Stocks accelerated their selloff in the final hour of trading Friday to close at session lows, logging their worst weekly decline for the year, as ongoing signs of weakness overseas and tepid economic news in the U.S. kept investors on edge.
The Dow Jones Industrial Average tumbled 136.99 points, or 1.05 percent, to close at 12,849.59, led by BofA and JPMorgan .
The S&P 500 slumped 17.31 points, or 1.25 percent, to finish at 1,370.26, a closely-watched technical level. The Nasdaq declined 44.22 points, or 1.45 percent, to end at 3,011.33.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, soared to finish above 19.
For the week, the Dow fell 1.61 percent, the S&P dropped 1.99 percent, and the Nasdaq plunged 2.25 percent. Among the Dow components, BofA was the biggest weekly laggard, while H-P climbed.
All 10 S&P sectors ended in the red for the week, led by financials and energy. Techs posted their first weekly loss for the year.
JPMorgan posted results that topped estimates, but shares slipped due to year-over-year declines in net income and revenue. In addition, CEO Jamie Dimon said elevated mortgage-related costs and losses may continue for a while longer.
Wells Fargo also beat earnings expectationsas the bank posted strong mortgage banking results, but shares dipped.
Regional banks were hit the hardest, dragged by firms including Suntrust , Regions and First Horizon .
“The path of least resistance in the short-term is for a correction,” said Bruce McCain, chief investment strategist at Key Private Bank. “We have not yet decoupled from markets in Europe and Asia—If they sneeze, we won’t necessarily catch pneumonia, but the idea that we’ll avoid any signs of a cold is optimistic.”
McCain believes the market is still in the "middle of a correction" and may last more than usual near the bottom.
“As you get to the bottom of whatever the level is, unless we see significant deterioration in Europe or much worse outcomes from Asia, then it’s time to put more money to work,” he recommended. “There’s potential for a rebound in the emerging regions later on off the summer correction.”
On the economic front, U.S. consumer sentiment declined in early April, hurt by rising gasoline prices, according to a survey by University of Michigan and Reuters.
Geopolitical concerns also weighed, as Chinese growth slowedin the first quarter. But the tepid data led some to believe that Beijing could further ease monetary policy further to boost the economy.
In addition, Spanish banks had borrowed heavily from the European Central bank in March, underlining the continuing difficulties peripheral institutions are having in securing funding.
Federal Reserve Chairman Ben Bernanke spoke at a conference in New York, defending the central bank's response to the financial crisis, but made no comments about the current state of the economy or the policies taken to spur growth.
Traders have been closely analyzing the Chairman's comments for signals about the possibility for further monetary easing on the heels of some tepid economic reports in recent weeks.
A slew of Fed officials spoke publicly throughout the week, expressing mixed views about maintaining low interest rates until 2014.
Google is in the spotlight as well after the search-engine giant's earnings beat forecasts and the company also announced a two-for-one stock split designed to preserve the control of its co-founders. At least 10 brokerages boosted their price target on the firm.
Apple has rejected the U.S. Justice Department's allegations that it colluded with publishers over electronic book pricing, calling the charges "simply not true," according to reports.
Coinstar surged after the company lifted its revenue outlook, thanks to stronger-than-expected demand at its Redbox kiosks.
Also on the economic front, consumer prices rose 0.3 percent in March, according to the Labor Department, in line with expectations.
—Follow JeeYeon Park on Twitter: @JeeYeonParkCNBC—
On Tap Next Week:
MONDAY: Retail sales, Empire state mfg survey, business inventories, housing market index, Eli Lilly shareholders mtg, Oracle vs. Google trial; Earnings from Citigroup, Mattel
TUESDAY: Housing starts, industrial, Citigroup shareholders mtg, tax day; Earnings from Coca-Cola, Goldman Sachs, J&J, IBM, Intel, Yahoo
WEDNESDAY: Weekly mortgage apps, oil inventories; Earnings from Abbott Labs, BlackRock, Bank of NY Mellon, Halliburton, Ebay, Qualcomm, Yum Brands
THURSDAY: Jobless claims, existing home sales, Philadelphia Fed survey, leading indicators; Earnings from BofA, DuPont, Morgan Stanley, Nokia, Travelers, Verizon, Microsoft, AMD, Capital One, SanDisk
FRIDAY: Earnings from GE, McDonald's, Schlumberger
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