep rates low, until March at the earliest, and wouldn't start raising rates until sometime in the second half.
Still, he says, there are still a few buying opportunities.
"Tech is still an attractive place — not only is it cyclical but also somewhat defensive," Kleintop said, referring to the fact that most of the sector has very little debt and strong cash flow, plus it's pegged to business spending more so than consumer spending.
He also likes commodities, given oil's drop below $75 and demand from China.
Still, he said, they'll be looking for exit points in the coming months, anticipating that the second half will be tough.
On Tap for Next Week:
MONDAY: Existing-home sales; Earnings from Apple and Texas Instruments
TUESDAY: Fed begins two-day meeting; Consumer confidence; Two-year note auction; Earnings from DuPont, J&J, Travelers, Verizon, Corning, US Steel and Yahoo
WEDNESDAY: Apple announcement; Geithner to testify; new-home sales; Five-year auction; Fed statement; Earnings from Boeing, Caterpillar, ConocoPhillips and United Technologies; Obama State of the Union
THURSDAY: Jim Chanos speaks on China bubble; durable-goods orders; seven-year auction; Earnings from 3M, AT&T, Eli Lilly, Ford, Nokia, P&G, Altria, Colgate-Palmolive, Lockheed Martin, Motorola, Microsoft and Amazon
FRIDAY: First look at Q4 GDP; Chicago PMI; consumer sentiment; Earnings from Chevron
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