A late-week rally wasn't enough to erase a disappointing week characterized by a relentless slide in oil prices and speculation about U.S. interest rates.
Investors have been in a glum mood for weeks as concerns about a weaker earnings season, signs of a global slowdown, and plummeting crude oil prices pulled financial markets sharply lower. The S&P 500 has fallen more than 9% so far this year.
Stocks posted their fifth weekly loss in just six weeks. The S&P 500 fell 0.83%, the Dow Jones Industrial Average dropped 1.4%, and the Nasdaq fell 0.6%. For the year, the S&P 500 has tumbled 8.9% and is firmly in correction territory, having fallen 12.6% from its most recent high.
A selloff mid-week bruised global equities after investors grew skeptical that global central banks could rein in rampant volatility and soothe financial markets. Federal Reserve Chair Janet Yellen took center stage on Wednesday and Thursday during her semi-annual testimony to Congress.
The central bank chief reiterated that interest-rate increases would be gradual, particularly given the pain felt in financial markets recently. Yellen underlined that the Fed was not on a "pre-set path" and that monetary policy would shift depending on data and financial circumstances.
"As is always the case, the economic outlook is uncertain," Yellen said. "Foreign economic developments, in particular, pose risks to U.S. economic growth," she noted, pointing to recent signs of a global slowdown and subsequent market turbulence.
The markets interpreted comments from the central bank's chair to mean a rate hike in March is off the table. Societe Generale analysts forecast three rate hikes this year, likely to be delivered in June, September, and December.
Banks tumbled on the prospect of fewer increases this year. Bank of America (BAC - Get Report) , JPMorgan (JPM - Get Report) , Citigroup (C - Get Report) , Goldman Sachs (GS - Get Report) , and Wells Fargo (WFC - Get Report) were all lower for the week, while the Financial Select Sector SPDR ETF (XLF - Get Report) slid 2.2% since Monday.
Bank of America and Wells Fargo are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio.
It was a fairly bare week for the economic calendar, which left investors little to gauge exactly how the U.S. economy is faring. U.S. retail sales for January, out on Friday, showed a small increase as lower gas prices continued to pressure the headline number. December retail sales were also revised to show growth, a positive sign that holiday sales weren't quite as weak as expected.
"While still hardly robust and clearly losing momentum compared to last year, from the [Fed's] perspective, any further evidence of the U.S. economy weathering the market turmoil at the start of the year is confirmation the [monetary policy] committee should continue to focus on the longer-run and ignore short-term disruptions," said Lindsey Piegza, chief economist at Stifel.
Fresh data on the labor market also helped to support the Fed's decision to hike rates in December for the first time in nearly a decade. Job openings that month climbed to 5.6 million, the second-highest level ever. Voluntary resignations increased 7%, indicating that workers were confident of finding new positions.
Crude oil ended with its best day in seven years on Friday but still remained down nearly 5% for the week. Commodities have been whipsawing between gains and losses since Monday amid speculation about whether production cuts would alleviate oversupply.
On Friday, the United Arab Emirates energy minister said the Organization of the Petroleum Exporting Countries was open to cutting output, while earlier in the week, failed negotiations between Saudi Arabia and Venezuela sent oil tumbling.
"The market has had some practice regarding this kind of exercise in recent weeks, with prior rallies off Russian comments and the Venezuelan tour generating prior recovery attempts, helping to train the market to be both skeptical regarding the prospects for actual cuts and, if anything, more aggressive in trading," said Timothy Evans, energy futures specialist at Citi.
The International Energy Agency also spooked markets earlier in the week, warning that oil likely will remain lower as Iranian production exacerbates an oversupply crisis.
"It is very hard to see how oil prices can rise significantly in the short term," the IEA said in its monthly industry report. "Persistent speculation about a deal between OPEC and leading non-OPEC producers to cut output appears to be just that: speculation."
The number of earnings reports during the week slowed as the end of the quarterly reporting season neared. Media companies were the highlight, with Disney (DIS - Get Report) , 21st Century Fox (FOXA) and Viacom (VIA.B) each disclosing their recent quarterly performance.
Disney reported a worrying decline in profit at its television business. Television earnings dropped by 6%, driven by a slide in subscribers at ESPN and lower advertising revenue at A&E. Overall profit benefited from the blockbuster release of Star Wars: The Force Awakens last December.
21st Century Fox also disappointed after a weaker showing from its film business over the quarter. The media giant reported an 8.4% decline in revenue, generated mostly by the sale of Sky Italia and Sky Deutschland a year earlier, though weaker home entertainment sales also pressured the top line.
Corporate America is now more than two-thirds of the way through the earnings season. So far, the majority of reporting companies have topped analysts' earnings estimates, though expectations were lower than normal because of pressure from a stronger dollar and weaker oil.