Stocks post worst week since June as Dow drops 1.5%

Stocks finished the week in negative territory, with major indexes logging their worst week since June, as investors found little reason to buy following the market's recent highs and amid ongoing worries about when the Fed may start to wind down its stimulus program.

"This is continuation of a sideways market that we've been experiencing for much of the week," said Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors. "There's no big catalyst that's out there that's pushing us forward or backwards."

(Read more: Marc Faber expects a crash—but likes these stocks)

U.S. Major Index Performance

Last Change Today's % Change 1 Week % Change YTD % Change
Dow 15,425.51 -72.81 -0.47% -1.49% 17.71%
S&P 500 1691.42 -6.06 -0.36% -1.07% 18.60%
NASDAQ 3660.11 -9.02 -0.25% -0.80% 21.22%
Russell 2000 1048.4 -1.07 -0.10% -1.08% 23.44%
CBOE VIX 13.38 0.65 5.11% 11.69% -25.75%

The Dow Jones Industrial Average fell 72.81 points to finish at 15,425.51, dragged by Disney and Home Depot. The Dow was down more than 130 points at its session low.

The S&P 500 dropped 6.06 points to end at 1,691.42. And the Nasdaq slid 9.02 points to close at 3,660.11. This week marks the weakest weekly volume on the S&P 500 since August since 2006.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, finished above 13.

For the week, the Dow tumbled 1.49 percent, the S&P 500 slumped 1.07 percent, and the Nasdaq declined 0.80 percent. IBM was the worst weekly performer on the Dow, while Alcoa rose.

Most key S&P sectors finished in the red for the week, led by telecoms and financials, while materials finished higher.

Major averages have been dented this week amid uncertainty about when the Fed may start winding down its stimulus program. The Dow and S&P 500 have declined more than 1 percent each for the week. The Dow is poised to log its first weekly drop in seven.

(Read more: Art Cashin: The market 'check engine light' is on)

Most recently, Dallas Fed president Richard Fisher reiterated on Thursday that the central bank will likely begin cutting back on its massive bond-buying stimulus in September as long as economic data continues to improve.

"The assumption has been that September is a likely start date and the only thing that would hold them back is very disappointing economic news between now and then," said Albright. "But I'm not sure if the market is prepared for an abrupt end of the QE program…the concept of tapering has led market participants to believe this would be a more drawn out event."

China's benchmark Shanghai Composite rallied 1 percent for the week to close above the 2,050 mark, lifted by better-than-expected industrial output numbers for July, plus a healthy increase in fixed asset investment in the first seven months of the year. Meanwhile, Chinese consumer prices were unchanged in July on the previous month, and producer prices fell an annualized 2.3 percent.

"More spending is called for, while further acceleration in credit growth is discouraged. This approach requires significant improvement in capital allocation efficiency to work. There is no quick magic, and so patience and tolerance is still required," analysts at SG Global Economics wrote in a research note.

(Read more: China's factories remain in deflation, producer prices show)

Meanwhile, a marginally weaker yen helped Japan's benchmark Nikkei index rebound from the previous day's one-month low. Dollar-yen traded at the 96.60 handle, after hitting a new seven-week low overnight.

JCPenney 's largest investor Bill Ackman sent a second letter to the retailer's board, demanding a new meeting of the board and called for chairman Thomas Engibous to be replaced. JCPenney shot back, calling Ackman's statements "misleading, inaccurate and counterproductive." Shares of JCPenney tumbled nearly 6 percent, giving back most of the previous session's gains.

BlackBerry soared after Reuters reported that the troubled smartphone maker is looking to the possibility of going private. Shares have plunged more than 30 percent in the last three months amid increasing competition from Apple and Samsung.

Among earnings, surged after the travel website posted earnings that beat expectations and handed in a strong outlook. At least 10 brokerages lifted their price targets on the company.

Second-quarter earnings season may be winding down, but several major retailers are still slated to post quarterly earnings next week, including Wal-Mart, Macy's, Kohl's and Nordstrom.

(Read more: Taking stock of S&P quarterly earnings)

On the economic front, June wholesale inventories slipped 0.2 percent in June, missing expectations for a gain of 0.4 percent, according to a Reuters poll. Inventories declined 0.5 percent in the month prior.

—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

Coming Up Next Week:

MONDAY: Treasury budget; Earnings from Sysco
TUESDAY: Retail sales, import/export prices, business inventories, Fed's Lockhart speaks, Samsung holiday mobile preview; Earnings from Flower Foods, Cree
WEDNESDAY: MBA mortgage applications, producer price index, oil inventories, Fed's Bullard speaks; Earnings from Deere, Macy's, Cisco, NetApp, NetEase
THURSDAY: Fed's Bullard speaks, consumer price index, jobless claims, Empire state mfg survey, Treasury int'l capital, industrial production, housing market index, Philadelphia Fed survey, e-commerce retail sales, natural gas inventories, Fed balance sheet/money supply, Ford analysts mtg; Earnings from Wal-Mart, Kohl's, Applied Materials, Nordstrom
FRIDAY: Housing starts, productivity & costs, consumer sentiment

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